Tax obligations for foreign investors, as well as for natural and legal persons resident in the Republic of Croatia, play a key role in shaping the business framework on the luxury real estate market in Croatia. For foreign investors, understanding the complexity of the tax system is necessary for proper planning and management of financial resources.

Real estate sales are subject to real estate sales tax at the rate of 3% or value added tax at the rate of 25%. Sales tax is paid if VAT is not paid on real estate.

Who and when pays real estate sales tax?

The obligee is the acquirer – a legal or natural person who buys or acquires real estate by gift, exchange, inheritance or in some other way. PNP is paid on the basis of the decision of the Tax Administration, and on the basis of the contract submitted to the Tax Administration by the notary public who certified the contract on the sale/gift/exchange of real estate.

Exemptions from paying are also prescribed. In business transactions, it is not paid when real estate is entered into a company, when real estate is acquired in the process of mergers and acquisitions and division of companies. It does not pay: local and regional self-government units, state authorities, institutions whose sole founder is the Republic of Croatia or JLP(R)S, foundations and foundations, all legal entities whose sole founder is the Republic of Croatia, the Red Cross and non-profit legal entities registered for the provision of humanitarian aid in accordance with a special regulation, diplomatic or consular missions of a foreign country under the condition of reciprocity and international organizations for which exemption from it payment has been agreed by international agreement and other persons listed in the provisions of the Real Estate Tax Act.

Real estate subject to VAT

A taxpayer entered in the register of VAT payers is obliged to calculate VAT at the rate of 25% on delivered real estate, except in the case of prescribed exemptions.

Deliveries are exempt from VAT:

• buildings or their parts and the land on which they are located, except for deliveries before the first occupancy or use or deliveries where no more than two years have passed from the date of first occupancy or use to the date of the next delivery,
• agricultural land and any other land, except construction land.

Therefore, the taxpayer is obliged to calculate VAT on the delivered:

• building land,
• new buildings before the first occupancy or use, their parts and the land on which they are located, and
• buildings where no more than two years have passed from the date of first use to the date of the next delivery,
• Roh-bau buildings, and
• reconstructed buildings if the reconstruction costs in the previous two years before delivery are higher than 50% of the sales price.

Managing these tax obligations requires careful monitoring of changes in legislation and consultation with experts. Our service includes providing precise information on tax obligations, analysis of the latest legislative changes, and personalized strategies that will enable clients to optimally manage the tax aspects of their investments in luxury real estate on the Croatian market.