INTRODUCTION TO THE TOPIC
Croatia is a popular destination for foreign investors, particularly in the real estate sector, especially those located in the southern, coastal, and seaside areas of the country. This is because their tourist potential is far superior to that of properties used for tourism in other parts of Croatia. Naturally, when it comes to such investments, the speed of return is crucial, if not decisive.
The process of purchasing real estate in Croatia varies depending on whether the buyer is a citizen of the European Union (EU) or a third country (outside the EU, including the Republic of Iceland, the Principality of Liechtenstein, and the Kingdom of Norway). This article examines the key legal aspects related to real estate purchases by foreign nationals, with particular emphasis on the rules and restrictions for EU and third-country citizens, as well as the possibility of obtaining a residence permit based on ownership of a property purchased in Croatia.
RULES AND RESTRICTIONS FOR EU AND NON-EU CITIZENS IN REAL ESTATE PURCHASES
EU Citizens
Citizens of EU member states enjoy favorable conditions when it comes to purchasing real estate in Croatia. According to Croatian law, specifically Article 358.a of the Ownership and Other Real Rights Act, EU citizens have the same rights as Croatian citizens in acquiring property. This legislative framework is based on the principle of the free movement of capital within the EU. Thus, EU citizens do not have to meet any special conditions, and the process of purchasing property is the same as for local buyers. This means they can freely purchase land, apartments, or commercial properties without any specific restrictions. However, there is one limitation: they are not allowed to purchase agricultural land designated by special laws, nor can they acquire protected natural areas as defined by Croatian legislation.
Non-EU Citizens
For citizens of third countries (countries outside the EU, including the Republic of Iceland, the Principality of Liechtenstein, and the Kingdom of Norway), the rules are stricter. According to the law, foreign nationals from third countries can purchase property in Croatia only with the consent of the Ministry of Justice and provided there is reciprocity between Croatia and the buyer's country. Additionally, there are specific restrictions related to purchasing agricultural land. Third-country nationals can only purchase agricultural land if they have a registered business activity in Croatia, and that business is directly related to the cultivation or processing of agricultural land. This regulation aims to protect national interests, particularly in the context of agricultural production.
The principle of reciprocity, in the context of property ownership, means that Croatia will allow foreign nationals to purchase property only if their home country also allows Croatian citizens to buy property under similar conditions. In practice, this means that a foreign citizen will only be able to purchase property in a particular country (e.g., Croatia) if that country also allows citizens of that foreign country (e.g., Croatia) to buy property in their own country. This rule exists to maintain balance and protect national interests.
Regarding the assumption of reciprocity, the Ministry of Justice of the Republic of Croatia publishes a list of countries with which there is reciprocity concerning property ownership rights on its official website: https://mpudt.gov.hr/informacije-o-uzajamnosti-u-stjecanju-prava-vlasnistva-nekretnina-izmedju-republike-hrvatske-i-drzava-izvan-europske-unije-republike-island-knezevine-lihtenstajn-kraljevine-norveske-te-svicarske-konfederacije/6186?lang=hr
In terms of reciprocity, does the buyer need to submit a new request for consent if they decide not to purchase the property for which they initially requested approval? Yes, a new application must be submitted for each new property purchase, regardless of whether consent was previously granted for another property.
Emigrants and Descendants of Emigrants Born in Croatia
According to Article 355 of the Croatian Citizenship Act, foreign individuals who are emigrants from Croatia or their descendants, but who have not obtained Croatian citizenship, are not considered "foreign persons" if they meet the conditions for acquiring Croatian citizenship. In practice, this means that once these individuals fulfill the requirements to acquire Croatian citizenship based on Article 11 of the mentioned law, they will be granted a decision on their naturalization. Upon the decision's finalization, these individuals will be considered Croatian citizens in legal transactions, including property purchases, and will no longer be subject to any restrictions applicable to EU or third-country nationals.
PROPERTY PURCHASE PROCESS AND OWNERSHIP VERIFICATION
The property purchase process in Croatia involves several key steps, with the most important being ownership verification and meeting legal requirements.
The first step is to find a suitable property, followed by negotiations with the seller regarding the price and terms of sale. Before signing the purchase contract, it is crucial to conduct a detailed ownership check—this includes examining the land registry status of the property, verifying whether the property is owned by the seller, whether there are any encumbrances or liabilities on the property (such as mortgages or liens), and whether all necessary documents are properly registered in the land registry (e.g., whether the property has an occupancy permit).
After the ownership verification, the next step is to sign the (pre)purchase agreement, which must be notarized by a public notary, i.e. signature of the seller must be notarized by the public notary. The contract must contain all the essential elements, primarily a description of the property that must match the property description in the land registry of the competent court, the purchase price, payment terms, deadlines, and any other provisions agreed upon between the buyer and seller. When signing the contract, if an advance payment (deposit) is made according to the payment schedule, a preliminary agreement is often signed, followed by the signing of the (main) contract.
Regarding the advance (down)payment, it serves two purposes. It finalizes the agreement and acts as confirmation that the sales contract is concluded, but it also provides security that the obligations under the contract will be fulfilled. There is also the possibility of specifically agreeing on the advance payment as a penalty (earnest money), which is stipulated precisely to allow one party to withdraw. In such a case, the legal consequences are as follows: (a) If the seller withdraws, they must, according to the Law on Obligations, return double the amount of the advance payment; (b) If the buyer withdraws, the advance payment remains with the seller. Although there is no fixed amount for the advance payment, it is usually around 10% of the total purchase price. Any amount greater than 10% is considered part of the purchase price by judicial practice (however, the advance payment can also be a much smaller, symbolic amount sufficient to confirm the agreement between the parties on all key aspects of the sales contract). According to the Law on Obligations, if the party who provided the advance payment does not fulfill its obligations, the other party may seek performance of the contract, if still possible, claim damages, accounting for the advance payment, or settle for the received advance payment. On the other hand, if the party who received the advance payment is responsible for the non-performance of the contract, the other party can request performance of the contract, if still possible, claim damages, and return the advance payment, or return double the advance payment, which is the most common option. The question also arises of what happens with the advance payment when the remaining purchase price is paid—there are two options: the first is to deduct the amount of the advance payment from the final price, i.e., the purchase price is reduced by the amount of the advance payment, and this must be clearly stated in the contract. The second option is the return of the full amount of the advance payment, and the manner of this return is also regulated in the contract.
After signing the contract, the transfer of ownership is carried out by registering it in the land registry, i.e., the ownership is acquired by entering the buyer's name in the land registry through the execution of the sales contract in the land registry. It is important to emphasize that in the Republic of Croatia, the so-called "tabular statement" (Latin: Clausula intabulandi) is used in transactions, which can be an integral part of the purchase contract or issued separately from the contract as a separate document, on which the public notary certifies the seller's signature. Without this (whether part of the contract or a separate document), the transfer of ownership based solely on the contract is not possible; specifically, the competent court will refuse to execute the transfer of ownership if the tabular statement or document does not exist.
Payment of Real Estate Transfer Tax
The buyer is obliged to pay the real estate transfer tax in accordance with Article 12 of the Real Estate Transfer Tax Act ("Official Gazette" No. 115/16, 106/18), which amounts to 3% of the market value of the property. This tax is paid based on the purchase agreement, which is submitted by the notary to the local office of the Ministry of Finance, Tax Administration, within 30 days. The Tax Administration then issues a tax decision determining the tax amount and sends it to the buyer, who has the right to appeal the decision or pay the tax within 15 days from receipt of the decision. There are several exemptions from this tax, but since the category of buyers discussed in this article is not eligible for these exemptions, we will not address them specifically.
Possibility of Obtaining a Residence Permit Based on Property Ownership – Commonly Known as the "Other Purpose" Permit
Third-country nationals who purchase property in Croatia may obtain temporary residence for up to one year based on property ownership. According to the Foreigners Act, a foreign national who becomes the owner of a property in Croatia can apply for temporary residence, provided other legal conditions are met. To obtain a residence permit based on property ownership, the foreigner must meet certain conditions, including proving they have sufficient financial resources to live in Croatia and will not be a burden on the social system. Additionally, a residence permit is not automatically issued but is granted based on the assessment of the competent authorities.
It is important to note that although third-country nationals can become property owners in Croatia, the temporary residence permit allows them to stay in Croatia for up to one year. After this period (if they do not apply for temporary residence on another basis, such as employment), they must leave Croatia and reapply for temporary residence after 6 months from the expiration of the initial permit. Furthermore, residence granted for "other purposes" does not count toward the time required for permanent residence or long-term stay approval.
On the other hand, EU citizens are allowed to stay in Croatia without any restrictions, with the obligation to report their address to the competent police station within 3 days of arrival in Croatia.
LEGAL SOURCES
- Ownership and Other Real Rights Act (Official Gazette nr 91/96., 68/98., 137/99., 22/00., 73/00., 114/01., 79/06., 141/06., 146/08., 38/09., 153/09., 90/10., 143/12., 94/17. 152/14., 81/15.)
- Croatian Citizenship Act (Official Gazette nr. 53/91., 70/91., 28/92., 113/93., 4/94., 130/11., 110/15., 102/19., 138/21.
- Law on Foreigners (Official Gazette nr 133/20, 114/22, 151/22)
- The website of the Ministry of Justice: https://mpu.gov.hr/informacije-o-uzajamnosti-u-stjecanju-prava-vlasnistva-nekretnina-izmedju-republike-hrvatske-i-drzava-izvan-europske-unije-republike-island-knezevine-lihtenstajn-kraljevine-norveske-te-svicarske-konfederacije/6186
Author: Anja Juršetić Šepčević, managing partner
Text prepared and verified on: February 27th 2025