croatia

CROATIA

CROATIA

Content

Croatia General Information ..................................

Craoatia and European Union...............................

Traffic Infrastructure ..............................................

Labor Force ...........................................................

Economy ................................................................

Real Estate Market................................................

Legislation .............................................................

Foreign Investors ...................................................

Taxation System ....................................................

Craotian tourism – overview...................................

CONTENT

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Dubrovnik

CROATIA

The exceptional geographic position, mild Mediterranean climate

and culture, finished transitional processes and developed

markets, together with a clear European commitment and

orientation are the main reasons which make the Republic of

Croatia an attractive and wanted country for all types of

investments. According to social advancement Croatia is the

leading country and the main factor of the political stability in the

region, well-recognized among partners and institutions.

Millions of tourists visit Croatia yearly and the number

continuously increases, which is the best fact that confirms the

attractiveness of Croatian tourism and hospitality business, and

the most construction and sale of real estate. Croatia is a recently

discovered heaven for tourists around the world. Due to its

untouched nature, exceptional beauty of the coastline and pure

Adriatic sea, rich cultural heritage and gastronomic delights

Croatia is one of the most wanted destinations for the ones

looking for peace and rest on a mild Mediterranean climate.

GENERAL INFORMATION

Split’s Old Town

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CROATIA

The past years have marked an increase in the investment of

foreign investors who value the quality of life, and many have

decided to move to Croatia with their families. Current laws open

numerous entrepreneurial and investment opportunities in

production, sales and services. The most important fact that

makes the investments prospective and fertile is the ongoing

market increase, due to positive national politics towards open

markets. The state for some time is methodically disburdening

the administration and restructuring its judicial system to make it

compatible to the legal European system.

The future for Croatia is a new stronger judicial system, to attract

additional investments and ensure their security and continuity.

Croatia is an investment Mecca since it consolidates the

attractiveness of a new Mediterranean country which recently

reached a democratic exchange of people, goods and services,

successful economic transition and a political multi-party

transition. The processes which were to bring Croatia into a

recognized and a stable state are finished and it is heading

alongside with Europe. It is quite a short way within reach.

GENERAL INFORMATION

Korcula

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CROATIA

CROATIA GENERAL INFORMATION

Land surface: 56 594 km2

Surface of territorial sea and domestic sea: 31 067 km2

Population - estimated in mid-2006: 4 400 000

Population density (per km2): 78.5

Population in City of Zagreb in mid-2006: 784 000

Territorial structure as of December 31st 2007:

Counties: 21

Cities: 127

Districts: 429

Settlements: 6 749

Gross Domestic Product per resident: 11 545.94 USD

GENERAL INFORMATION

Map of Croatia

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CROATIA CROATIA AND THE EUROPEAN UNION

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The Republic of Croatia was proclaimed as independent

and democratic country in 1990. Croatia's political structure

is defined as a parliamentary democracy and is a member

of the United Nations since the May 22nd 1992, and now is

a candidate for full EU membership. Croatia has received

an invitation for full NATO membership on the 3rd April

2008.

It is a politically stable country. Parliamentary elections in

2007 proved the political continuity that has kept the

position of the ruling Democratic Party, in coalition with the

social liberals. Today the country moves towards full

membership in the European Union and is constantly

working to meet all mandatory requirements to strengthen

its democracy, improve its legislation, stabilize the economy

and to achieve economic growth. One of the main tasks is

the reform of the Croatian judicial system and public

sectors, such as the fight against corruption.

CROATIA

TRAFFIC INFRASTRUCTURE

Traffic in the Republic of Croatia is yet to reach the level of

utilization and construction quality that is characteristic of the

countries in immediate European environment, but a significant

improvement has occurred in this field over the last several

years.

Infrastructure, which includes traffic as one of its more important

elements, is the object of direct government interest, so its

development greatly depends on the actions of governing bodies.

STRUCTURE OF PASSENGER TRANSFER BASED ON THE TYPE OF TRANSPORTATION IN 2007.

by sea and coastline 9,1%

by road 45,1%

by railroad 44,2%

by air 1,6%

STRUCTURE OF PASSENGER TRANSFER BASED ON THE TYPE OF TRANSPORTATION IN 2007.

by sea and coastline 25,9%

by roads 53,4%

by railroad 12,6%

river 0,3%


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CROATIA

ROAD TRAFFIC

After its independence, Republic of Croatia has recognized the

process of constructing a complete road network as a strategic

condition of its economic development, and due to the fact that

very little was built between 1990 and 1998, the last decade saw

that process intensify a great deal. These days, Croatia

possesses 28.123 kilometers of public roads, and 6.823

kilometers are state roads. As far as main-road corridors are

concerned, 593 kilometers of high-level roads were built from

1970 to today – 417 km of highways, 72 km of semi-highways

and 104 km of fast roads.

The overall number of 1147 kilometers of highways and semi-

highways are now present in Croatia, while several hundreds

kilometers are currently in the process of construction.

A1 Zagreb-Split-Dubrovnik 571 km

A2 Zagreb-Macelj 60 km

A3 Bregana-Zagreb-Lipovac 305 km

A4 Zagreb-Goričan 97 km

A5 Beli Manastir-Osijek-Svilaj 89 km

A6 Bosiljevo-Rijeka 81 km

A7 Rupa-Rijeka-Ţuta Lokva 108 km

A8 Istrian “Y” Corridor: Kanfanar-Matulji 64 km

A9 Istrian “Y” Corridor: Kaštel-Pula 84 km

A10 Mali Prolog-Ploče; 8km

A11 Zagreb-Sisak; 48 km

Overall: 1514 km


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CROATIA

At the moment, highways are being developed proportionally to

the increase of traffic demands – new rest stops and junction

points are being built, while some sections are in store for

capacity increase by adding another traffic lane.

The most important highway is undoubtedly the Zagreb-Split

section, which is 380 km long and was finished in June of 2005.

Its significance is reflected in the fact that it represents a traffic

connection between Croatia and the Northern and Central

Europe. The A1 Highway will connect the continental area to

Dubrovnik, as it is already built till Šestanovac, while the section

towards Ploče is currently in the construction process. Its

continuation towards Dubrovnik is still in the projecting phase, but

it is expected to be completed by the end of 2009.


A1 Highway accros Maslinica Bay

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CROATIA

RIVER WATERWAYS

Traffic on the continental waterways is still not fully utilized as a

reliable, profitable and ecologically acceptable traffic method for

medium and long distances, but connecting the river-traffic

corridors to the Adriatic harbors remains a strategic goal.

Croatia mostly has international waterways, while the overall

length of its river waterways is 804 km. At the moment, Croatia

has four river harbors – Osijek, Sisak, Slavonski Brod and

Vukovar.

Croatian river waterways are connected to Amsterdam,

Rotterdam, Duisburg, Brussels, Paris, Strasbourg, Munich,

Vienna, Budapest etc.

There are several shipping companies in our country, as well as

a large number of concession holders in the harbor area.

Compared to the EU countries, which transport between 6% and

24% of cargo by river waterways, Croatia only manages to reach

the 1,5% figure. There are plans for adaptation and additional

building of continental waterways, which leaves plenty of chance

for improvement and development. Some of the more important

projects in the field of river waterways include the

reestablishment of the Danube-Sava canal, as well as the

construction of a new harbor in Vukovar.


Vukovar Port on Danube River

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CROATIA

SEA HARBORS

Croatia has six harbors of national importance – Rijeka, Zadar,

Šibenik, Split, Ploče and Dubrovnik, but only two of them (Rijeka

and Ploče) have the Pan-European traffic support in road and

railroad corridors.

Thanks to their position on the Adriatic Sea, which is positioned

very deeply in the European continent, and thanks to their

favorable traffic characteristics, Adriatic harbors have always

attracted transitional cargo traffic from the countries of Central

and South-Eastern Europe.

However, certain changes within the countries that gravitate

towards Croatian harbors have led towards the drop of Croatian

cargo traffic, although today’s situation indicates constant growth

in passenger traffic, and a slightly smaller growth in cargo traffic,

in all Croatian harbors.


Rijeka Port

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CROATIA

Over the course of the last decade, there has been a significant

improvement of the highway network in Croatia, which

strengthened the connections with European airway and road

corridors. These factors, along with the increased pressure on

some of the Italian harbors, transform Croatian harbors into

extremely attractive and permanent destinations in international

tourism and cruiser traffic.

According to our statistical information, Rijeka is the largest

harbor in the Adriatic with over 13 million tons of cargo in 2007,

and there are plans to bring further improvement and

modernization that would activate other Croatian sea harbors.

2007 saw the increase of a number of passengers (12 million

people), coastal transportations have been increased for 5,3%,

while cargo transportations are 3,2% higher than during the same

period in 2006.

The completion of the planned projects, which primarily intend to

bring quality road and railroad sections near our harbors, would

significantly increase the competitiveness of Croatian harbors. As

an example – Ploče was declared a harbor of special

international economic interest, and is now poised to slowly

transform from the traditional cargo transportation harbor to a

prolific distribution and logistic platform.


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CROATIA

AIRPORTS IN CROATIA

Seven airports in Croatia possess taking off/landing mechanisms

that can accept conventional airplanes without practically any

limitations, which provides them with the status of international

airports. Two of them are located in continental Croatia (Zagreb

and Osijek), while five of them can be found on the coast (Pula,

Rijeka, Zadar, Split and Dubrovnik).

Eleven smaller airports are also registered (for airplanes up to 50

seats or smaller airplanes), the first four of which are

international: Brač, Lošinj, Osijek-Čepin, Vrsar, Lučko, Varaţdin,

Čakovec, Sinj, Grobnik, Otočac and Ploče.

Ten international airports present nearly 1 percent of world

infrastructure, while according to passenger transportation,

Croatian airports and smaller airports participate with about

0,005%.

Croatia Airlines is our national airline company.


Major Airports in Croatia

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CROATIA

ZAGREB – The Pleso Airport is located about 15 kilometers

south from Zagreb, in a settlement called Pleso near Velika

Gorica. It is the biggest and the most important Croatian airport.

During 2007, Pleso Airport registered a 15%-increase of

passenger transportations compared to the year before. During

the Sunday morning of December 16th 2007, the Zagreb Airport

achieved the record for passenger transportations in its long

history – the 1979 record, which featured 1.917.000 passengers,

was beaten. By the time this year is over, almost 2 million

passengers will have passed through the Zagreb Airport.

ZADAR – It is located in a settlement called Zemunik Donji,

which is about 7 kilometers east from Zadar. This airport is an

important factor in the process of connecting northern Dalmatia

and Lika to the other parts of Croatia and the world. Due to the

recently established airlines in early 2007, the building for

passenger terminals was additionally expanded, which enables

the Zadar Airport to now receive a much larger number of

passengers. Zadar Airport facilities also include Lufthansa’s

InterCockpit school of flying.

SPLIT – This airport is located near Kaštela (6km from the

centre), Trogir (6km) and Split (25km). It was opened in 1966,

and the number of passengers continually grew until 1988. The

airport was shut down due to the war in 1991, but was soon

reopened in April 1992. These days, it stands as one of the more

important connections between Dalmatia and the rest of Croatia

and the world.


Zagreb and Split Airports

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CROATIA

DUBROVNK – This airport is one of nine Croatia’s airports. It was

built in 1936 in a little town called Gruda in Konavli. It was shut

down during the Second World War. In 1960, the airport was

transferred to today’s location, which is in Čilipe. During the

Serbian aggression on Croatia, the airport was completely

demolished and its entire property was robbed. The

reconstruction works have only just been completed in 2006.

These days, it stands as the second most important airport in

Croatia, right behind Zagreb.

RIJEKA – This airport is actually dislocated from the city itself

and can be found on the island of Krk, which is 17km from the

centre of Rijeka.

OSIJEK – This airport is one of the nine bigger airports in

Croatia. It is located alongside the regional Osijek-Vukovar road,

while being 20 kilometers from the centre of Osijek. Besides its

primary purpose of receiving and transferring passengers, goods,

mail and things, the Osijek Airport also provides shopping,

restaurant and medical services, as well as the airplane-taxi etc.

PULA – this is one of nine Croatia’s airports. It existed in the form

of an airport on grass even prior to World War II, while becoming

a civil airport in 1967. The largest number of passengers came

through this airport in 1990, and expectations reach up to 720

000 passengers by 2010.


Dubrovnik and Pula Airports

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CROATIA

Some of the operators and companies that land to the majority of

Croatian airports are: Air One, Aer Lingus, Austrian Airlines,

Airways, Centralwings, Clickair, Croatia Airlines, Darwin Airline,

Dubrovnik Airline, Estonian Air, Flybe, Flyglobespan, Flylal,

Germanwings, Iberia, Jetairfly, Lufthansa, Norwegian Air Shuttle,

SkyEurope, Thompsonfly, TUIfly, and others.

Because the program of European Union members puts a great

deal of emphasis on traffic infrastructure, it is only logical that the

development of essential traffic infrastructure like highways,

railroad corridors, harbors, airports and waterways is

undisputable and of primary importance. Observing all these

segments individually would be incorrect, as the context

demands for them to be viewed as one common picture. The

current priority is to activate the river waterways, which are very

appreciated and represented in Europe, and that is bound to

result in further improvements within the economic sector.


“Croatia Airlines” – Croatian National Airliner

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CROATIA

LABOR FORCE

As far as the labor force’s scale of quality and education goes,

Croatia occupies one of the leading positions in South-Eastern

Europe. According to the statistics, only one of 25 unemployed

people has a college degree. According to the income statistics,

Croatia is also near the top of its region.

In comparison to Europe, the competition on the Croatian labor

force market remains relatively flexible, as numerous

organizations some positive results in their efforts to attract

foreign investors that secure competition on the market. It is

expected that the situation on the job market will get better as

Croatia enters the EU.

LABOR FORCE

New building of Economics College in Split

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CROATIA

ECONOMY

Croatia’s largest export partners are Italy, Bosnia and

Herzegovina, and Germany, while the biggest import partners are

Italy, Germany and Russia.

The state of the economy is typical of a country that has been

through a transition from communism. Although the process of

privatization has occurred, main problems appear in the form of

large unemployment and inadequate economic reforms. Around

230 000 people were unemployed in Croatia during May of 2008,

which represents about 13,2% of the overall labor force. Another

big problem lies in the differences of standard and development of

individual parts of Croatia. This is demonstrated by the fact that

the GDP of a Zagreb resident is about three times bigger than the

average GDP in the entire country.

Tourism is an extremely important economic branch for Croatia.

According to statistical results, tourism was responsible for about

20% of Croatia’s GDP. Industry creates about one-fifth of the

GDP, while providing jobs for every fourth working resident of

Croatia. Agriculture, forestry and fisheries contribute with around

7,2% of the GDP. Over the last several years, the construction

business creates around 5,7% of the GDP. Distributive trade

provides jobs for about 15% of working Croatian citizens while

creating around 37% of overall income and 17% of overall

investments.

ECONOMY

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CROATIA ECONOMY

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Croatia’s path depends on the correlation of two important

factors – growing involvement in European ways and integration

processes of the world, which enable positive improvements in

the private sector.

After achieving a significant economic growth of 5.8% during

2007, statisticians are predicting the stabilization of that growth to

the satisfying 4.9% in 2008, as well as in following years. Some

of the main reasons for this stabilization are the post-election

period, which normally provides political safety and stability, as

well as the anticipated 2%-downfall of consumption.

Further reasons for the stabilization of economic activities in

Croatia are revealed in the slower pace of development in other

countries of the region, especially those in Europe, as well as in

the reduction of buying power all over the world – which is

caused by stronger inflations and reduced overall credit activities.

Monetary politics and demands from the European Union are

bound to also leave a trace.

CROATIA REAL ESTATE MARKET

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SUPPLY

As the capital of Croatia, Zagreb is our biggest and most

prosperous city and the fastest growing and most developed real

estate market in the country.

Over the last several years, prices of residential units have gone

up and down which is mostly caused by the constantly small

supply. The city is still interesting to local and foreign investors,

but the demand for residential capacities shows signs of a

downfall. The market is mostly dominated by large companies

serving as investors, so now the market is filled with large

residential projects on the city outskirts and alongside important

traffic roads, while still being fairly close to all the city traffic and

other infrastructure.

The problem on the market can be identified in the lack of high-

quality residential units, because the market rapidly grew and

became more sophisticated so that now it sets higher standards.

That is the reason why future projects will likely be directed

towards achieving quality.

CROATIA REAL ESTATE MARKET – EU & CROATIA

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At this point, the European market does not have a high

percentage of residents who are owners of residential

units, rental housing is a common occurrence. However, in

Croatia the number of owners of residential units is

surprisingly high - as much as 85% of residents are also the

owners of units, which has a lot to do with the lifestyle of

local residents.

Over the past few years, it has become very noticeable that

the demand outstrips supply in the housing market. It is

assumed that such situation is caused by the growth of

opportunities that are provided to customers such as the

relatively easy access to credit lines. It is therefore very

likely for the market to stabilize and increase prices again,

especially if we take into account the increase of foreign

interest in Croatia, expected Croatian membership in the

European Union, and the "migration" of the population to

larger cities and regional centers.

Over the years, strong demand was partly met by building

the so-called government apartments, which provided

opportunity for young families to solve their housing needs

with subsidized prices and soft housing loans. But this

helped only a fraction of the population like the ones with

lower standard, so that now we expect supply and demand

for real estate to stabilize. According to some surveys,

about 7% of people in larger cities plan to solve their

housing issue in the near future.

CROATIA REAL ESTATE MARKET – DALMATIA

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Housing market has reached a maturity level that now

requires quality housing units, as well as more detailed

approach to the market and the process of planning and

construction. This led to a more stable market situation

which is more favorable for buyers than investors, and this

resulted in a slowdown of growth and stabilization of prices.

Construction of new housing is still very active, and

dominant housing markets are still developing, including

cities such as Zadar, Split and Dubrovnik.

The whole of Croatia, along with most buyers and investors

in this market segment, relies on the local population.

However, in the 2009 by regulation of the bureaucracy and

legal issues for foreign investors and customers we

achieved much more in demand from the foreign countries

and further positive effect is expected when Croatia

becomes an EU member, which is expected in 2012.

CROATIA REAL ESTATES PROGNOSIS

PROGNOSIS

A slight further growth of a number of construction projects is

expected over the next several years, while the stabilization of

the economic situation will contribute to the improvement on the

real estate market, while also creating a favorable set of

circumstances for investments

The growth of real estate prices is expected, however that will

mostly relate to units and objects of top quality. We will witness

the continuation of high demand for quality real estates and

complete projects.

With a catchment area of 600 million people within a three hour

flight of Croatia, the growth of low cost airlines flying to airports

located on the coast is expected to boost the demand for holiday

homes in Croatia.

Holiday home demand will likely remain dominated by Germany

and Austria. As another trend, we can expect to see a growing share

of British buyers.

The Croatia homes market is expected to stabilize with

implemented General Urbanistic Plans and establishment of

planned building zones

With the acceleration of the planning process and definition of

zones for holiday homes development, both local and foreign

developers will have the opportunity to develop projects that meet

the requirements of current and future demand.

Demand and absorption rate is expected to pick up

With the increasing demand of holiday home buyers in Europe

and the specific interest in Croatia, the availability of large and

medium scale projects for sale will lead to a steep increase in the

number of acquisitions.

Property prices are expected to appreciate due to EU accession

and the development of high quality homes, but at more reasonable

prices.

The residential inventory will continue to grow in the coming years,

as the stable economic situation and the developing market present

favorable conditions for real estate developers

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CROATIA

LEGISLATION

A new law on mediation in real estate transactions was adopted

in October 2007, and it is expected to deliver additional protective

measures to the real estate market. The law itself brings a lot of

new things, such as obligatory education for real estate agents

who now must officially enter the registry. The law also

prescribes obligatory ways of damage insurance, states integral

contract elements, determines obligations for parties and

mediators, and much more.

The construction law was also changed and adapted, as the

increased level of decentralization simplified and quickened the

process of gaining necessary construction licenses, and changes

were made that require construction performers to apply for valid

registration, all with the purpose of increasing the quality of

construction and bringing more order in the way business is

conducted on the construction market.

LEGISLATION

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CROATIA

REASONS TO BUY IN CROATIA

Despite of the increased number of tourists over the last several

years, prognosis until 2011 says that Croatia will remain to be an

attractive destination – due to the successful preservation of its

environment.

Croatia resembles Spain or Portugal 20 years ago – it is

undiscovered, fresh, attractive and desirable – it attracts

experienced travelers that are looking for a place that is

simultaneously different and fascinatingly interesting because of

the surprises it offers. Large urban centers and the Western

culture are nowhere in sight.

Untouched coastal area that spreads across 1100 miles

alongside the Adriatic coast, as well as the 260 sunny days per

year, define Croatia as a wonderful tourism destination and a

true vacation paradise. Considering the standard in Western

Europe, the real estate prices are still very accessible.

A large amount of interest from foreign investors creates a very

dynamic market. Although the market is rapidly developing, there

is the chance that it will keep getting bigger compared to Spain

and France.

The quality of real estates is very high!

Past few years demonstrated that Croatia is becoming much

more accessible by air, while the airplane tickets are becoming

less expensive. Croatia is not far from Great Britain or Ireland (2

½ - 3 hours by plane). Airline companies that have more

accessible prices are in negotiations regarding the permission to

land their airplanes in Croatia.

Real estate transactions can be greatly simplified if you choose

an adequate associate in Croatia.

Macroeconomic circumstances and political relations are stable

and safe due to the probable admission of Croatia into the EU.

FOREIGN INVESTORS

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CROATIA FOREGNEIRS AS REAL ESTATE OWNERS IN CROATIA

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In past several years we have witnessed a growing

interest of foreign nationals for properties in Croatia,

especially for those on the Adriatic coast. Although we first

saw it with a touch of sympathy, an unstoppable interest of

foreigners for all our properties was a pleasant surprise.

Stabilization and Association Agreements defined that

when buying a property for all EU citizens have the same

options as Croatian citizens.

However, there are some different conditions for the

acquisition of property for foreigners in general and foreign

legal entities. Foreign companies will acquire a property

more easy since it is sufficient to establish a branch office in

Croatia and automatically they are allowed to acquire all

properties that are available to Croatian citizens.

At this moment, no one knows how many foreign owners

have a second home in Croatia because the official figures

differ from those in reality. According to data from 2006 the

Ministry of Foreign Affairs registered only about 15 000

purchases, but the situation on the coast (where in every

small village people know exactly who owns each house

and whom it is sold to) is saying that the official statement is

far less than reality.

On the foreign property markets and tourism fairs, real

estate agencies advertise buying a house on the Croatian

coast as "investment that van be returned fully in ten years

through rent“, which suggest the real estate business at first

place.

The largest number of properties that foreigners are buying

or looking to buy is located in Istria and Dalmatia. This fact

was expected because many foreigners coming from

countries that do not have access to the sea or from

countries with a cold and unattractive sea coast. By

improving the quality of roads to Croatia and more rapid

construction of the roads the warm Adriatic Sea has

become more accessible to them.

CROATIA LAWS LIMITING FOREIGN OWNERSHIP, AND EUROPEAN DEMAND

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All foreign nationals from EU and outside it can not buy

property in the excluded areas, namely:

* Agricultural land, defined by a separate law

* Protected nature areas, also under special legislation

Austrians, Germans, Britons, Italians, Russians,

Hungarians, Czechs, Slovaks, and even the Scandinavians

are buying real estate on the Adriatic coast and its

hinterland.

Some precise number of statistics are not available, but the

fact is that the Slovenes are the biggest buyers,

concentrated on the region of Istria: Pula, Crikvenica, and

the islands of Krk, Pag and Cres.

As we move southern Slovenes buy less and less. The

British, like Italians, are mostly choosing Istria, although

there are interested in Dalmatia, especially in Dubrovnik.

Hungarians and the Russians do not choose the location,

but will very carefully selected the property, while the

Austrians and Germans are buying what they please

regardless of location because the distance is irrelevant for

them.

An online record of 40% of international visits regarding real

estate is showed, mostly from Germany, followed by Austria

and Italy.

CROATIA

The acquisition process:

1. A written offer for the real estate is issued by the vendor. If

the conditions are convenient, the buyer should return a

written confirmation.

2. Pre-contract agreement between the buyer and vendor. The

buyer in most occasions is expected to pay a down payment

equivalent to approx. 10% of the total selling price.

3. The buyer then should apply for the consent from the Ministry

of Foreign Affairs (MOFA). Necessary documents include:

- The purchase agreement

- The seller’s proof of title

- Certificate confirming that the property is within the

construction zone

- Proof of citizenship for the buyer

- Power of attorney, if an attorney is involved.

4. A binding contract is then prepared by a lawyer and signed by

the notary. An official note of the contract should be made in

the Land Registry. Once MOFA consent is granted, the

contract needs to be registered in the Municipal Cadastral

Department’s Land Books, and the purchase tax needs to be

paid.

At pre-contract stage, the down payment is not returned if the

buyer fails to fulfill the terms of the contract. In cases where the

seller fails to fulfill his part of the contract, he is expected to

compensate the buyer by paying double the sum of the deposit.

FOREIGN INVESTORS

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CROATIA

TAXATION SYSTEM

Croatian taxes are proportional to taxes of other countries in the

region, although they are still relatively high – for example, VAT is

as high as 23%. The Croatian Government has the ambition to

lower the taxes, but is currently prevented by some of the needs

of the government budget.

If you buy a real estate in Croatia that was built prior to

December 31st 1997, you pay a real estate tax that is 5% of the

contract value.

If you buy a new building that was built after December 31st

1997, you pay 23% of VAT, which is calculated by the price of

real estate construction, as well as a 5%-real estate tax that is

determined by the value of the part of the property on which the

object was built.

If you buy a used real estate built after December 31st 1997, you

only pay a real estate tax that is 5% of the contract value.

The process of real estate transaction also includes some legal

fees, which usually reach about 1.5% of the buying price + VAT.

If you’re buying the object in the name of the company that is

registered in Croatia, there are some additional legal and notary

fees that end up around 2.300 USD.

TAXATION SYSTEM

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CROATIA

The real estate tax is 5%, but it isn’t paid if the person is buying

its first real estate (if the person resides in Croatia). The tax is not

paid if 50 m2 are bought for one person, 65 m2 for a two-person

household, 83 m2 for a three-person household, and 94 m2 for a

four-person household.

The price of a residential tax for those people that don’t have a

registered place of residence in Croatia is 2 USD/m2 of the

object’s size per year.

The yearly tax on land is 0,38 USD/m2

The saving is 0.52% of the real estate’s market value per year

Garbage disposal expenses are about 77 USD per year

Electricity expenses – price of 1KW in 2008 is around 0.15 USD

Water expenses – 1.54 USD per cubic meter in 2008

Insurance for the house and household depends on the size of

the house; the price for a 160 m2 house is around 770 USD per

year

You pay a 35% tax on income in case you sell the house before

three years of owning it

You pay a 5% tax in case you inherit a real estate

Car taxes are from 60 to 310 USD per year

Taxes on marine vessels are from 45 to 1000 USD per year

Income taxes depend on the amount of profit and the number of

employees, and they move in the 15%-45% range

Tax on a vacation house is 1.5-4.6 USD/m2 per year

Agriculture taxes, which amount to 60-77 USD per hectare, are

paid for uncultivated agricultural land

Taxes on construction parcels are rarely applied, and they cost

0.15-1.54 USD/m2 per year

TAXATION SYSTEM

30

CROATIA CROATIAN TOURISM - OVERVIEW

31

Croatia is a leader in establishing political stability in the

region, and millions of tourists visit it yearly and that number

continues to increase, what confirms the attractiveness of

Croatian tourism and hospitality.

It is believed to be the newly discovered paradise for

tourists from all over the world. Because of its untouched

nature, extraordinary beauty of its coastline, alluring Adriatic

sea, rich cultural heritage and cuisine, Croatia is considered

to be one of the most desirable destination for people

seeking peace and quiet in the mild Mediterranean climate.

CROATIA DALMATIAN TOURISM - OVERVIEW

32

Dalmatia is the greatest Croatian tourist region.

There are three large cities in Dalmatia: three thousand

years old Zadar, Split – home of the Roman Emperor

Diocletian, and at the extreme south Dubrovnik a city on

UNESCO World Heritage List.

Split is the seat of Split-Dalmatia County and makes an

important traffic intersection as well as largest ferry-port on

the Adriatic coast of Croatia. Its International Airport is the

second largest and has a large importance in transport in

Croatia, while the airport on the island Brac is built for

smaller aircrafts, mainly for tourism purposes. The richness

of Middle Dalmatia is really diverse, and does not apply

only to the sun, natural resources, turbulent history, the

beauty of the Mediterranean and continental dishes, but

also to the cultural heritage which shaped generations and

generations of its habitants.

The Adriatic is one of the most beautiful seas in the world

whose cleanliness is one of the world's best. Contribute to

its attractiveness is the color and transparency of water

which increases towards the south and offshore. An

indicator of water purity is the average transparency of the

Adriatic Sea is 20-33 m, and the highest transparency was

measured in the oversea area and is 56 m, and endemic

species that inhabit the sea - Adriatic Bračić (Fucus

virsoides) and bottlenose dolphins.

CROATIA DALMATIAN TOURISM - OVERVIEW

33

Croatia is receptive country, in a large extent it accept

the tourists from the earliest beginnings of the tourism.

Until the first half of the 20th century it was the destination

of mass tourism. According to statistical data in the 1938,

the highest tourist traffic is shown in entire Croatia, even in

the parts under the Italian administration. Specifically, there

were 500 000 tourists who have made 3 million overnight

stays, of which 61% related to foreign tourist traffic. Most

visited tourist destinations are Opatija, Crikvenica and Rab.

Mass tourism has spurred economic development all across

regions. In the period from 1991 Croatia is among the

medium developed touristic countries. The development of

tourism more attention is devoted to the individual needs of

tourists and a clean and preserved environment as well.

More special forms of tourism are formed, major being

yachting, sports, cultural and rural tourism. It is known that

the most sought after tourist destinations in Croatia are

situated on the coast. So-called business tourism prevails in

cities like Zagreb, Osijek and other major cities, and various

spas. Croatia places a lot of attention towards nautical

tourism and all the accompanying facilities, so it becomes

the desired destination for a large number of foreign visitors

who all appreciate the untouched nature and relax in

solitude and silence.

References: Republic of Croatia - Central bureau of statistics, Croatian motorways ltd. - Major transport infrastructure in Croatia, Regional Development Fund of the Republic of

Croatia, www.hr – Croatian homepage, Croatian auto club, Colliers international, Croatia, King Sturge, Croatia, www.timesonline.co.uk , www.guardian.co.uk

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