According to the Real Estate Sales Tax Act, any acquisition of the real estate by purchase, exchange, inheritance, donation, entry, and exclusion of real estate from a company, acquisition of real estate in liquidation or bankruptcy proceedings, acquisition based on the court or other body decisions, acquisition under the law and other ways of acquiring real estate from other persons, is considered a real estate transaction that is subject to real estate transfer tax at the rate of 3%, except for that on which value-added tax is calculated. However, Chapter 4 of the Real Estate Sales Tax Act prescribes certain exemptions:
- General exemptions;
• Tax exemptions when entering real estate into a company; and
• Tax exemptions for an inheritance, gift, and other acquisition of real estate free of charge.
GENERAL EXEMPTIONS
The general exemption covers those legal and natural persons who, based on their status, are exempted from the obligation to pay real estate transfer tax:
- The Republic of Croatia and local self-government and administration units, state authorities, public institutions, foundations, the Red Cross, and similar humanitarian associations established based on special regulations,
- diplomatic or consular missions of a foreign state, subject to reciprocity, and an international organization for which an exemption from payment of real estate transfer tax has been agreed by an international agreement,
- persons who acquire real estate in the process of returning confiscated property and consolidation of real estate,
- displaced persons and refugees who acquire real estate by exchanging their real estate abroad,
- citizens who buy a residential building or apartment (including land), on which they had an occupancy right or with the consent of the occupancy right holder according to the regulations governing the sale of apartments on which there is an occupancy right. The same applies to protected tenants who buy a residential building or apartment in which they live based on a lease agreement,
- persons who acquire real estate following the regulations governing the conversion of social ownership into other forms of ownership,
- persons who acquire real estate based on a lifetime maintenance contract who are heirs of the first hereditary order with the real estate provider,
- persons who, by the dissolution of co-ownership or the division of joint ownership, acquire separate parts of that or those real estates, regardless of the ratios before and after the dissolution of co-ownership or division of joint ownership.
TAX EXEMPTIONS FROM THE INTRODUCTION OF REAL ESTATE INTO A COMPANY
To encourage and develop entrepreneurship, Article 12, paragraph 1. of the Real Estate Sales Tax Act prescribes an exemption for the acquisition of real estate when a company enters into the company’s capital. Namely, from January 1, 2017, the exemption from real estate transfer tax can be applied when the real estate is entered into the company in the position of capital reserves. This procedure is not obligatory to be conducted through the court register, but the right to exemption is proven by appropriate documentation at the competent Tax Authority.
Real estate transfer tax is not paid when real estate is acquired in the process of merging companies, as well as in the process of dividing a company into several of them.
TAX EXEMPTIONS FOR INHERITANCE, DONATION, AND OTHER ACQUISITION OF REAL ESTATE WITHOUT COMPENSATION
Article 15 of the Law on Public Procurement stipulates that exemption is exercised by:
- Spouse, descendants, and ancestors who form an upright line and adoptees and adoptive parents who are in that relationship with the deceased or the donor;
- Legal and natural persons to whom the Republic of Croatia or a unit of local and regional self-government donates or gives real estate free of charge for compensation or other reasons in connection with the Homeland War and
- Ex-spouses when arranging their property relations in connection with a divorce.
