Choosing the purchase method

Advantages & Disadvantages

When buying a property in Croatia, you basically have two options: buying in the name of a company or as an individual. Find out about the benefits and difficulties for each of these methods below.

Choosing the purchase method

1) Company Route

Advantages

  • The whole ownership process can be completed in 10-12 weeks.
  • If buying a newly built property you will have been charged VAT at 22%, with a company you could claim this back.
  • The avoidance of Real Estate Transfer Tax when you come to sell your property is a major advantage of the company route.
  • If buying land or a property that requires building permits you can only apply if you are the registered owner. In most circumstances you will not wish to wait months for permission so the more convenient route is the company way.
  • In some counties it is easier to obtain Rental Licenses if you own the house.

Disadvantages

  • The average set up costs are around £1,000 and you will need an initial share capital of £2,000.
  • The bureaucracy, tax, costs and paperwork involved in maintaining a company in Croatia is complex and ongoing. You will need to employ a Croatian accountant to keep you up to date-this will cost around £1,000 pa.
  • Buying as a company has always suffered from the suggestion that at some point in the future the British Government would introduce a new and substantial tax aimed at anyone who owns a property through a company, rather than those who hold properties in their own name.
  • Using the company route for tax avoidance could also backfire in the future, courtesy of the Croatian government, for example Portugal in January 2004 introduced a new law which levied an annual charge of 5% of any property owned by a company, to tighten up on people avoiding stamp duty.

2) Private Individual

Advantages

  • You gain immediate occupancy.
  • Low cost.
  • You can refurbish your house immediately within the existing footprint.
  • Avoid concerns over future law changes regarding the use of companies to purchase overseas properties.

Disadvantages

  • You do not own your property until you receive permission; this can take 2+ years in some counties.
  • With ownership on hold you cannot extend your property.
  • You cannot claim back the VAT if buying new property.
  • In some counties obtaining a Rental License may be difficult.
  • You cannot have the utilities in your name, so contracts must be drawn up carefully with the vendor to ensure ongoing supply.

1) Company Route

Advantages

  • The whole ownership process can be completed in 10-12 weeks.
  • If buying a newly built property you will have been charged VAT at 22%, with a company you could claim this back.
  • The avoidance of Real Estate Transfer Tax when you come to sell your property is a major advantage of the company route.
  • If buying land or a property that requires building permits you can only apply if you are the registered owner. In most circumstances you will not wish to wait months for permission so the more convenient route is the company way.
  • In some counties it is easier to obtain Rental Licenses if you own the house.

Disadvantages

  • The average set up costs are around £1,000 and you will need an initial share capital of £2,000.
  • The bureaucracy, tax, costs and paperwork involved in maintaining a company in Croatia is complex and ongoing. You will need to employ a Croatian accountant to keep you up to date-this will cost around £1,000 pa.
  • Buying as a company has always suffered from the suggestion that at some point in the future the British Government would introduce a new and substantial tax aimed at anyone who owns a property through a company, rather than those who hold properties in their own name.
  • Using the company route for tax avoidance could also backfire in the future, courtesy of the Croatian government, for example Portugal in January 2004 introduced a new law which levied an annual charge of 5% of any property owned by a company, to tighten up on people avoiding stamp duty.

2) Private Individual

Advantages

  • You gain immediate occupancy.
  • Low cost.
  • You can refurbish your house immediately within the existing footprint.
  • Avoid concerns over future law changes regarding the use of companies to purchase overseas properties.

Disadvantages

  • You do not own your property until you receive permission; this can take 2+ years in some counties.
  • With ownership on hold you cannot extend your property.
  • You cannot claim back the VAT if buying new property.
  • In some counties obtaining a Rental License may be difficult.
  • You cannot have the utilities in your name, so contracts must be drawn up carefully with the vendor to ensure ongoing supply.

Further reading

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