Taxation system in Croatia
The taxation system is friendly towards foreigners in that, if you are tax resident in Croatia, you can receive your foreign pensions free of taxation. You can also receive interest on loans and investments tax free. And, if you own your house there for three years or more, you will pay no Capital Gains Tax if you sell it after this period. If you do dispose of your property within a three year period, you will have to pay 35% Capital Gains Tax.
You become resident for tax purposes in Croatia in one of two ways: physical presence or available accommodation. You meet the physical presence test if you stay for at least 183 days under circumstances that indicate your visit is not temporary. The 183-day visit may overlap calendar years. You meet the available accommodation test if you have accommodation in Croatia at your exclusive and continuous disposal for at least 183 days under circumstances which indicate you intend to keep and use it.
Your length of stay is not imp nor does it matter if the acorn is owned or rented. Such "deemed residence" is very attractive for foreigners who wish to maintain legal residence in Croatia without having to be physically present for a minimum period.
Persons physically present in Croatia for more than 182 days annually are considered tax resident. There is no wealth tax in Croatia and no inheritance 1 first line of succession. In other cases it is only 5%. Tax on rental income is 15% which, after all allowable expenses, is a net rate of 7.5%. VAT is charged on almost all goods and services including property at 22% and is included in I Croatia property prices quoted.
Tax rates change frequently and it is
advisable to check the tax position with your lawyer at the time of purchasing
your property in Croatia. There is also a double taxation agreement
between Croatia and UK, so one does not end up paying tax twice.
However, you will pay the higher of the taxes as the UK revenue authorities
will not refund you tax if the rate is higher in the UK than in Croatia.
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