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WHAT TAXES DO NATURAL PERSONS PAY WHEN BUILDING AND SELLING REAL ESTATE IN THE REPUBLIC OF CROATIA?
In a large number of construction projects for the construction of residential buildings or detached buildings, houses, natural persons participate as investors. Natural persons participating as investors are increasingly foreign citizens, citizens of the European Union as well as citizens of other countries.
Citizens of the European Union acquire real estate and participate in the construction of residential buildings in the Republic of Croatia in the same way as Croatian citizens.
Investors often decide to build as natural persons due to smaller financial obligations and additional levies if the real estate is purchased and the construction is done through a trading company (bookkeeping services, company tax, value added tax, etc.)
When building and selling real estate in which the investors are natural persons, it is very important to know the tax and legal aspect of such investments, all in order to determine whether such an investment is economically adequate and profitable, or whether it is necessary to decide to establish a company and realize the investment through a company.
The sale and alienation of real estate in the tax aspect of the sale of real estate by natural persons is regulated by the provisions of the Income Tax Act (Official Gazette No. 115/16, 106/18, 121/19, 32/20, 138/20, 151/22, 114/23 ).
Income from property and property rights is also considered to be the income that the taxpayer receives from the sale of real estate and property rights. Disposal is considered sale, exchange and other transfer. Income is the difference between the receipt determined according to the market value of the real estate or property right that is alienated and the purchase value increased by the increase in producer prices of industrial products.
Income from the sale of real estate is not taxed:
- if the alienation was made between spouses and relatives in the first line and other members of the immediate family
- and between divorced spouses if the alienation is directly related to the divorce
- and by inheriting real estate and property rights
- if the real estate was used as a residence for the taxpayer or dependent members of his immediate family, and also in the case if the real estate or the property right was alienated after 2 years from the date of acquisition.
Furthermore, income from the alienation of real estate and property rights is taxed if more than three real estates of the same type or more than three property rights of the same type are alienated within a period of five years from the date of acquisition of the real estate or property right.
If a building with several apartments or business premises or construction land or several land parcels is sold, each apartment, business premises, construction site or land parcel is considered one real estate.
Income is the difference between the total amount of receipt determined according to the market value of real estate or property rights that are alienated in a period of 5 years and their purchase value increased by the increase in producer prices of industrial products and investment costs for which the taxpayer has credible documents.
Income tax is determined at a rate of 24%.