The ABCs of Taxes for the Foreign Property Owner in Croatia: Facts, Myths and Favorable Lump Sums
When deciding on the investment of a lifetime – buying a house or an apartment in Croatia – you face excitement, but also some fear. The sight of the crystal clear Adriatic Sea is one thing, but the sight of a document from the tax office is another. We know the thrill of uncertainty.
Questions immediately arise in one’s mind that can effectively cool holiday enthusiasm: “Is Croatia a property tax haven or a hidden trap? How much percentage do you have to give back to the state on the transaction? And most importantly: How to avoid paying taxes in two countries – Croatia and Poland, Germany, or Austria?”
Let’s start with a fundamental piece of news that will immediately bring relief: the Croatian property tax system is in fact exceptionally simple, transparent and extremely gracious for non-residents.
Here we don’t have to deal with a maze of complicated fees or the annual, draconian cadastral tax we know from other parts of Europe. Croatia is playing the open card, opting for simplicity and low burdens.
That is why we have prepared this guide. We’ll take Croatian taxes apart. We’ll show that the 3% purchase tax is the only big, one-time fee, and the model flat-rate rental taxation is a real game changer For every investor. Without legal jargon, instead with concrete examples.
Read more. We assure you that after this article, tax issues will become the least of your worries!
Buying Real Estate: One-time Fees You Need to Know
Let’s start at the beginning, which is when the dream becomes a reality. Unlike monthly bills, these charges only occur once.
Key Fee: Property Transfer Tax (Porez na promet nekretnina).
This is the only, significant, one-time fee you will encounter when buying from an individual or on the secondary market.
What is the height? The rate is fixed at 3% of the market value of the property (usually the amount appearing in the purchase and sale agreement).
When and to whom do I pay? You pay tax to the tax office (Porezna Uprava) Upon receipt of the tax decision. What is important: you have 15 days to do this from the date of the decision. This process is always supervised by our agency and a lawyer, so you don’t have to worry about deadlines.
Important Exception: If you are buying a property from a developer, which is a VAT payer (and this is the case with most new buildings), you are exempt from this 3% tax! The VAT is already included in the purchase price. This makes a huge difference – by buying “first-hand”, you actually save that 3% at the start.
Additional Charges:
Beyond that 3%, you still have only minor formal fees:
Notary: The fee for the certification of your signature on the contract. This is a relatively low cost, calculated according to the rates of the Croatian Chamber of Notaries.
Court Fee (Land Court): A symbolic amount you pay to have your name entered in the land records (Gruntovnica). Full ownership for a few dozen euros. It couldn’t be simpler.
Taxes on Possession: No Costly Surprise
Here we come to the section where many of our customers are catching their heads in disbelief.
The Great Myth Debunked: No Cadastral Tax!
Forget about the annual high property value taxes you have to pay in other European countries. Croatia doesn’t have that!
In Croatia, there is NO annual cyclical property tax (cadastral tax), calculated on the market value of the property owned.
This is the foundation on which we build investment attractiveness. This is a permanent, powerful savings!
The Only Fee: Porez na nekretnine (New property tax starting in 2025.)
Here we need to be precise, because the regulations have just undergone reform. However, we will start with the most important news, which for the investor is crucial and has not changed:
Croatia STILL does NOT have a cadastral tax based on the market value of the property!
This is a huge relief. You won’t be paying 1% or 2% of your home’s market value, as is the case in the U.S. or in some Western European countries.
What has changed? As of January 1, 2025, the old “vacation home tax” has been replaced by a new one Property Tax (Porez na nekretnine).
What is it? This is a tax paid once a year to the local municipality. It applies to all Properties that are not used for permanent residence. So if you buy an apartment for rent or as a “second home” (and are not permanently registered in it), you are subject to this fee.
How much is it? The decision is up to the local authority (city or municipality), which can set the rate within the statutory ranges: EUR 0.60 to EUR 8.00 per m² of floor space per year.
What does this mean in practice? Popular tourist resorts can aim for the top fork to finance infrastructure, while smaller resorts can stay with minimum rates.
Example for an 80 m² apartment:
Optimistic Variant (small municipality): 80 m² x €2.00 = €160 ANNUALLY.
Maximum Variant (top resort): 80 m² x €8.00 = €640 ANNUALLY.
Even in the most expensive scenario, we are talking about an amount that is fully predictable and still competitive on a European scale. These aren’t thousands of euros that eat into your profit, but it’s worth checking the rate in a specific municipality before you buy!
Local Fees:
Remember Municipal Naknada (municipal fee for infrastructure) and Pričuva (Community renovation fund) are service charges, not taxes strictly speaking. They are low and were discussed in detail in our previous article on maintenance costs.
Rental Taxes: a Lump Sum That Investors Love
If you are buying a Croatian property as a tourist rental investment, this section is the most valuable for you. Croatia has one of the friendliest rental tax systems in Europe.
Basic Model: Flat Rate (Paušalno Oporezivanje)
This is the reason why investing in short-term rentals in Croatia is so exceptionally profitable. Forget about the complicated accounting of all income and expenses. Croatia offers a solution ideal for small and medium-sized investors.
How it works. You pay a fixed, predetermined, token amount per registered bed (per person), completely independent of how much you actually earn. We call this a lump sum (paušal).
Rate (Note – Change from 2025): After the 2025 reform, flat rates are set by local municipalities depending on the the tourism category (Index of Tourist Development, ITR) to which your property belongs.
| ITR Category | Minimum annual amount per bed (EUR) | Maximum annual amount per bed (EUR) | Default amount (if JLS does not determine) (EUR) |
| I (Best developed for tourism) | 150 | 300 | 225 |
| II | 100 | 200 | 150 |
| III | 50 | 150 | 100 |
| IV | 20 | 100 | 60 |
Example: If a property in Sibenik (category I) has 4 beds, and the local government has set the rate at €200 per bed, the annual Paušal will be:
4 x 200€ = 800€
Absolute Game Changer: Imagine that your 4-bed (2-bedroom) apartment generates €20,000 income during the season. Instead of paying tax on this amount, you pay, for example, 4 beds x €200 =. 800 EUR tax per year.
This is your entire income tax burden! The system is fully legal and is the primary means of taxing tourist rentals for individuals.
Remember the Remaining Additional Fees (Action Points):
The Paušal model is simple, but you have to add a few nominal annual fees, which we at KokoStay always include in our calculations:
- Tourist fee (Turistička pristojba): Fee, the amount of which is set by the region. It is usually €50 – €100 per bed per year.
- Contribution to the Chamber of Tourism (Članarina): Symbolic flat fee, usually less than €10 per bed per year.
- Tourist tax (Boravišna pristojba): It is paid by the guests, and you as the owner or management company collect it and drain it. It is a symbolic amount (e.g., 1-1.5 EUR/person/night).
Even after all these fees are added up, the annual tax and paratax burden remains ridiculously low, making Croatia a true tax haven for the small and medium-sized investor in short-term rentals.
VAT on rental (PDV) – The trap for non-residents (and how to avoid it)
In Croatia, the standard VAT rate for tourist accommodation services is 13%. This tax is paid on rental income. And this is where a key principle of Croatian law enters the picture that you need to know about:
Rule: In Croatia, as an individual, you can be exempt from registering for VAT (exemption threshold), only if you have Croatian tax residence.
⚠️ Warning: If you are non-resident, you are not bound by any threshold. This means that theoretically, As soon as you start tourist rentals, you are required to register for VAT (PDV ID) and monthly/quarterly accounting for this tax.
Sound complicated? It is, but fortunately there is a legal and proven way, as a non-resident, to not have to do VAT accounting:
Solution: Reverse Charge with KokoStay
This is the mechanism that solves your problem. Instead of renting directly to tourists (which requires VAT registration), you sign a property management contract with a Croatian tourism agency – that is, KokoStay.
What You Do: You provide The service of making the facility available (rental to an agency) for the benefit of KokoStay.
What KokoStay does: We are the ones who provide the actual service of accommodation to tourists and it is on us that the obligation to account for VAT (reverse charge principle).
Conclusion: By working with a licensed agency such as KokoStay, you avoid the need to register as a VAT payer in Croatia, file complicated declarations and double bookkeeping. This is the safest and most legally efficient model of operation for a non-resident.
Avoiding Double Taxation: Questions from Abroad
This is an area where certainty is needed. No one wants trouble with the home tax office.
International Contracts: Your Protective Umbrella
The good news: Croatia has signed Double Taxation Avoidance Agreements (DTAs) with most European Union countries, including Poland, Germany, the Czech Republic and Austria.
What does this mean in practice? According to these agreements, income earned from the rental of real estate (so-called “real estate income”) is subject to taxation in the country where the property is located – that is, Croatia.
This income is then included in your annual tax return in your country of residence (e.g., Austria), using the appropriate UPO method (most commonly, the exclusion with progression or proportional credit). This way you don’t pay for the same thing twice.
Key Tip: While the mechanism is simple, we always recommend consulting an accountant in your country of residence (Poland, Germany, Czech Republic) who specializes in international accounting. This is a simple visit that will take all the stress out of your declarations and guarantee formal correctness.
Summary
As you can see, Croatia’s property tax system is not an enemy, but an ally of the investor. It provides simplicity, low transaction costs (only 3% on the secondary market), and with no cadastral tax and an extremely favorable rental lump sum, it puts Croatia among the best places to invest in Europe.
Don’t let myths stop you from making an excellent, safe and financially transparent investment.
Want to find out exactly how much Porez na Kuće za Odmor in the municipality of your choice and how to optimize your rental profits with a lump sum? Get in touch with us! With us, the buying process is legally secure and financially transparent – from the first page to the last.
