vat and house purchase

[james]

Have read (in the kpmg guide to purchase of real estate in croatia) that if a house is purchased through the company method in croatia that the vat payable by the buyer is recoverable. Is this true and under what circumstances can this be the case? Is it difficult to set up a company and what would average set up costs be including initial share capital,vat registration and legal fees-both initial and and recurring- and other associated costs.
This is all news to me so any information would be welcomed.
James

[Giles]

i am in the process of doing the same so maybe i should wait until we have finished before i comment. The set up of the company seems to be more striaghtforward than the actual purchase of the property. i would count on 4-5,000 euros including initial basic capital

[James]

Thanks for the info Giles re costs. Does anyone have any info on whether it is possible to reclaim the vat and under what circumstances?
Has anybody actually purchased through this method and what were their experiences?

Any info is appreciated
James

[fozzy]

i've heard that if you do buy the house through a company, that it's more difficult to pass it on to your children or to sell it

[james]

Giles
Noted your replyof 24th october. Are you expecting to reclaim the vat on purchase of your house through the company method. If yes is it a straight forward process? Any info you have on this or which anybody else can provide would be appreciated as i am short of info on this and cant find a reliable scource to clarify this point. Any help would be appreciated.
James

[Giles]

Sorry - I meant that I am settgin up a company. The house I am buying is pre-1997 and is therefore not VAT-able. I have no idea of the "simplicity" of reclaiming VAT - I harldy understand it in the UK!! The one thing to remember is that if you are buying a house that has VAT and you reclaim that VAT then you must charge VAT when you sell.

[Mirko]

I am puzzled by all this: a friend bought an apartment in Zadar, and nobody mentione any VAT!

[Anja]

The taxing system in Croatia on the property purchase works this way:
If a house has been purchased by a private person or a company from a private person (the house is not newly built but old) the tax paid by the buyer is 5%
This is not the 5% of the purchase price but the 5% of the council valuation price.

If the house has been purchased by either a company or a private person from a development company or a self employed builder and the house is either newly built or recently has had a building permission for a redecoration or redevelopment then the tax paid by the buyer is 22% .

If the house has been bought by either a company or a private person from a private person than the tax paid is 5% of the valuated price.

I am not sure whether this 5% can be recovered.

[Anja]

Anja said:

If the house has been bought by either a company or a private person from a private person than the tax paid is 5% of the valuated price.

Sorry -this should read:
If the house has been bought by either a company or a private person ( and this is a newly built or newly redecorated house) from a private person than the tax paid is 5% of the valuated price.

[Rich]

Anja -
'If the house has been purchased by either a company or a private person from a development company or a self employed builder and the house is either newly built or recently has had a building permission for a redecoration or redevelopment then the tax paid by the buyer is 22% '.

Anja, are you sure that the above that you wrote in above post is truly the case? If so, how do the government expect to get buyers of new build property with taxes of 22%?

P.s. How do I put another a quotation from another post in a white box?

[Giles]

This is an interesting topic and I would (respectfully) query Angela.

If a private person or company buys a new property (i.e. post 1997) then I thought that 22% VAt was payable on the building element of the transaction and 5% Real Estate Transfer tax (RETT) on the land element.

From what I understand the private person would not be able to reclaim the VAt whereas a company would. And neither would be able to reclaim the 5% RETT.

However, now that that building is in the "VAT system" the next sale would also be subject to VAT. As vendor this is not a problem if you are selling to a company because they can reclaim the VAT however if it is a private person then again they have to swallow the 22%.

Am I right or am I talking baloney? Come on, Peter or Graham, you guys tend to know the answers to things like this??!!

[Anja]

Giles said:

This is an interesting topic and I would (respectfully) query Angela.

If a private person or company buys a new property (i.e. post 1997) then I thought that 22% VAt was payable on the building element of the transaction and 5% Real Estate Transfer tax (RETT) on the land element.

From what I understand the private person would not be able to reclaim the VAt whereas a company would. And neither would be able to reclaim the 5% RETT.

However, now that that building is in the "VAT system" the next sale would also be subject to VAT. As vendor this is not a problem if you are selling to a company because they can reclaim the VAT however if it is a private person then again they have to swallow the 22%.

Am I right or am I talking baloney? Come on, Peter or Graham, you guys tend to know the answers to things like this??!!

I think you are right here.
22% VAT in Croatia is called PDV.
(Porez na dodatnu vrijednost)
You probably have seen the kpmg document on taxes
but if not it is worth checking:
www.kpmg.hr/dbfetch/52616e646f6d4956f4444db6793a4bf473c77466fa7545c5/croatiarealestate.pdf
It looks like if the seller is VAT liable and if the seller sells redeveloped property than the buyer has to pay 22% VAT on it.
If the buyer is VAT liable than he can recover this.
Re 5% Real Estate transfer tax - it is not recoverable.
Also there is 35% tax ( tax on the profit -difference between purchase price and the selling price ) plus local authority tax ( prirez) if property has been sold within three years of the purchase.

[Anja]

Guest-Rich said:

Anja -
'If the house has been purchased by either a company or a private person from a development company or a self employed builder and the house is either newly built or recently has had a building permission for a redecoration or redevelopment then the tax paid by the buyer is 22% '.

Anja, are you sure that the above that you wrote in above post is truly the case? If so, how do the government expect to get buyers of new build property with taxes of 22%?

Unfortunately this is true.
Sometimes the 22% is included into the price ( I have seen a few adds like this..)

[Anja]

Guest-james said:

Is it difficult to set up a company and what would average set up costs be including initial share capital,vat registration and legal fees-both initial and and recurring- and other associated costs.
This is all news to me so any information would be welcomed.
James

Our partners in Croatia ( Split) charge £1200 EURO for the whole process of registering of a company plus you need to deposit £2500 on the company account ( but this is yours afterwards of course).
The whole process lasts 7 working days.
The company name has to be either in Latin or Croatian but it can be your surname as well.

[Graham - Bosmere]

With regard to asking Peter Ellis or myself about VAT(pdv) on houses, I am afraid I would not be a lot of assistance - if you want to rent them out, get to Croatia cheaply etc then yes I can help, but for purchase advise etc., Peter and his wife are the experts.