Buying a Property in Croatia (with Slovenia & Montenegro)<= /span>

Why are we dealing with these countries under one hea= ding?

Mainly, to save space. Because they all formed part of the former Yugoslavia there are many similarities between the legal and administrative systems in these countries. Putting the three = of them together is politically incorrect and does pose some problems when explaining the process but it was, I'm afraid, unavoidable. The main f= ocus of this section is Croatia as that is where the bulk of the activity lies – though there is currently a huge increase in interest in neighbouri= ng Montenegro where people think (not always correctly) that they will get bet= ter value.

Where are People Buying?<= /span>

In each of these countries there has bee= n an explosion of interest by foreigners interested in buying property. From the British point of view, the strongest market, by far, is the Croatian market. There is, however, growing activit= y in both Slovenia and Montenegro.

The main focus of activity by foreign bu= yers is, from north to south, as follows:

Slovenia – The Coast

For most people, Slovenia is seen as a mountain destination rather than a coastal destination. There are developments being sold on the coast. We have seen particular interest around Koper, Piran and Portoroz.= Parts of the coast are, however, f= airly industrial and rather spoiled by some low-grade developments carried out ma= ny years ago.

Slovenia – Inland=

The jewels in Slovenia are to be found inla= nd. Slovenia has largely unspoilt alpine terrain. The main focu= s at the moment is in the capital, = Ljubljana; in Bled (in the hills to the = north west of the country) and in the Soca valley.

Croatia= – Istria

The coast of Croa= tian Istria has a number of very attractive but somewhat overdevelo= ped towns burdened with the aftermath of some fairly low-grade development dati= ng back a number of years. Look = out for Porec, Rovinj &= amp; Novigrad. There are also beautiful areas inland.

Croatia – Dalmatian Coast

The northern part of the Dalmatian coast — essentially from the border of Istria down to Trogir, near Split — has received relatively l= ittle attention, though there has been some activity around = Zadar and Sibenik.&n= bsp; This relative lack of interest is probably a reflection of the fact = that the coast is a little less attractive than the coast further south and the climate is not quite as good.

There has been masse= s of activity in the southern part of the Dalmatian coast. Starting with the lovely and ancie= nt town of T= rogir, a few miles west of Split, there are a whole series of small towns and villages that have enjoyed the interest of the property investor. The numbers are, however, like in Slovenia and Istria, in absolute terms relatively small.

Croatia – Dalmatian Islands<= o:p>

Much of the activity in Croatia= is on the islands. Croatia= has an enormous coastline and a thousand Islands — not all habitable. On= the main islands (Brac, Korcul= a & Hvar) there are some quite substantial developments going on. At lea= st, they are substantial in Croatian terms. They are tiny by comparison to the developments in, for example, Spain.

Croatia= – Dubrovnik

Dubrovnik is, without doubt, the jewel of the Croatian coast. It is divided into the old walled = city and newer, but still small, residential areas to the north of the old town.= The old town of Dubrovnik is a UNESCO World Heritage city. Everybody who sees it f= alls in love with it and would like to buy property there. Given that it is only about 300 me= ters across that means a massive excess of demand over potential supply and that= can only lead to rising prices. Property in the walled city is tiny and generally has no views except across a 6 foot wide alley way into a neighbouring property. The area is p= edestrianised and getting to many of the houses involves quite a steep climb. For these reasons, some people pre= fer the newer part of Dubrovnik. There are attractive high-class residential developments about 3 miles from the old city on the Lapad peninsular. Because the whole of Dubrovnik is geographically constrained by the sea and the mountains and because it is s= uch a popular location for Croatians and tourists alike, even property in the n= ew are part of Dubrovnik is in short supply and expensive. &nb= sp; Expensive, however, is a relative concept. Comparable property in, for exampl= e, Nice or Marbella would be several times more expensive.&nbs= p; In the future I believe that people will look back with nostalgia at= the prices being charged in Dubrov= nik today. This is a world-= class destination with a huge long-term potential.

Montenegro

Montenegro is Croatia= 10 years ago. It is much poorer.= It has a tiny population of only a= bout 700,000 people. It lives in a= n uneasy relationship with its bigger partner, Serbia which seems only to be= held together because the Serbians allow the Montenegrins almost total independence. The border of <= st1:country-region w:st=3D"on">Montenegro is only about 30 minutes from Dub= rovnik airport and it is the area just over that border that has received most attention. If anything, Montenegro is even more beautiful than southern Croatia. Look out, in particular, for the <= span class=3DSpellE>Kotor inlet (a real Fiord), the city of Kotor, the = amazing collection of 17^th century summertime palaces at Perast and the town of Bar.

What is available and at what price?

There is always a huge range of prices i= n any property market. This one is = no exception. You need to rememb= er that, by and large, you get what you pay for. That is to say, a more expensive property is usually more expensive because it has some special quality abou= t it and, conversely, a very cheap property is usually very cheap because it has= a very poor location, it is built to a very low standard, it is in a bad stat= e of repair -- or all three!

Prices have been rising rapidly. Some of our clients have seen grow= th of over 40% in the last year.

The table below attempts to show some ge= neral indication of prices as at January 2005.

Place & T= ype of Property	Low £	Mid £	High £
Slovenia
Farm, 10 hectares, 50 km from Ljubljana ̵= 1; superb situation and quality			£265,000
Portoroz &= #8211; Large villa (400m2 of construction) with 6 bedrooms/8 bathrooms			£395,000
50 year old house on beach in Peljesac. &nb= sp; 70m2 on 300m2 plot.			£250,000
Croatia
Istria – Rovinj – Small 2 bedroom house needing some repair	£40,000	£50,000	£60,000
Istria – Rovinj – 4 bedroom house in good order	£200,000	£250,000	£350,000
Istria – Rovinj Old Town – 2 bedroom apartment	£150,000	£200,000
Korcula &#= 8211; Apartment in renovated complex – sea views	£90,000	£100,000	£120,000
Brac I= sland – 3 bedroom villa with sea views		£200,000
Hvar I= sland – 4 bedroom villa with sea views	£250,000	£300,000	£350,000
Dubrovnik – Old City – 2 bedroom apartment 80m2 in good condition		£190,000
Dubrovnik – New apartment – 2 bedroom, 2 bathroom, near to beach, sea views, 100m2			£200,000
Montenegro
Perast = 211; C17th Palace – 5 bedrooms. &n= bsp; Needs a lot of work. A true piece of history. Stunning location on the water's edge.	£350,000
Perast = 211; Ruin – Stone built terraced house. On the water's edge.	£100,000
Kotor R= 11; Old stone built, 6 bedroom villa on 2,000 m2 plot.= Needs renovation.		£175,000
Herceg Novi – Modern 2 bedroom apartment. Sea views.		£80,000
Land with 2 ruins. 2,000m2. Sea views.	£30,000

Why are People Buying? – Slovenia as a Place to Invest

Slovenia was of the wealthies= t part of the former Yugosl= avia. It's st= andard of living is considerably higher than that in Croatia and even higher than = that in Montenegro. Prices of attractive, well positio= ned property reflect this. It is, however, possible to buy property inland at Croatian prices. Slovenia's links to the west = are stronger than those in its neighbours and, of course, Slovenia is already a member of the European Union.

Why are People Buying? – Croatia as a Place to Invest

Croatia is blessed with a government that seems absolutely committed to the preservation of its heritage, it is crystal clear water and its ecological balance. They are determined = not to commit the errors committed in Spain and n= ot to permit overdevelopment. That commitment, coupled with Croatia's natural beauty and its historic heritage make it a very attractive investme= nt location and an equally attractive holiday or retirement location. Prices are not low by Eastern Euro= pean standards. A100 square metre two-bedroom apartment in Dubro= vnik, for example, will cost you about £200,000. The same apartment in one of the s= mall island towns would be about half that amount unless it was literally on the water's edge when it might be about £150,000. If Croatia can maintain its focu= s on the quality and limited development those prices are likely to seem absurdly low in a few years time! Alth= ough older property for restoration does exist, it is in short supply anywhere n= ear the coast and any old property offered for sale is likely already to have b= een bought by a speculator and sold on at a profit.

Why are People Buying? – Montenegro as a Place to Invest

Montenegro is not nearly as advanced as Croatia<= /st1:place> as a place in which to invest or even to buy a holiday or retirement property. The whole process i= s more complicated. The system is less reliable. This does not mean to say that it = cannot be done. Those who do it are = likely to find that they have acquired an asset that will perform very well in investment terms over the next five to 10 years. Do not, however, expect immediate returns or a bonanza in Montenegro. In my judgment, it is not yet read= y for that. Dep= ending on political developments that may or may not come later. Certainly Montenegro has a wealth of na= tural beauty and some magnificent historic cities to offer to the property buyer. One curiosity in Montenegro is that although it is not yet part of the European Union, and has been given = no dates are joining, the currency in use is the eu= ro.

The Climate as a Factor in Investment

Most British people buying abroad are motivated, in large measure, by the thought of a better climate. What is "better" depends= on your personal perspective. &nbs= p;

If the property is for retirement the bu= yers will want a climate that is acceptable all year round. If the property is a holiday home = the buyers will be looking for a climate that appeals to them at the time is wh= en they are most likely to use the property.&= nbsp; If the property is for investment and for letting to the holidaymaker they will be looking for a long rental season.

Maximum Temperature - Dubrovnik

Minimum Temperature - Dubrovnik

Rainfall - Dubrovnik

Sunshine - Dubrovnik

Growth of Gross Domestic Product as a Factor in Investment

A growing economy will produce more in t= he way of growth in the value of real estate than a stagnant or declining economy. The gross domestic p= roduct is one way of measuring that growth.

The Exchange Rate as a Factor in Investment

For us, one of the key indicators of any country where investment is likely to prove successful is either a stable exchange rate against other major currencies or a rate that is slowly impro= ving against other major currencies.

A common pattern for emerging market cou= ntries is that when they first get their independence the exchange-rate sinks rapi= dly, improves slowly and then stabilises or, if the country is doing well, slowly gains ground.

If the exchange rate is rising against t= he pound or the dollar the effect is that, in addition to benefiting from any increase in the value of the property you have bought, you also benefit from the increase in value of the currency.&nbs= p; The reverse is, of course, also true.

In Croatia the currency has been= a very stable when measured against the euro for some time. It's slightly more variable perfor= mance against the pound and are simply reflects the dollar/euro or pound/euro exchange rates moving over time.

Tourism as a Factor in Investment

Estate Agents & Property Finders

Estate agents catering to the internatio= nal market are new. The market it= self has only really existed in any volume for the last two years, so you could = not expect anything else. Of cour= se, estate agency as a whole is relatively new in Croatia, dating really from <= st1:country-region w:st=3D"on">Croatia= 's independence from the communist world which started in 1990.<= /p>

There are some good, reliable local esta= te agents. There are also some h= ighly disreputable ones. There are = also good, reliable overseas agents operating in Croatia. There are, unfortunately, also a l= arge number of people who have seen the explosion in the volume of sales and who have decided to get into the business for the quick buck. Many of them know nothing about ei= ther Croatia= or its real estate market. They are = simply salesmen.

You are much better dealing with a reput= able agent. Seek recommendations.<= /span>

Be wary of the estate agent who says tha= t his fees include his services in checking out the title of the property on your behalf. Some local agents off= er this service. Traditionally t= his is a task that the agent has performed in Croatia. With the boom in foreign buyers, f= ew now do so or do so diligently. It= is dangerous to rely on the agent. Many agents, particularly the foreign agents, know little or nothing about the intricacies of Croatian title.&n= bsp; They are not lawyers. = They will understand nothing of the interaction between the Croatian and the Eng= lish legal system. Even if their intentions are entirely above board and honest, will you really have the confidence that they will alert you to any problems when, if you do not proceed, they will lose their commission?&= nbsp; Remember that the Croatian estate agent's commission is typically fi= ve per cent and, in the case of a foreign agent, often 10% of the price of the property. That is several yea= rs' salary for the average Croatian.

As a preliminary step, check out all of = the websites you can find to get an idea for the prices and types of property available. Remember that not = every agent will sell the same property at the same price.

You need to be aware that everyone is an esta= te agent! The amount of co= mmission that somebody can make by introducing a foreign purchaser to an agent can be the equivalent of a year's salary. &n= bsp; Be cautious if the taxi driver or the barn offers to introduce you to property.

It is not that all such introductions ar= e a bad thing. Occasionally you w= ill find that the waiter does, genuinely, have a brother who wants to sell his property. In this case such an introduction can work well. Y= ou will save the estate agent's fees and you may even pay less for the property then you would have done buying via the agent. More often, though, it will probabl= y end in tears. If you want to do t= his, be very careful. Often the properties will turn out do have title or planning difficulties. Sometimes they will turn out to be hugely overpriced.

If you are looking for property on the c= oast the combination of estate agents and sales direct from developers should fi= nd what you are looking for. On = the other hand, if you are looking for a 'different' property, possibly one in = an old city, inland or a project for restoration, you may well find it useful = to recruit the services of a local property finding agent. See the main section of the book f= or an explanation of their function.

Mortgages

At the time of writing, mortgages to buy property in Croatia<= /st1:place> are not available for non residents. = It is likely that they will become available during 2005, though thi= s is not guaranteed.

It is worth thinking about what the consequence of those mortgages is likely to be. At the moment, the only people who= can buy property in Croatia<= /st1:place> are those who can liberate the fairly substantial purchase price from their savings or the equity in their UK home. Once mortgages become available the whole process will become much more accessible. There is already a shortage of sup= ply and that shortage will only be exacerbated by further demand. As a result, it seems inevitable t= hat prices will rise still further when this happens.

In the meantime, those wanting a mortgage finance can sometimes obtain it from specia= list overseas banks, generally in Switzerland or the United States= . These banks are generally interest= ed only in the larger transactions — say, loans of €200,000 or hig= her and their arrangement fees are usually higher than those charged by normal banks. The process of obtaini= ng an offer and dealing with the paperwork can also be more complex and therefore more costly.

The Process of Buying

The most important thing to stress about buying a property in Croatia is that there is a lot more risk associated with it than buying in say, Spain or England. There is a lot of property with ei= ther bad title or defective planning consent.&n= bsp; Legal advice is essential unless you take the view that the amount y= ou are investing is so small you can afford to write it off.

Freedom to Buy

You can, as a British person, buy land, buildings or apartments in Croatia. Not everybody is able to buy land = in Croatia= . People of other nationalities can = only do so if their country allows Croatians the right to buy land in their coun= try. As a foreigner, you can never buy agricultural land or forestry land and buying cultural monuments or certain other categories of land requires special procedures.

The same basic rule applies in Montenegro.

In Slovenia, EU citizens can buy although still have to register their interest in doing so prior to making = an offer on a property.

In Croatia, in order to buy a pr= operty you need to seek the authority of the government. This is, in essence, a simple confirmation of the fact that Croatian people enjoy the right to buy in the= UK. Of obtaining it is generally= a formality but can take up to a year. This gives rise to problems when, hardly surprisingly, the seller do= es not want to wait three year for you to get permission to buy. In this case various safeguards ha= ve to be put in place by your lawyers to cover the unlikely eventuality that you = do not get permission and to cover the greater risk that, for example, a debt could be attached to the property before you are able to transfer the title into your name.

An alternative to buying in your own aim= is to buy through the medium of a Croatian limited company. This company could be 100% foreign owned. In the Croatian contex= t, sometimes the purchase by a company can reduce your overall tax burden — especi= ally if you are buying the property as an investment and for rental — and = it will eliminate the need to obtain the official permission to buy the property. Only with through a company, however, does involve extra expenditure including the cost of sett= ing up the company (perhaps £1000) and the annual cost of filing the paperwork and keeping everything in order.= See the main section of this book for details of the advantages and disadvantages of owning in this way.

In Croatia there is a regrettable tendency for agents to encourage you to set up companies in circumstances where, frankly, they just make no sense for you. Often the agent will volunteer to = set the company up for you, at a fee. Perhaps this explains their enthusiasm for the idea! Before you think about setting up = the Croatian company you should take detailed legal and financial advice. Because of the speed with which yo= u have to move when you see property in Croatia you should take that = advice before you go looking for properties.

Initial Steps

Once you have found a property that you = want to party you will be expected to sign some form of contract. This will generally either be a Reservation Contract or a Preliminary Purchase Contract. See the main section of the book f= or an explanation of these concepts.

Note that the title Preliminary Purchase Contract is misleading. It is actually a full binding purchase contract.

We recommend that, wherever possible, you insist on signing a Reservation Contract rather than a Preliminary Purchase Contract at this stage if at all possible.

Searches and Enquiries

Once you have signed a Reservation Contr= act your lawyer should make various enquiries.= He should check that the contract is fair, that the seller has good title and the right to sell to you, that the area is zoned for residential building and that the building being undertaken enjoys all of the necessary planning and building consents. In the case of an apartment he should check that the title to the building has been officially divided into individual titles for the individual apartment units.

If you are buying an older property, especially one which needs work, you should think about having a survey car= ried out. This is, strangely, a relatively rare thing to do. = In Croatia= there is no profession of building surveyor.&nbs= p; As a result, we tend to arrange surveys either through a local Master Builders, through land surveyors who have developed an interest in the surveying of the buildings or through a fuse specialist UK qual= ified surveyors who have seen a market opportunity in providing such surveys in <= st1:country-region w:st=3D"on">Croatia= . The UK surveyors are much more expensive.

Depending on the circumstances of your c= ase there could well be other inquiries that also need to be made.

In Croatia it is quite common fo= r work to be started, illegally, before all of these steps are in place. It is also quite common for proper= ty to have a title that is defective. Sometimes these problems are fatal and should put you off having any involvement in the purchase. = On other occasions the risks are minimal and, provided you go into the transac= tion with your eyes open, might not put you off buying if you really like the property.

New Property – Structural Guarantees

These benefit from a 5 year guarantee.

Declared Values

It is common for the value to be declare= d in the title to be less than the true value.&= nbsp; This is technically illegal but almost universal practice. The reason for this is, of course,= that the declared value is the value used by the tax office to determine the tax= es payable in respect of the purchase. You should avoid this if possible.&= nbsp; The tax payable on the purchase (the equivalent of stamp duty) is 5%= of the value declared. The main benefit under declaration accrues to the seller. He will avoid paying capital gains tax. You will be removing a b= urden from the seller and landing yourself with a potential problem later on if you ma= ke a significant under declaration.

In Croatia the position is made = a bit more complicated because each property has a tax value, a little like our E= nglish rateable values, which is often used as the stated value for tax purposes.<= span style=3D'mso-spacerun:yes'> These are usually roughly half the= true value of the property. When b= uying a new property off plan you will not know what the tax value is likely to be upon completion.

See the main section of this book for mo= re details as to the issues arising out of under declarations.

Declared Currency

The value of the property must, by law, = be declared in the title deed as paid in local currency – Kuna. Often the initial agreed pri= ce will be expressed in some other currency – typically Euro or US Dolla= rs – but, if you agree to this, the price agreed will have to be convert= ed into Kuna at the time of signing the title.

Bank Guarantees

Bank guarantees under which, if the buil= der is unable to complete the project, you are repaid the money you have invested = are still very much a rarity in Croatia. A few developers are now providing them. They are worth having.<= /span>

The Other Main Dangers

The main problem tha= t we come across in Croat= ia are defective title and defective planning consents.

There are, however, other problems. Recent changes to the planning legislation have meant that some plots of land, previously located in places where building could be contemplated, are now not going to be capable of development. Be very cautious= if someone shows you any planning documentation for a plot where building has = not started.

There are also many 'missing' sellers &#= 8211; perhaps people who are still the recorded owners of the property but who emigrated years ago and whose whereabouts is now unknown. In addition, there are some properties in Croati= a owned by Serbians who fled the country during or after the Balkans war. It is often either impossible to c= ontact these people or to secure their agreement to the sale of the property.

The Contract

Once your lawyer has checked out the pro= perty and found that everything is in order you are ready to sign the Preliminary Purchase Contract. This commi= ts you and the seller to signing the full contract transferring ownership shortly afterwards or, if the property is still in construction, once the property = has been fully built.

The Preliminary Purchase Contract contai= ns most of the clauses you would expect to see in an English contract. These will include a description o= f the property, a statement of the legal title to the property, the price to be p= aid, how it is to be paid, the deadline for payment and any other deadlines applicable, what should happen in the event of breach of contract etc. Many Croatian contracts are badly drafted. This is because ther= e is really no history in Croatia of drafting contracts for the sale of land. The problem is exacerbated by the = fact that many contracts are drafted in English, which is clearly not the first language of the person doing the drafting.= As a result they are unclear or muddled. Specifications tend to be very "thin". The contrac= ts tend to be lacking in detail as to what happens if anything goes wrong.

At this point you will normally pay a de= posit 10% of the price of the property. In the case of a property under construction ("off plan") you will s= tart to make stage payments. The s= ize and number of these payments will vary from property to property. A typical scheme would provide for= an initial payment of 30% followed by two further payments of 30% as construct= ion progressed and followed by a final payment of 10% upon delivery. Occasionally schemes are found whe= re there is only one preliminary payment of, say, 30% with the balance being p= aid on delivery.

Signing the Contract of Transfer of Title

Once you are ready to take delivery of t= he house and you have obtained your certificate from the Ministry of foreign affairs that you are entitled to own property in Croatia you will sign the Fin= al Purchase Contract. This is si= gned in front of a notary public, in the way described in the main section of th= is book. It is at this point tha= t the balance of the money is paid across to the seller.

You do not need to be present in Croatia= to sign this document as your lawyer can prepare a Power of Attorney under which you can appoint somebody else to sign on your behalf. This is a sensible thing to do as = it saves the need for you to go to Croatia, often at short notice, to sign the final title.

Registration of Title

Once you have paid the balance of the pr= ice your ownership of the property will be registered in the local title register. Once this has been = done you -- or the local Croatian company that you have set up to own the proper= ty -- will be the full legal owner of the property in much the same way as you would be in Britain<= /st1:place>.

The Expenses of Buying

The main expenses of buying are as follo= ws:

Tax, the equivalent = of stamp duty, at 5% of the price. Payable within 30 days.

VAT on new property at 22% - sometimes included in the price quoted to you.

Estate agents' fees, if these are not al= l paid by the seller. In Croatia= it is customary for the buyer to pay part of the estate agent's fees, typically 2= % - 3% of the price if you are using a local Croatian finder/agent.<= /p>

Notary's fees. These will vary from case to case = but will typically not exceed £200.

Legal fees. These will depend upon whether you= use a Croatian or an English lawyer. The English lawyer's fees will inevitably be higher but you will be able to sue them if they get it wrong and they will be able to give you lots of advice, particularly concerning the vital issues of who should own the property to minimise your tax and other problems, which the local Croatian lawyer would= not be able to help you with. The= y will range from about 1% to 2% of the price of the property.

Fees to set up a com= pany. If you are goi= ng to set up a Croatian company. This is likely to cost £1000 - £1500.

Conversions & Renovations

There are many properties on sale in Croatia, particularly in the rural areas, that need huge amounts of work. As yet there= is not much of a market for these properties.= The problems associated with the renovation project can be huge. Not least will be your probable inability to speak Croatian. = If you are contemplating a renovation project it is vital to get good advice right= at the outset.

Building costs are low. A full restoration project is like= ly to cost about £200 per square metre.&nb= sp; If simple repair is necessary you might end up paying about £2= per hour for a skilled labourer, though more if you employ a contractor.=

As is the case with many countries, it i= s very easy to find that once you have finished your project the cost of buying the property and the work you have undertaken is more than the value of the pro= perty as it stands. Keep control

Renting out your Property

In order to rent out your property in Croatia= you'll will, technically, need to obtain a licence from the Croatian authorities.<= span style=3D'mso-spacerun:yes'> That's licence is obtained for a c= ertain specified number of months rental per year. You are then taxed on the period of permitted letting irrespective of actual performance. The system of taxation is differen= t if you are letting the fire a limited company that owns the property.

If you let your property via a local Cro= atian agent they will be responsible for all of the paperwork, for collecting the tourist tax due and for paying other taxes. Their fees will typically be betwe= en 15% and 18% of the rental received.

Give that a large percentage of the peop= le seemed to rent apartments in Croatia are from Britain many people will seek to access that market directly. Many will do so with out the neces= sary permit or registration for rental. Many will not pay their taxes. This is not to be advised and will undoubtedly become more difficult= as the tourist industry develops over the next few years.

If you are renting out your property you should make sure that you use a proper rental contract. Your lawyer will be able to supply= you with a draft that you can change as necessary.

Renting on short term lets to tourists produces the least problems in terms of what you can do if the tenant does = not pay the rent or refuses to leave.

Rental yields in Croatia are, at the moment, a little unclear as the market is still young.

At the moment, we would expect to see a = net rental yield (i.e. net of all expenses apart from your finance costs and personal taxation) of about 4% - 6% in a popular coastal area. In the longer term I expect to see demand increase but also supply to increase. These may well cancel each other o= ut leaving yields more or less as they stand today but it is more likely that yields will grow somewhat, particularly if measured against acquisition cost rather than current value. Th= e one factor that it is likely to spoil this picture, however, is the rapidly ris= ing price of property. A person w= ho bought an apartment for £100,000 and who rented out for £250 per week will be much happier than the same person who spent £150,000 on = the same property and will also rented out for £250 per week. When thinking of your rental yield= we always suggest that you work it out on the basis of current value, not purc= hase cost as that will allow you to compare the performance of your investment w= ith opportunities elsewhere.

At the moment, and with the substantial qualification that there are huge variations in the marketplace, we would expect to see you rent a good one-bedroom apartment on the coast for about £200 per week during the main season. A 2 bedroom apartment would let for= about £300 per week. In= Dubrovnik it will= be about 50% higher.

Visas and Residence Permits

UK visitors to Croatia= can visit without any type of visa for up to 90 days. They can only do this once in any six-month period.

If you wish to visit for longer than 90 = days you can obtain a visa from the Croatian consulate in the country where you live. The formalities are minimal. This will allow you to remain in <= st1:country-region w:st=3D"on">Croatia= for up to 180 days in any year.

If you wish to live permanently in Croatia, without working, you will need to obtain a residence permit. The paperwork can be a little tire= some but it is not really difficult to do this.= You will need to show that you either own or have a proper can see on suitable accommodation.

If you wish to work in Croatia= you will have to obtain a work permit. This is a lot more difficult as you have to be able to demonstrate that you are needed because no local person is capable of meeting the needs of the emplo= yer.

Taxes for Non-Resident Property Owners

Local Property Taxes

These are the equivalent of your English Council Tax or our old rates. Local property taxes in Croatia are very low. <= /p>

Management Charges

Management charges are not taxes but thi= s is a convenient point to think about them. If you live in an apartment complex or in a group of buildings that share a common facility (such as a swimming pool) you will have to pay a management charge to cover the cost of providing those common facilities. In the case of a block of apartmen= ts, those facilities will include the cleaning and electricity for the general areas, any gardening, the maintenance of pools, lifts, car parking areas et= c. Obviously the cost of the management charge will vary dramatically dependent upon the quality and number of facilities provided for you. £300 per year provides a lot = of facilities.

Income & Capital Gains Taxes

A foreign investor can invest in properties in Croatia either directly, in h= is own name, or through a local company.

Rental income – Company Owned Pr= operty

The basis of the taxable income of a company, investing in Croatian real proper= ty is the gross income from the property less any tax-deductible expenses and depreciation. These expenses include any management costs, repairs, maintenance, insurance etc and interest on any loans used to buy the proper= ty.

The corporate tax rate is a flat rate of 20%. <= /p>

Rental income – Individually own= ed apartment

For non-residents, you will pay tax Croatia= only on your income deriving from your presence in = Croatia. This will, of course, include any = rental income that you generate. The= tax rates range from 20% to 45% but, in most cases, the 20% rate will be applic= able to rental income. The taxable amount of the rental income is 70% of the gross rent received.

Capital Gains Taxes

These are treated as part of your income= . There is no tax if you have owner = your property for more than three years.

Wealth Taxes

None

Inheritance Taxes

There is no inheritance tax, but your he= irs will have to pay the property transfer tax in order to register their new o= wnership of the property.

Taxes for Resident Foreigners

This is beyond the scope of this book.

Double Taxation Treaty

The Double Taxation Treaty determines wh= at happens if, under local tax law and UK tax law, you are deemed to= be liable to pay tax in both countries.

The general principle behind all Double Taxation Treaties is that it is unfair that you have to pay the same tax tw= ice, so the rules are designed to help the two countries decide which of them sh= ould get what.

The treaties are long and complex. Seek advice as to their effe= ct in your case.