| - Inheritance
and gifts - are exempted from taxation in the first line of succession,
and in other cases there is a single rate of only 5%.
Besides all
these advantages, due to the lack of controlled foreign corporation rules,
anti-avoidance provisions or similar regulations in Croatia, appropriate
structures can be easily put in place for personal tax planning and financial
privacy. Value added tax (VAT) of 22% was introduced in 1998 and applies
for most goods and services.
Corporate
Taxation and Treaty-Protected Holding Companies
Corporate income
tax is paid at a single rate of 20%. This tax is reduced to 10% for companies
operating in Croatian tax-free zones, or even to 0% provided the investment
is in tax-free zone infrastructure. Additional tax incentives apply to
companies that invest at least 10 million kunas (US$1.2 million) and employ
at least 30 Croatian workers. Also, accelerated depreciation can significantly
lower a tax base.
Capital gain
is taxed at rate of 20%. A Croatian holding company is exempt from paying
income tax on dividends.There is withholding tax on dividends, royalties
and interests, but they can be avoided or lowered to 5% (for dividends)
using companies incorporated in countries with which exist favourable double-taxation
treaties. With its unique tax advantages and extensive tax treaty network,
Croatia offers interesting possibilities for international tax planning.
Can Croatia
anticipate attacks by the Organization for Economic Cooperation and Development
for engaging in so-called harmful tax practices as a result of the country’s
favorable tax regime? This is very unlikely. Croatia is not a target and
is unlikely to appear on any list, since it cannot be considered a “tax
haven” in the conventional sense.
Tax Free
Yachting In Croatia
Tax-free yachting
Croatia is
also a very attractive place for yacht owners who wish to keep their yachts
in Europe, but not within the European Union to save the value-added tax
on the purchase price.
If you wish
to use a private yacht in EU waters, you must be aware of the various VAT
implications. In principle, all yachts owned or used by EU residents must
have their VAT paid before they may enter EU waters. An exemption is possible
only for yachts owned by non-EU residents and used temporarily in EU waters
by a non-EU resident - for example, a company incorporated outside the
EU or an individual who normally lives outside the EU.
Important points
to be considered for determining whether or not VAT is payable are the
place of purchase of the yacht, where it will be used, who is its beneficial
owner, whether it will be chartered out to third parties and whether it
will be used by EU residents.
Yacht owners
can moor their yachts in Croatia indefinitely without paying Croatian import
duties or VAT. Spare parts and additional equipment remain duty-free and
VAT-free if the yacht is under a foreign flag.
Since Croatia
is not a EU member, you do not have to pay VAT on a yacht purchased within
the EU if the yacht is registered and exported out of EU territory. Yacht
owners with Croatian residence permits can sail into EU waters for up to
18 months in any 24 months period without paying VAT on the yacht. Every
yacht must be registered in an internationally recognized jurisdiction
to provide proof of nationality and ownership. A yacht assumes the nationality
of the jurisdiction where it is registered and is therefore subject to
the regulations laid down by the governing register.
Very often,
companies and private individuals enjoy major advantages and legal tax
savings by registering their yachts in an appropriate jurisdiction, providing
confidentiality and the protection and privileges offered by such registration.
With registration of the yacht in an appropriate jurisdiction and mooring
of the yacht outside the EU in Croatia, one can enjoy one of the most beautiful
coasts in Europe, have easy access to the EU if desired and operate the
yacht in a most tax-efficient environment.
For further
information about yacht registration and marine services in general, please
contact
Henley & Parterners -
With respect
to the spectacular nature, rich culture and history, favorable tax situation
and non-membership in the EU, Croatia is therefore a real paradise for
yacht owners who wish to keep their yachts in Europe and at the same time
legally avoid taxes and restrictions of the ever-growing EU regulations.
In summary, yacht owners, even if EU citizens, can benefit in many ways:
VAT-free Purchase
of Yacht - Since Croatia is not a member of the EU, the VAT on their purchased
yacht can legally be avoided if the yacht is registered and exported out
of EU territory, for example registered in Guernsey, Gibraltar or St. Vincent
and brought to Croatia, even if the yachtsmen have Croatian residence permits.
Residence in
Croatia - Yachtsmen with Croatian residence permits who stay in Croatia
continuously no longer than one year for the purpose of tourism, health
or similar personal needs can sail with their foreign registered yacht
in Croatian waters without paying import duties and VAT, and also in EU
waters for up to 18 months in any 24 months period. (It must be noted that
some EU members apply this rule differently). Such yachtsmen can keep their
yacht in Croatia without paying import duties and VAT without a time limit.
VAT-free Spare
Parts and Equipment - Spare parts and additional yacht equipment remain
duty-free and VAT-free if the yacht is under a foreign flag and is moored
in Croatia.
Residence
Permits for Yacht Owners
Foreign nationals
who wish to stay longer than three months in Croatia must obtain a residence
permit. To get a residence permit, it is sufficient to have a yacht moored
in a Croatian marina or to rent or own an apartment. An application for
residence in Croatia involves submitting various government forms and identification
documents, including proof of sufficient funds, and requires a visit to
Croatia followed by six to eight weeks processing time. The residence permit
is valid for a maximum of one year and can be easily renewed.
Personal
Taxation
Croatian residents
normally pay personal income tax of 15% for monthly salaries up to 2,500
kunas (approximately US$ 300); 25% for monthly salaries between 2,500 and
6,250 kunas; and 35% for monthly salaries of more than 6,250 kunas (approximately
US$ 750). With surtaxes and social security deductions, the total tax burden
on salaries can easily exceed 50%. But if you do not receive a salary,
consultancy fees or similar income in Croatia, the tax situation is much
more favourable.
Dividends,
royalties and interest payments from non-financial institutions received
by individuals are taxed at only 15% but can be lowered to 5% (for dividends)
or to 0% (royalties and interest payments) if a double-taxation agreement
applies. Croatia has 30 double-taxation agreements.
Interest payments
on loans, investments, deposits with financial institutions, public loans
and securities and similar income are exempt from taxation, as are pensions
received from abroad and capital gains from trading any financial assets.
Inheritance and gifts are exempted from taxation in the first line of succession,
and in other cases, there is a single rate of only 5%.
Real Estate
in Croatia
The Croatian
real estate market is fairly well developed. Land and house prices are
still very favourable, particularly on the islands where there are beautiful
stone houses built in the traditional style. Also in the beautiful historic
towns such as Dubrovnik, Hvar, Zadar or Korcula there are excellent opportunities
to acquire prime location real estate at reasonable prices.
Although the
purchase of real estate is straightforward, it is nevertheless advisable
to make use of professional assistance. After the estate agent or attorney
prepares the contract, the parties sign the contract and notary certifies
the signatures. The notary’s fees are very low since the notary only certifies
the signatures. Following that, the estate agent or attorney requests for
the registration of the property on behalf of the buyer. Foreign persons
can purchase real estate in Croatia providing that they get an approval
by the Ministry of Foreign Affairs. The approval is issued if there is
reciprocity, i.e. if Croatian persons can purchase real estate in the country
of the purchaser. While such an approval can take up to 12 months, it can
easily be avoided if the property is bought by a domestic company, which
can be entirely owned and controlled by a foreign person. In that way,
the transfer tax on real estate of 5% can also be avoided during each subsequent
sale of the property.
To establish
yourself or your business in Croatia will require securing relationships
with key partners such as government officials, bankers and corporate professionals.
You need experienced consultants to build a network of contacts and help
you to become established in your new environment.
The specialized
services of Henley & Partners are a resource and complement to major
law and consulting firms. We can help other firms and their clients with
the unique and specific details required by the immigration and business
relocation process and related tax planning.
Contact
Henley & Partners – For assistance in gaining residency to
Croatia, real estate in Croatia and corporate structuring beneficial to
living in Croatia. |
