The Income Tax Law, with the latest amendments (Official Gazette No. 151/22) that came into force from 1st January 2023 https://www.zakon.hr/z/85/Zakon-o-porezu-na-dohodak , defines income from property alienation as the difference between the market value of the property and the purchase price increased by the growth rate of industrial products prices. The term alienation considers a sale, exchange, gift or other transfer with remuneration.
Income tax is calculated on the tax base which is determined as the difference between the amount received from property alienation and the expenses of alienation by applying a 20% tax rate and local surtax.
The expenses that are recognised as costs are the actual purchase value of the property, the property transfer tax (3%), the costs of renovation and additional investments, the cost of property sale, etc. all under the condition that they can be proven with contractor’s invoices and bank statements dated in period from property acquisition until alienation.
The taxpayer who alienates the property must pay the tax liability within 15 days after receiving the Tax Administration’s income tax assesment.
Property alienation is not taxed in the following cases:
• if the property is alienated at least two years after the purchase date,
• if the property has been used as taxpayer’s residence or his close family members,
• if the alienation is executed between spouses or first degree family members,
• between divorced spouses if the alienation is directly connected with a divorce or inheritance of the property.