Investing in Croatia via SCI: Benefits and Pitfalls

Published on September 29, 2025 and written by Cyril Jarnias

Investing in Croatia through a real estate civil company (SCI) presents a unique opportunity to expand your assets in a country experiencing strong economic growth, while benefiting from a flexible and tax-advantageous structure.

Attracting more and more investors, Croatia offers a growing real estate market where prices remain attractive compared to other European destinations.

However, navigating the legal and administrative framework of this country can prove complex for the uninitiated. This article explores in detail the potential benefits and pitfalls to avoid to ensure your investment is successful.

Optimizing the Legal Structure for a Real Estate Company in Croatia

In Croatia, the Real Estate Civil Company (SCI), as known in French law, does not exist as a specific legal form. Real estate investors therefore use other legal structures for property ownership and management, primarily the limited liability company (DOO/GmbH) and, to a lesser extent, the joint-stock company (DD).

Legal and Tax Obligations for a Real Estate Structure in Croatia

• Registration:
  • Establishing a company (DOO or DD) requires the involvement of a notary, drafting and notarizing the articles of association, registration with the commercial register (commercial court), and obtaining a certificate of incorporation.
  • You must obtain a company seal, a statistical number, open a bank account, and deposit the minimum share capital (2,500 to 20,000 EUR for a DOO).
  • Registration with the tax administration (VAT, corporate tax, social contributions) is mandatory.
• Property Management:
  • The company can buy, sell, rent, or manage real estate properties for its own account.
  • Administrative and accounting management is strict (record keeping, annual accounts, tax reports).
• Income Distribution:
  • Profits are subject to corporate tax (generally 12-18% depending on turnover).
  • Dividend distribution is then taxed at a rate of 10% (withholding tax).
  • Non-residents must appoint a local tax representative.

Comparison of Main Legal Structures in Croatia

Structure	Minimum Capital	Liability	Taxation on Profits	Management Formalities	Share Transfer
DOO (GmbH)	2,500 – 20,000 EUR	Limited to capital	12-18% CT, 10% dividends	Moderate	Fairly flexible
DD (SA)	27,000 EUR	Limited to capital	18% CT, 10% dividends	Complex	More formalized
Sole Proprietorship	None	Unlimited	Personal Income Tax Scale	Low	Non-transferable
SCI (France)	1 EUR	Limited to contributions	PIT or CT depending on option	Statutory flexibility	Very flexible

Advantages of an SCI-Type Structure (DOO) in Croatia

• Competitive Taxation:
  • Moderate corporate tax (12-18%).
  • Low annual property tax (0.60 to 8 €/m² depending on use and location).
  • No specific surtax for foreign investors.
  • Property acquisition taxed at 3% (primary residence), without double taxation.
• Asset Protection:
  • Liability limited to share capital.
  • Clear separation of personal and professional assets.
• Wealth Transfer:
  • Facilitated transfer via share assignment.
  • Flexibility in drafting articles of association to plan transfer terms or entry of new partners.

Practical Recommendations for Optimizing the Legal Structure

• Prefer establishing a DOO for real estate holding, due to limited liability, moderate taxation, and management flexibility.
• Adapt the articles of association to facilitate transfer (approval clause, shareholders’ agreement, management of voting rights).
• Anticipate international taxation: verify the tax treaty between Croatia and the investor’s country of residence to avoid double taxation.
• Appoint a local tax representative if you are a non-resident.
• Take advantage of tax incentives for “green” investments or luxury real estate, by studying local schemes.
• Consult a local expert (notary, tax specialist) for drafting the articles of association, choosing the tax regime, and ensuring compliance with Croatian regulations.

Key takeaway: The DOO structure offers in Croatia the best alternative to the French SCI for real estate investment, combining advantageous taxation, asset protection, and ease of transfer, provided the articles of association are adapted to your wealth and family objectives.

SCI and Tax Optimization: Maximizing Gains in Croatia

Tax optimization strategies for investors using a real estate civil company (SCI) in Croatia revolve around selecting the tax regime, utilizing deductions and exemptions, and considering international treaties to avoid double taxation.

Advantageous Tax Regimes in Croatia for Real Estate

Type of Income	Tax Rate (2025)	Specifics
Long-term rental income	8 %	Incentive for rentals over 6 months
Short-term rental income (tourism)	10 %	Increased rate to curb tourist rentals
Corporate tax (profits)	12 % (up to 2.5 M HRK/year) 18 % (above)	SCI taxed at CT if subject to this regime
Annual property tax	0.15 % to 0.35 % of cadastral value	Low rate, cadastral value often below market value
Real estate capital gains tax	20 % (if resale < 2 years)	Exemption after 2 years

Exemptions and Tax Deductions

• SCIs can deduct expenses related to maintenance, repairs, loan interest, condominium fees and certain management fees from rental income.
• If the property is held for more than 2 years or is a declared primary residence, full exemption from capital gains tax upon resale.
• SCIs can opt for corporate taxation, allowing profits to be reinvested at a reduced rate (12% or 18%) instead of personal taxation.

International Tax Treaties and Double Taxation

• Croatia applies bilateral tax treaties with many European countries, including France, to avoid double taxation.
• Real estate income is in principle taxed in Croatia, but the tax paid can be credited against the tax due in France (or other country of residence of the partner).
• Income received via the SCI must be declared in the country of residence, taking into account the tax credit corresponding to the tax already paid in Croatia.

Legal and Tax Obligations for an SCI in Croatia

• Maintaining accounting compliant with Croatian legislation (income declarations, VAT if applicable, annual reports).
• Declaration and payment of local taxes (property tax, municipal taxes).
• Compliance with ownership transparency obligations, especially if the SCI is held from abroad.
• Obtaining a Croatian tax identification number for the SCI and foreign partners.

Tax Risks and Pitfalls to Avoid

• Misclassification of rental duration (short vs. long term), leading to an inappropriate tax rate.
• Underestimation of cadastral value in the declaration, potentially resulting in tax adjustments.
• Forgetting local or international declaration obligations, exposing to penalties.
• Confusion between personal and corporate taxation: an SCI not registered as a commercial company may be treated differently under Croatian law.

Practical Tips for Tax Optimization

• Prefer long-term rentals to benefit from the reduced 8% rate.
• Systematically deduct all eligible expenses to lower the taxable base.
• Plan the resale to take advantage of capital gains exemptions (primary residence or holding > 2 years).
• Consult a local tax specialist to structure the SCI in compliance with Croatian and international regulations.
• Verify the application of tax treaties to avoid any double taxation.

Key takeaway: Croatia offers an attractive tax framework for rental real estate via an SCI, but rigorous management and a good understanding of local and international regimes are essential to maximize gains and avoid pitfalls.

Pitfalls to Avoid When Buying Real Estate in Croatia via an SCI

Administrative and Legal Complexities

• The establishment of an SCI in Croatia is subject to specific formalities: drafting articles of association compliant with local law, registration with the Croatian commercial register, deposit of share capital, and obtaining a Croatian tax number for the company.
• The procedures are often lengthy and require certified translation of documents as well as the mandatory involvement of a local notary.
• Certain real estate activities may require additional authorizations or be subject to restrictions depending on the nationality of the partners.

Local Legislation on Private Property and Applicable Taxation

Croatian legislation provides that all owners—individuals or legal entities, national or foreign—are liable for an annual tax on real estate properties. Since 2025, this tax has replaced the tax on secondary residences.

A tax treaty between France and Croatia aims to avoid double taxation but implies a declaration in each concerned country.

Tax Regime	Taxation in Croatia	Taxation in France (SCI)
Legal Entities	Annual property tax + CT (18%)	Possible tax credit according to treaty
Individuals	Annual property tax	Mandatory declaration

It is essential to understand the chosen regime for your SCI (income tax or corporate tax) as this will directly impact your tax obligations.

Financing Risks

• Croatian banks sometimes impose restrictions on non-residents for granting real estate loans; some institutions outright refuse financing to foreign companies.
• Fluctuations in the euro/kuna exchange rate can significantly vary the actual cost of the property when repaying a loan contracted in another currency.

Obtaining Permits and Authorizations

Obtaining building permits or authorizations for work can be complex: long administrative delays, strict technical requirements, local urban planning regulations sometimes difficult to access without perfect command of Croatian.

• Incomplete applications rejected
• Frequent changes in local rules
• Frequent need for agreements with neighboring co-owners

Remote Management and Local Representative

• Managing a property from abroad exposes to: delays in resolving common problems, difficulty in ensuring regular rental/technical/administrative follow-up;
• It is highly recommended to appoint a reliable local representative, ideally with a notarized power of attorney to act quickly if necessary.

Prudent Evaluation and Independent Expertise

• Request multiple estimates to avoid any overestimation relative to the real market
• Be cautious of recently renovated properties whose quality is not always guaranteed
• Meticulously verify land titles (cadastral compliance is essential)

Recommended Local Experts

• Lawyers specialized in cross-border real estate law
• Tax advisors with thorough knowledge of Franco-Croatian treaties
• Accredited real estate agents speaking French/Croatian

Systematically consulting these professionals not only secures each step but also optimizes your investment both legally and fiscally.