Kresimir Jelakovic

Under the European Green Deal, Croatia is aligning with EU-wide climate goals. The Green Deal is the EU’s roadmap to becoming climate-neutral by 2050, and one of its main tools for reducing emissions from buildings and road transport is ETS2 (Emissions Trading System 2). ETS2 can be thought of as a market-based carbon tax.

ETS2 is the EU’s carbon pricing system for heating fuels and road transport fuels. It extends the existing EU Emissions Trading System (ETS), which already covers large industrial emitters.

As of 2026. 2026,fuel suppliers only need to monitor and report how much CO₂ is emitted from the fuels they sell. 2028. Starting in 2028, they are expected to buy ETS2 allowances at EU auctions. Each allowance gives the right to emit 1 tonne of CO₂. Because these allowances can be traded and their price fluctuates, they are considered a financial instrument, similar to stocks or bonds.

Suppliers will pass the cost of allowances on to consumers, so eventually the price of heating and transport fuels will increase. In 2026, ETS2 does not yet affect household bills for heating or transport fuel, but by 2028 it is expected to add hundreds of euros per year on respective bills per household.

The goal of carbon pricing is to encourage the transition to clean energy and reduce emissions. To support this, incentives and funding will be available for households and businesses that invest in renewable energy systems.

Krešimir Jelaković

In Croatia, real estate transactions are most commonly structured as either asset deals or share deals, each offering distinct strategic and financial advantages for investors. In addition to these standard approaches, alternative structures—such as development agreements, joint ventures, and building right or long-term lease arrangements—are increasingly used, particularly in sectors like renewable energy, where large-scale solar and wind farms require significant land use and regulatory alignment.

An asset deal involves the direct acquisition of real property, including land, buildings, and any fixed installations. Once the purchase agreement is executed, ownership must be formally registered in the Croatian Land Register. This structure offers clarity in asset ownership and may be preferable for greenfield investments or when the investor wants a clean title without corporate liabilities.

A share deal, by contrast, involves the acquisition of a company, usually an SPV, that holds the real estate. By purchasing a controlling stake—often 100%—the investor gains indirect ownership of the property while maintaining the existing corporate vehicle. This can be strategically advantageous, allowing investors to leverage the existing corporate structure for tax planning, accounting efficiency, and liability management.

From a fiscal perspective, share deals often provide a more favorable tax outcome. Asset transactions are typically subject to a 3% real estate transfer tax or 25% VAT, depending on the nature of the transaction, where in a share deal taxes may be mitigated or entirely avoided, which can significantly enhance overall investment returns.
For investors considering entry into the Croatian real estate market, understanding the nuances between these structures is essential for optimizing transaction value, managing risk, and aligning with long-term investment strategies.

If you decide to buy a residential property in the Republic of Croatia, you should take into account that in addition to the tax that you pay when purchasing a property (real estate transfer tax at a rate of 3% where the buyer and seller are individuals, and where an entrepreneur sells the real estate, the rules get a bit more complex), every property owner in the Republic of Croatia is obliged to pay annual property tax (cro. porez na nekretnine).

Property tax ranges from 0.60 to 8.00 EUR/m2 of usable area of the property, depending on the decision of the municipality or city in which the property is located, so for example, for a 250.00 m2 house on the Adriatic coast the annual property tax will be – in the city of Zadar 150.00 EUR, and – in the city of Umag 2,000.00 EUR.

Below you can see an overview of property taxes in certain popular tourist locations on the Adriatic coast.

Property Tax	Year 2025
City of Zadar	0.60 EUR/m2
City of Split	1.99 EUR/m2
City of Korčula (Island of Korčula)	4.00 EUR/m2
City of Šibenik	5.00 EUR/m2
City of Dubrovnik	5.00 EUR/m2 – Zone I 4.00 EUR/m2 – Zone II 3.00 EUR/m2 – Zone III 2.00 EUR/m2 – Zone VI 0.60 EUR/m2 – Zone V
City of Rovinj	6.25 EUR/m2
Municipality of Bol (Island of Brač)	7.50 EUR/m2
City of Vis (Island of Vis)	8.00 EUR/m2
City of Umag	8.00 EUR/m2

Property tax is not paid if you use the respective property for permanent residence, or if you rent it out under a lease agreement for permanent residence with a duration of at least ten months. This means that if residential property is rented out on a long-term basis to third parties for example, for business purposes, and not for permanent residence, it is possible that in addition to the tax liability based on the lease agreement, a tax liability for property tax will also arise, however it remains to be seen what the practice of the tax authority will be in this case.

If it is a newly built property, the obligation to pay property tax arises a little bit later, on the day of enforceabiltiy of the use permit, or where and when the newly built property is being used without a respective use permit, on the day of the start of the respectiv use thereof.

Exemptions from payment are also prescribed for municipalities and cities, and in certain cases where and when the residential purpose of the real estate is not functionally possible, as well as in other cases prescribed by law.

For example, a short-term exemption from property tax exists for real estate that is recorded in the company’s business books as property intended for sale, when and if less than six months have passed from the date of entry thereof in the business books until 31 March of the tax relevant year, as well as for property taken over in exchange for unpaid receivables, when and if less than six months have passed from the date of taking over ownership over the respective real estate until 31 March of the tax relevant year.