No.: 081-97-1061/1

Zagreb, 26 June 1997

President

of the Republic of Croatia

Franjo Tuđman, Ph.D. (signed)

CONVEYANCE TAX ACT

I. BASIC PROVISIONS

Article 1

The conveyance tax shall be calculated and paid pursuant to the provisions of this Act.

Article 2

(1) The conveyance tax shall be a joint revenue of the central budget, the county budgets and the municipalities or cities in whose territory real estate subject to payment of the conveyance tax is located.

(2) The allocation of conveyance tax revenues shall be regulated by separate legislation.

Article 3

Domestic and foreign natural or legal persons shall be deemed equal as this pertains to payment of the conveyance tax unless stipulated otherwise by international treaty or convention.

II. OBJECT OF TAXATION

Article 4

(1) The object of taxation is conveyance of the title to real estate. In the sense of this Act, conveyance of real estate shall be deemed any and all acquisition of title to the ownership of real estate (hereinafter: acquisition of real estate) in the Republic of Croatia.

(2) In the sense Paragraph (1) hereof, acquisition of real estate shall be deemed the purchase or sale, exchange or donation of real estate, its registration to the benefit of and withdrawal from a company, its acquisition pursuant to a court of law decision or ruling by another body as well as other modes of acquiring real estate from other parties.

(3) Real estate in the sense of this Act shall be land and buildings.

(4) The land from Paragraph (3) hereof shall be agricultural, construction and other lands.

(5) The buildings from Paragraph (3) hereof shall be residential, commercial and all other buildings and their components.

Article 5

(1) The acquisition of newly-constructed buildings which are taxed pursuant to the Value-added Tax Act shall not be deemed real estate conveyance in the sense of this Act.

(2) Buildings or their components which are constructed, transferred or paid after the date of entry into force of the Value-added Tax Act shall be deemed the newly-constructed buildings from Paragraph (1) hereof.

(3) If the receiver of the newly-constructed building is unable to exempt the assessed value-added tax as a tax advance, then in further transactions this building shall be taxed pursuant to the provisions hereof. If the receiver of the newly-constructed building could only partially exempt the assessed value-added tax as a tax advance, then in further transactions this building shall be taxed pursuant to this Act only in that portion that could not be exempted from the assessed value-added tax as a tax advance.

III. TAXPAYERS

Article 6

(1) The conveyance taxpayer shall be the receiver of real estate.

(2) Every participant in the exchange of real estate shall be a real estate taxpayer upon each exchange, liable for the value of the real estate acquired.

(3) If an indivisible part of the real estate is acquired, the conveyance taxpayer shall be each receiver individually.

Article 7

(1) The conveyance taxpayer, in cases of inheritance of real estate, shall be the legal heir or legatee. If, during the probate proceedings the legal heir renounces the inheritance or cedes it to another heir, no tax on such renouncement or cession of inheritance shall be paid thereon.

(2) In cases of donations or other acquisition of real estate free of charge, the receiver of the donation or other person who acquired the real estate free of charge shall be the conveyance taxpayer.

Article 8

(1) If the real estate is acquired pursuant to a lifelong support agreement, the conveyance taxpayer shall be the receiver of real estate.

(2) Upon the acquisition of real estate pursuant to Paragraph (1) hereof, the conveyance tax shall be reduced by 5 percent for each year of the duration of the support that passes from the date of conclusion of the lifelong support agreement certified by a court of law or other competent body until the death of the person who receives such support.

IV. TAX BASE

Article 9

(1) The conveyance tax base shall be the market value of the real estate at the time of acquisition.

(2) The market value of real estate shall imply the price of the real estate which is or may be obtained on the market at the time of its acquisition. The market value of the real estate shall, as a rule, be determined on the basis of an acquisition document.

(3) Upon the acquisition of real estate for a fee, the conveyance tax base shall be the total amount of the fee for the transferred real estate title. The total amount of the fee shall be deemed all that the receiver either gives or pays for the acquisition of the real estate, such as payment in cash, cession of other real estate, assets or rights, assumption of the former owner's debts, etc.

(4) In the exchange of real estate, the tax base shall be determined for each participant in the exchange according to the market value of the real estate that each individual participant acquires by means of the exchange.

(5) If co-owners acquire indivisible parts of real estate, the tax base shall be determined separately for each co-owner according to the market value of the part of the real estate that they acquire.

(6) The National Tax Administration shall be authorized to estimate the market value of real estate.

(7) The owner or holder of real estate shall be obliged to provide access to land and buildings to the authorized persons of the National Tax Administration so that the market value of the real estate can be assessed.

V. TAX RATE

Article 10

The conveyance tax shall be paid at a rate of 5 percent.

VI. TAX EXEMPTIONS

1. General Exemptions

Article 11

The conveyance tax shall not be paid by:

1. the Republic of Croatia and local self-government and administration units, bodies of state authority, public institutions, endowments and foundations, the Red Cross and similar humanitarian associations established pursuant to special legislation,

2. diplomatic or consular offices of foreign states under the condition of reciprocity, and international organizations which are exempt from payment of the conveyance tax under international agreements,

3. persons who acquire real estate as restitution for seized assets or in land consolidation proceedings,

4. displaced persons and refugees who acquire real estate through the exchange of their real estate located abroad,

5. citizens who purchase a residential building or apartment (including the surrounding land) on which they have tenancy rights or with the approval of the holder of tenancy rights according to regulations governing the sale of apartments bearing tenancy rights. The same shall hold for protected tenants who purchase residential buildings or apartments in which they live based on a rental agreement,

6. persons who acquire real estate pursuant to regulations governing the transformation of social assets into other forms of property,

7. persons who acquire real estate pursuant to agreements on lifelong support and care who are immediate heirs in relation to the real estate donor,

8. persons who acquire specific portions of real estate through the dissolution of co-ownership or upon the allocation of joint title to real estate up to the value of their co-ownership or joint title before the dissolution.

2. Tax Exemptions Upon the Registration of Real Estate to Companies

Article 12

(1) When real estate is registered with a company as an equity share or increase in equity in accordance with the Companies Act, the conveyance tax shall not be paid.

(2) The conveyance tax shall not be paid when the real estate is procured in merger and acquisition procedures between companies in the sense of the Companies Act, and in proceedings to divide a single company into several companies.

3. Tax Exemptions Upon Inheritance, Donation and Other Acquisition of Real Estate Free of Charge

Article 13

In cases of inheritance, donation or other acquisition of real estate free of charge, the real estate tax shall not be paid:

1. by the spouse, descendents, parents and grandparents and adopted children of the deceased or donor,

2. the brothers and sisters, their descendents, and daughters- and sons-in law of the testator or donor when they inherit or receive as a gift agricultural land, if agriculture is their principal source of income,

3. the brothers and sisters, their descendents, and daughters- and sons-in law of the testator or donor, when they inherit or receive as a gift real estate and if they lived with the testator or donor in a joint household at the time of the construction of the building, the acquisition of other real estate, or at the time of the testator's death or the assumption of the gift. A joint household, in the sense of this Act, shall be deemed the joint acquisition of revenues and assets and the disposal of revenues and assets which are inherited or bequeathed,

4. legal and natural persons to whom the Republic of Croatia or local self-government unit bestows or cedes real estate free of charge to compensate for damages or due to other reasons pertaining to Croatia's war for independence,

5. former spouses when they divide their assets pursuant to divorce proceedings.

VII. EMERGENCE OF TAX LIABILITY

Article 14

(1) The tax liability emerges upon the conclusion of a contract or other legal matter by which real estate is acquired.

(2) If the real estate is acquired on the basis of the ruling of a court of law or other body, the tax liability shall emerge upon the entry into force of such ruling.

Article 15

(1) The notary public who certifies the signatures on documents pertaining to the sale or other form of alienation of real estate shall be obliged to submit one copy of such document to the National Tax Administration office in the area in which the real estate is located within a period of 15 days after the end of the month in which the signatures on the document were certified, pursuant to the mandatory personal submission of documentation.

(2) Court of laws and other authorized bodies shall be obliged to submit their rulings which alter the title to real estate in the land registers or in official records to the National Tax Administration office in the area in which the real estate is located within a period of 15 days after the end of the month in which the ruling enters into force, pursuant to the mandatory personal submission of documentation.

Article 16

(1) If, pursuant to a lifelong support agreement, the title to real estate is transferred before the death of the receiver of support and care, the tax liability shall ensue upon the conclusion of the lifelong support and care agreement and the tax exemption from Article 8(2) hereof shall not apply.

(2) If, on the basis of a lifelong support and care agreement, the title to real estate is transferred after the death of the receiver of support and care, the tax liability shall ensue upon the death of the receiver of support and care.

VIII. TAX ASSESSMENT

Article 17

(1) The taxpayer shall notify the National Tax Administration office in the area in which the real estate is located of the emergence of the tax liability within a period 30 days from the date of its emergence.

(2) In addition to notification of the emergence of the tax liability, the taxpayer shall also submit the agreement, and if the real estate transfer is conducted by another legal instrument or the ruling of the state administrative body or court of law, the taxpayer shall submit evidence of this legal instrument or ruling of a state administrative body or court of law.

(3) At the request of the National Tax Administration, the taxpayer must also submit other data necessary for tax assessment.

(4) The form and content of the notification of tax liability shall be determined by the minister of finance.

Article 18

(1) If the taxpayer does not submit notification of the emergence of tax liability within the stipulated period, the regular conveyance tax shall be increased by 20 percent. The increased tax may not have an amount below HRK 1,000.00.

(2) The increased tax from Paragraph (1) hereof shall not be paid if the real estate seller, court of law or other state administrative body from Article 17(1) hereof sends notification of the emergence of tax liability or if the taxpayer provides evidence that the tax liability was not reported in due time because of extraordinary circumstances not within his/her control.

IX. TAX COLLECTION

Article 19

The taxpayer shall pay the established amount of the tax within a period of 15 days after the delivery of the certificate of establishment of the conveyance tax.

Article 20

The seller of real estate shall guarantee the collection of the conveyance tax from the buyer on a solidary basis if the liability to pay this tax was assumed by agreement.

X. TAX RETURNS

Article 21

(1) The person who pays the conveyance tax, interest, compulsory payment costs or monetary fines but who was not obliged to do so shall be entitled to compensation for all amounts paid or paid in excess.

(2) The amounts paid or paid in excess from Paragraph (1) hereof shall be returned to the person from whom they were collected, at that person's request, within a period of 30 days from the date on which such request is submitted.

Article 22

If the agreement on the transfer of title to real estate is terminated at the volition of the parties within a period of 60 days from the date on which the agreement is concluded, but before the transfer to the new owner is executed in the land register or if the agreement is terminated or annulled by court of law ruling, the taxpayer shall be entitled to the return of taxes paid. The transfer of title due to termination or annulment of agreement or other legal instrument shall not be deemed a new conveyance of real estate in the sense of this Act.

XI. PROCEDURAL PROVISIONS

Article 23

With reference to appeals, renewed proceedings, the statute of limitations, payments, compulsory collection and deferral of tax payment, as well as the conduct of misdemeanor proceedings, the provisions of the Personal Income Tax shall be applied.

XII. PENAL PROVISIONS

Article 24

(1) A legal or natural person shall be charged with a fine of HRK 2,000 to 50,000 for preventing access to land and buildings by authorized persons to determine the market value of the real estate (Article 9(7)).

(2) A notary public and accountable official in a court of law or other body shall be charged with a fine of HRK 2,000 to 50,000 if they do not submit the document with a certified signature or ruling whereby the title to real estate changes (Article 15) to the National Tax Administration office in the prescribed manner.

(3) The accountable person of a legal person shall be charged with a fine of HRK 1,000 to 10,000 for the violation from Paragraph (1) hereof.

XIII. TRANSITIONAL AND FINAL PROVISIONS

Article 25

(1) The conveyance tax as stipulated by the provisions hereof shall be paid on the value of constructed and non-transferred buildings as at the date of entry into force of the Value-added Tax Act and on the value of buildings paid for up to the date of entry into force of the Value-added Tax Act.

(2) In the interests of the accurate calculation of the conveyance tax or the value-added tax, the supplier shall be obliged to secure data on the base for payment of the conveyance tax or the value-added tax.

Article 26

Conveyance taxpayers who have concluded contracts on the sale of future buildings before the date of entry into force hereof but who did not incur a tax liability in the sense of Article 11(2) of the previous Conveyance Tax (Narodne novine, no. 53/90, 59/90, 61/90 and 95/94) shall be obliged to submit the contract or evidence of other legal transaction whereby the future building is to be transferred to the National Tax Administration office in the area in which the building is being constructed within a period of 30 days from the date of entry into force of this Act.

Article 27

(1) In cases of conveyance tax assessment in which the tax liability emerged before the entry into force of this Act and in which the emergence of tax liability was not reported up to the entry into force hereof, the conveyance tax shall be established in accordance with this Act. The conveyance tax shall not be paid if at the moment of the conclusion of the real estate transfer agreement such conveyance was exempted from payment of taxes.

(2) Cases in which the tax liability was reported before the entry into force of this Act, while the ruling on assessment of conveyance tax or estate and gift tax were not issued or if it was issued but did not become legally binding as pertains to the recognition of the tax concessions from Article 12 and Article 13(4) hereof, shall be completed in accordance with this Act.

Article 28

(1) On the date of entry into force hereof, the previous Conveyance Tax Act (Narodne novine, no. 53/90, 61/91 and 95/94) shall no longer be valid.

(2) Before the entry into force of the regulations from Article 17(4) hereof, the Regulations on the Form and Content of Tax Liability Reports shall be applied (Narodne novine, no. 1/91).

(3) Upon the entry into force of this Act, the provisions of Articles 6, 7, 11, 14, 16 and 89 of the Local Self-Government and Administration Financing Act (Narodne novine, no. 117/93) shall no longer be valid to the extent that they pertain to the taxation of inheritances, donations or acquisition of real estate free of charge.

(4) Upon the entry into force of this Act, the decisions of the counties and the City of Zagreb on estate and gift taxes which pertain to real estate shall no longer be valid.

Article 29

This Act shall enter into force on the eighth day after the date of its publication in Narodne novine (Official Gazette of the Republic of Croatia), while the provisions of Article 5 hereof shall be applied as at the date of application of the Value-added Tax Act.

Class: 410-20/96-01/01

Zagreb, 18 June 1997

CHAMBER OF DEPUTIES

OF THE PARLIAMENT OF THE REPUBLIC OF CROATIA

Speaker

of the Parliamentary Chamber of Deputies

Vlatko Pavletić (signed)