EU citizens are now allowed to own property in Croatia and the procedure is now quite straightforward.

The new government are aiming for EEC membership in 2007/8 and formalities are becoming easier all the time. The main problem is proving title to property as the records are not electronic, and our legal team issue check title on all property before we offer it to our clients.
If the buyer is not a Croatian citizen, there are 2 possible ways to buy property:
Option 1.
Once a sales agreement has been signed, the buyer applies for permission from the Croatian government to register his title (via the lawyer). Providing the buyer is resident in a country with a reciprocal agreement with Croatia, ie most European countries, then the application will be granted, but may take several months. During this time, no alterations can be made to the property, but you may take possession and live there.
Option 2.
A foreign buyer can form a Croatian Limited Company, there can be 1 shareholder and the formalities can be completed in 6 weeks by your lawyer.
The main difference from option 1 is that in the case of a company, the searches and proof of title are handled by a private lawyer, hence the quicker result.
A Limited company requires an initial capital of €2,500 which can be recovered once the company is formed. There are legal formation costs of approximately €1000 which cannot be recovered.
New properties, such as apartments in a new building are considered "clean" and potential buyers can follow option 1: older properties and land require option 2.

TAX & FEES ON PROPERTY PURCHASE
There are 2 possible taxes imposed on property purchase in Croatia, VAT or Sales Tax.
All property built after Jan 1st 1998 is subject to VAT at 22% (and is included in prices quoted).
For property built prior to 1998, a sales tax of 5% is applied to the sale price.
It is possible that Sales Tax of 5% will be applied to the land and VAT at 22% to the value of the building.

In the case where property is purchased via a Croatian Company, in theory the VAT can be reclaimed, but unless the property is going to be used commercially or let, it is not practical to register for VAT as this implies that the company will be trading.

TAXES ON SALE OF PROPERTY
when a property is sold, there are 2 taxes which may be applied:
Capital Gains Tax (CGT) if sold by an individual or Corporation Tax (CT) if sold by a Company.
Recently the CGT rate has been reduced to match the CT rate, i.e. 20%.
CGT is only applicable to properties sold within 3 years of purchase: CT is applied annually to company profits, which take into account normal trading factors.

LEGAL FEES
There are legal fees of approximately 3% (+vat), currently these are scale fees authorized by the Croatian Law Society.