Foreign ownership of locally rented Croatian prope

[milrob]

I have a client wishing to sell an investment property on Vis to a non resident. The property is let in local currency to local Croatian residents.

I understand that foreigners are prevented from opening local bank accounts denominated in HKR.

Has anyone any experience of dealing with is problem, please?

[Peter Ellis]

I'm not aware of any problem for foreigners opening bank accounts in Croatia denominated in Kuna. We initially open foreigner's foreign currency accounts for clients with them, in order for them to transfer foreign currency in to the country. However, once they are active here, they need Kuna accounts in order to pay utility bills etc. They can transfer money from the foreign currency account to the Kuna account in order to fund it.
The only corollary is that they will have to visit Croatia in order to open any account, as it can not be done remotely.
Opening an account here is not difficult for a foreigner and can be done on production of passport and a small deposit.

[MilRob]

Hi Peter
Thanks for your speedy reply. We have a house on Vis and I have attempted to open a local bank account. I have been told that I may only do so if this is a foreign currency account, and that I am not allowed to have a HRK account as well. So that all payments of local utility bills must be done by individual transfers of FC from that account.

The problem is that if a foreign investor buys the property & is in receipt of rental income in local Kuna it cannot be collected unless there he has a HRK account in which to credit it and earn interest, etc.

Any further thoughts or advice would be much appreciated.
Regards,

[milrob]

Hi Peter

Thanks for your speedy reply. We have a house on Vis & I attempted to open a local bank a/c. I was told that this could only be a foreign currency a/c, and so all payments to utilities would have to be by individual transfer of specific amounts of FC from that a/c.

The problem for an investor in these properties producing tenanted rental income in HRK is that without a local currency account it cannot be collected nor earn interest, since I understood that HRK is not freely convertible into FC.

Any further thoughts w/b much appreciated.
Regards,

[Peter Ellis]

I see what you mean now. The setup seems to vary from bank to bank. It was only after checking with Ksenija that I realised that although our clients have been getting kuna accounts with our bank for the purpose of paying utilities, they are actually restricted to just that.

Your solution is something that you should have been doing anyway. If you are renting out to anyone, be they foreigners or Croatians, you should be doing it through the medium of a company.
The Croatian government is understandably anxious that large numbers of foreigners will advertise and take rental income abroad whilst their clients enjoy Croatian facilities for which they make no contribution. For that reason they insist that a Croatian company be involved. Since a Croatian company,even if 100% foreign owned, is a Croatian entity, it will have no problem having a Kuna account.

[milrob]

Hi Peter
Thanks for that. Forming a local company is clearly the easiest solution.
Regards, Miles