The transfer of a newly built property (before its first use/occupation), as well as of the plot on which the building is situated, is generally subject to VAT in Greece, provided that the building permit is issued or revised from January 1, 2006 onwards and construction works hadn’t begun prior to this date. In this context, property is meant to refer to any building and structure related to the building or the ground in a fixed and permanent way. Greece also treats the handing over of certain construction works as a supply of building or parts of a building.
The applicable VAT rate is 24% with the exception of cases when the property is located on one of the Aegean Sea islands of Chios, Samos, Lesvos, Kos and Leros, where the reduced VAT rate of 17% is applicable.
The Greek Government has recently introduced an optional VAT suspension scheme to boost the attractiveness of the huge stock of unsold properties as well as to generally provide impetus to construction activity. Under this scheme, between December 12, 2019 and December 31, 2022, the transfer of a newly built property (as described above) is exempted from VAT. Constructors that wish to opt for this scheme must apply within six months from the date of the issue of the building permit. For building permits issued before the entry into force of the suspension scheme (i.e. before December 12, 2019) the application deadline was June 12, 2020.
In case the constructor opts for the VAT suspension scheme, the property transfer tax at a rate of 3% (plus 3% municipality tax on the amount of the transfer tax) is applicable and payable by the buyer.
The strategy of the Greek Government to enhance the real estate as well as other related sectors is illustrated through a number of tax initiatives, including the above-mentioned optional VAT suspension scheme, the reduced Corporate Income Tax rate of 24%, the reduced withholding tax rate on dividends of 5%, and the three-year suspension of the capital gains tax (15%) applicable on individuals in case of property sale transaction.
Below we outline some more important tax aspects related to a purchase of property which may be of interest to investors.
Special Property Tax
Further to the above VAT framework analysis, it is important to note the annual Special Property Tax, equivalent to 15% on the objective value of the property as of 1st January each year and applicable on any real estate company holding ownership or usufruct rights on a specific property in Greece. Exempted from this tax are, amongst others, companies which declare their final Ultimate Beneficial Owner to be a physical person who holds a Greek Tax Number, or are listed in a stock exchange market etc. Therefore, before deciding to invest in the real estate market in Greece, the SPT framework should be considered and evaluated carefully.
Taxpayers holding rights on property on the 1st of January each year are subject to an annual real estate property tax called “ENFIA”. ENFIA is not imposed on the objective value of real estate property; rather, it is determined on the basis of various factors, according to the final registration of the property at the land registry or ownership title, such as m2, floor, year built, road view, price zone, property use (main or ancillary use) etc.
TAP (Real estate property fee)
Real estate property fee is collected through electricity bills (if the property is not connected to an electricity provider, it is payable to the Municipality annually) and is equal to 0.025%-0.035%.
Corporate Tax: Withholding Tax on Dividends (WHT), Annual Professional Fee and other fees
The Corporate Income Tax rate in Greece today is 24%, applicable on the profit of the company for income generated in 2020 and onwards. The Greek Government is expected to decrease it to 20%, something which is likely to happen in the fall of 2020. The WHT rate is the one applicable according to the relevant Double Tax Treaties (DTT). According to the “Parent–Subsidiary EU Directive”, no WHT applies between EU-based companies.
Additionally, an Annual Professional Fee is imposed on corporations in Greece in amount of an annual fixed fee of 1,000 euro payable concurrently with the filing of the annual tax return.
Last but not least, Capital Concentration Tax is imposed on share capital of commercial companies equal to 1% of the share capital amount, with the exception of the initial share capital on which it is not applied. On the share capital of a Societe Anonyme (S.A.) company, an additional 0.001 duty is imposed on the initial share capital or on the future increase in favor of the Greek Competition Authority.
For further information on how you or your business can benefit from the recent tax amendments or to discuss your potential real estate investments, please contact our Athens Legal and Tax Department at email@example.com
Chief Legal and Tax Consultant
EUROFAST GLOBAL LTD