The transfer of a newly built property (prior to its initial use/occupation) as well as of the plot on which the building is situated on is subject to VAT in Greece. This is provided that the building permit is issued or revised from January 1, 2006, onwards and that construction has not begun prior to such date. Greece also treats the handing over of certain construction work as a supply of building or parts of a building.
The applicable VAT rate is 24%. If the property is located on one of the Aegean Sea islands of Chios, Samos, Lesvos, Kos and Leros, the reduced VAT rate of 17% is applicable.
The Greek Government has recently introduced an optional VAT suspension scheme to foster the sales of a large number of unsold properties and to boost construction activity. Under this scheme, as of December 12th, 2019 and until December 31st, 2022, the transfer of a newly built property, per above, is exempted from VAT. Constructors who wish to opt for this scheme must apply for it within six months from the date of the issue of the building permit. For the 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 cases where the constructor opts-in for the VAT suspension scheme, the property transfer tax rate of 3% is applicable (plus 3% municipality tax on the amount of the transfer tax) and payable by the buyer).
The strategy of the Greek Government to enhance the real estate and other related sectors is illustrated through a number of tax initiatives. Included within these is the VAT scheme noted above, as well as:
- Corporate Income Tax. It has been reduced from 25% to 24%. A further reduction to 20% is expected during the fall of 2020.
- The three-years suspension of the capital gains tax (15%) applicable to individuals in case of a property sale transaction.
- The reduced withholding tax rate on dividends of 5%. Below, we outline some more important tax aspects related to a purchase of property that may be of interest to investors:
- Special Property Tax It is important to note the annual Special Property Tax, equivalent to 15% on the objective value of the property as of the 1st January each year and applicable to any real estate company holding ownership or usufruct rights on a specific property in Greece. Exempted from this tax are, amongst others, companies that declare their Ultimate Beneficial Owner until the final physical person who holds a Greek Tax Number, or is listed on a stock market etc.
- ENFIA Taxpayers holding rights on the property on the 1st of January each year are subject to an annual real estate property tax or “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) A 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%.
- EU Parent-Subsidiary Directive: 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 on payment of dividends.
- Last but not least, Capital Concentration Tax is imposed on the 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.
Above all, however, Greece boasts a clean and healthy environment haring taken immediate and adequate measures to combat COVID-19 pandemic. Greece is currently probably the healthiest country in Europe.
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 firstname.lastname@example.org
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Chief Tax & Legal Advisor