Partnering international businesses in Greece
The Greek real estate market is burdened by various taxes, which are required by various laws; these taxes must be paid prior to the completion of transfer of the real estate. It is important to note that transferal taxes apply only in the case of drawing up the final contract for sale. In any other case, such as the drawing up of the pre-agreement, even if it is drawn up by a notary public, such taxes are not required to be paid.
The various transferal taxes are calculated by considering the price settled upon by the contracting parties. Due to past incidents of persons declaring lower prices than the ones actually contractually agreed in an attempt to pay lower taxes, Greek legislators established a system for the objective calculation of the value of real estates. Based on this system, if the contracting parties declare a price lower than the actual price, they will be charged taxes based on the actual price.
This objective calculation system is based on certain minimal values of the real estates which are initially assigned by areas (‘price zones’). Eventually these price zones are influenced by other factors which shape the final objective value of the real estate. These factors are the size of the real estate, the floor on which it is located (if it is an apartment), the length of the facade (if it is a store), whether an elevator and/or heat installations exist in the building etc.
In practice however, and for many years, the objective value of real estates was, in many cases, lower than the market value of the real estates; in certain areas the objective value was found to be twice or three times less than the market value. Due to successive increases in objective values, the divergences in some areas are not so wide. A change in objective values is expected within year 2018, which will effectively narrow the gap between the objective value and the market value. The basic taxes that are imposed on a real estate sale are the Real Estate Transfer Tax and Value Added Tax (V.A.T.).
We should note that the Real Estate Transfer Tax is regulated by law no. 1587/1950 in connection with law 4226/2013 while V.A.T. was established mainly by law no. 3427/2005. Furthermore, law 4172/2013 introduced a capital gains tax payable by the seller.
Real Estate Transfer Tax is imposed on any transfer of real estate against a price in money or in land. This tax is levied on the price stated in the contract. However, if this price is below the objective value of the estate, the tax is calculated on the objective value of the estate. This tax is charged by law on the purchaser of the property, who has to pay, in full, the competent Tax Office which regulates the real estate prior to concluding the transfer deed.
As per the new tax provisions, the tax factor amounts to 3,09%.
Law no. 3427/2005 modified the V.A.T. Code (law no. 2859/2000) and brought about the imposition of V.A.T. for new buildings. According to the new tax provisions, V.A.T. at 24% is levied where a newly-erected real estate is acquired against a price and in money, for which building permission was issued after 1.1.2006 and the sale is being performed directly by the contractor. In this case the law considers the real estate as commercial goods, therefore for such transaction VAT is levied instead of the transfer tax.
Law 4172/2013 introduced the capital gains tax for the first time in Greek legislation and is imposed on property sale transactions as of 1.1.2014; nevertheless application of such law was suspended until the 31.12.2017; as of 1.1.2018, it is expected that such law will enter into force. Such tax is payable by the seller and is calculated at 15% on the difference between acquisition and sale price. There is a scale reducing the taxable capital gains based on the years that the seller kept the property before selling it, while an exemption is provided for capital gains up to 25.000 € as well as in case where the seller had acquired the property before 1.1.1994.