REGULATIONS FOR ACQUISITION (BORDER AREAS)
Generally there are no restrictions on non-residents acquiring real estate in Greece. However, all interested purchasers, including Greek residents, must obtain prior permission from the appropriate authorities before purchasing real estate in border areas. In the case of non-EU residents, the definition of border areas is expanded and the procedures and conditions for obtaining the necessary consent are more burdensome. Shares in real estate companies which are defined as companies having more than 60% of their capital and reserves invested in urban real estate may only be owned by Greek or EU residents, or nationals of Greek origin, and such shares must be registered.
TAXES ARISING ON ACQUISITION, OWNERSHIP, OCCUPATION, DISPOSAL (INCLUDING LEASE)
Taxes on Acquisition
Real estate transfer tax is payable by the purchaser (the tax rates mat range from 9% to 13%). Exemptions are available under certain circumstances (e.g. purchase of a primary residence, importation of foreign exchange).
Registration, notary and lawyers fees are payable.
Real estate transfer tax as well as other ancillary costs to the acquisition (such as notary and lawyers' fees etc.) may be either fully written-off within the financial year they are incurred or in equal instalments over a period of up to five years.
VAT is not charged on used buildings and will not be paid on new buildings until 1997 (i.e. buildings for which the building permit was issued on or after 1 January 1997).
Taxes on Ownership
The annual tax on real estate has been abolished as of 1 January 1993. It has been replaced by a local tax to be collected by the municipalities. The tax is imposed annually at rates ranging between 0.025% and 0.035% of the objective value of the property. The exact rate is determined by the local authorities. Such tax is deductible for income tax purposes.
Taxes on Occupation/Rental Income
Income from real estate is subject to income tax at the rates described in the previous chapters. There are special rules applicable to determine net taxable income where the income is earned by individuals and foreign entities which do not have a permanent establishment in Greece, and not all expenses (including depreciation) are necessarily taken into account.
The occupation of owner-occupied real estate gives rise to taxable imputed income. The imputed income arising from the ownership of up to 200 square metres for a maximum of two residences is exempt from taxation in the hands of homeowners. Businesses receive a deduction equal to their imputed income, with no effect for income tax purposes.
Apart from income tax payable on rental income, individuals are subject to a 3% supplemental tax on gross real estate income, which is increased to 6% if the real estate is used for residential purposes and exceeds 300 square metres. This supplemental tax cannot exceed the primary tax payable on this income. Corporations are subject to the same supplemental tax, however the rate applicable is only 3%.
Stamp duty is payable on rental income at the rate of 3.6% which is normally shared equally by the lessor and lessee.
Rental income is not subject to VAT, however the rental of furnished units with certain added services and of equipped industrial premises are subject to VAT at the rate of 18%.
Taxes on Disposal
Real estate transfer tax on the transfer of real estate is paid by the purchaser (see Taxes on Acquisition).
Capital gains tax is payable by the seller/vendor.
A 5% tax is payable by the seller of shares of real estate companies (see definition of such companies above under "Regulations for Acquisition (Border Areas)"). This tax is applied on the higher of actual price or the value of shares as determined for the purposes of inheritance tax, namely, the fair market value.
Taxes on Compulsory Revaluation of Real Estate
All enterprises maintaining double-entry accounting books are obligated to revalue land and buildings every four years beginning with 1992. Buildings acquired within the revaluation year are not subject to revaluation. The revaluation surplus is subject to 1% income tax and must be capitalised within two years of the revaluation.
Tax Savings from Depreciation
Buildings are subject to depreciation on the straight line method at a rate from 5% up to 12% depending on the use of the building. Depreciation is deductible from the income from commercial businesses. Where an individual earns income from real estate, depreciation is not deducted per se and net taxable income is determined in accordance with the rules provided for in the tax law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Marios T. Kyriacou, KPMG Peat Marwick Kyriacou, Athens, Tel: +301 6062100; Fax: +301 6062111 or enter a text search 'KPMG Peat Marwick Kyriacou' and 'Business Monitor'.