Plans for extension of property tax breaks

The government is looking to extend the suspension of the 24% value-added tax on newly built properties and the 15% capital gains tax on property transfers, with the relevant legislative provision expected to be submitted in the fall.

According to sources, the extension is being considered for one or two years, maintaining the tax regime currently in force in the real estate market. The decisions will be finalized during discussions for the tax intervention package that will be announced at the Thessaloniki International Fair in September, where the prime minister customarily outlines new government economic policy.

These are two tax measures that continue to form part of Greek tax legislation and, therefore, under normal circumstances, should be applied, as laws are enacted to produce legal effects and not to remain suspended for long periods of time.

VAT 24% for newly build properties

Value-added tax on newly built properties was introduced by a 2005 law and enacted in January 2006, in the context of measures to harmonize Greek legislation with the European Union’s VAT regime and to rationalize taxation of newly built properties. However, its implementation was suspended several years later as an exceptional measure aimed at boosting construction activity and the housing market. In a market where the supply of new housing remains limited and demand remains strong, particularly in large urban centers and tourist areas, a significant part of the additional cost is likely to be passed on to the final buyer through higher sales prices, market players argue.

Capital Gain tax up to 15% for properties sale

This is not the case when it comes to the capital gains tax on properties, which is imposed on the profit arising from the sale of a property. Its reinstatement would also increase the tax burden on sellers, who in many cases would attempt to pass part of the cost onto the asking prices. However, its impact on final values is estimated to be significantly smaller than VAT.

This is because the capital gains tax is not imposed directly on the buyer but on the seller. Therefore, the possibility of passing on the burden depends on market conditions, as in situations of increased demand, some sellers may raise prices, and in a weaker market may cover most of the tax themselves.

Source: eKathimerini.com