Suspended value added tax on real estate to emerge on Jan. 1, 2017

Activation of a suspended “added value” tax on real estate transactions is set for implementation as of Jan. 1, 2017, a burden on top of the current property tax (ENFIA) and amid a dramatically imploded property market in the country.

The surcharge was suspended in December 2014 for two years, a decision taken by the then Samaras government a month before snap elections in the country brought radical leftist SYRIZA to power with a junior populist-rightist coalition partner.

At the time the “added value” tax on real estate sales was deemed as excessively complicated to impose, with tax bureau employees and notaries – the professionals in Greece that usually draw up contracts for real estate transactions – unable to set a figure for payment to the state.

The result was a debilitating “freeze” on practically all real estate transactions in 2014, including everything from commercial property to grazing rights.

On paper, the still suspended provision foresees a “value added” or “surplus value” tax based on a 15-percent coefficient slapped on the profit arising between the original purchase price and the subsequent – possibly decades later – sale price.

The tax is imposed on the seller of the property, whereas the buyer must pay a 3-percent transfer fee based on the objective value of the property, as set by the tax bureau.

A 25,000-euro tax-free ceiling is allowed for owners of property that have kept the real estate in their possession for at least five years.

Of course, what’s not mentioned in the law is the fact that in bygone decades sales of real estate, especially in transactions between private individuals and particularly ones involving residential units, was officially listed at lower rates than the actual monetary figure that changed hands. The reason was to keep taxes and fees towards third parties (notaries, building registries etc.) low by using cash.