Greece To Raise Property Taxation

by Lorys Charalambous, Tax-News.com, Cyprus

09 August 2005

Greek Economy and Finance Minister Giorgos Alogoskoufis last week presented a package of property-related tax measures as part of the government's effort to bring its deficit within the Maastricht criterion of 3% of GDP.

The country's 19% value-added tax (VAT) will apply to the construction and sale of new buildings after January 1, 2006, with an exemption for first-time house buyers.

Property buyers, who until now paid up to 11% of the property's value as transfer tax, will henceforth pay a 1 percent tax called a transaction fee.

Transfers of properties acquired after January 1, 2006 will be subject to a graduated capital gains tax, whose rate depends on the number of years the seller owned the property before selling. Thus, the tax rate is 20% for owners selling a property after ownership of up to five years; 15% if the ownership period was from five to 15 years; 5% if it was from 15 to 25 years; and nil if the seller owned the property for over 25 years.

The tax-free portion of an inheritance or a parental transfer of property is increased from 20,000 euros to 80,000 euros,and the payment time for inheritance taxes is increased from 24 monthly instalments to 24 bimonthly ones.

In Greece, property taxation is based on so-called 'objective' valuations, which are periodically adjusted, but tend to lag market values. Alongside the imposition of VAT, the government is raising these values by up to 50%. They were last adjusted in 2001, but the property market has surged since then.

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