As announced by Greece Prime Minister Kyriakos Mitsotakis, tax reforms are a “key priority” in order to attract more foreigners to invest in Greece. Amongst the reforms announced during the past month were tax reforms relating to immoveable property. Two important measures are the reduction of the ENFIA tax and the elimination of the 24% VAT on property purchases which will be applicable for three years.
Over the past few years, the Greek real estate market took a blow. The cause behind it is not the value of the property, as property prices have decreased by 40% to 50% since 2008, but rather the tax burden which is imposed upon the individual. In fact, it was announced that the ENFIA tax, a tax on the ownership of property, will decrease. An owner of an immovable property in Greece is obliged to pay the annual ENFIA tax, which is determined in accordance with various factors such as age, location and size of the property. It is anticipated that:
- Individuals owning a property valued up to €60,000 will see a reduction of 30%;
- Individuals owning a property valued between €60,000 and €70,000 will see a reduction of 27%;
- Individuals owning a property valued between €70,000 and €80,000 will see a reduction of 25%;
- Individuals owning a property valued between €80,000 and €1,000,000 will see a reduction of 20%.
- Individuals owning a property valued more than €1,000,000 will see a reduction of 10%.
Elimination of the 24% Property Purchase VAT
Those individuals seeking to purchase a property with a building permit issued after the 1st of January 2006 are obliged to pay 24% VAT when they are either not using the property as their primary residence or are not Greek citizens. The 24% VAT is considered as a hefty tax burden, and investors are seeking to buy properties with a building permit issued before January 2006. It has been estimated that when taking all the costs involved in a property transaction into consideration, Greece becomes one of the most expensive countries within the EU to invest in.
In efforts to reduce this burden on prospective investors, Mitsotakis announced the exemption of the 24% VAT which will be valid to all new developments. The VAT exemption will be applicable for the next three years, therefore, those individuals purchasing property in Greece would only be subject to the standard 3.09% property transfer tax.
Investing in Greece
It has been anticipated that Greece’s GDP during 2019 will grow at a rate of 2%, and therefore is showing signs of recovery. Property prices are still increasing at a moderate pace, thus allowing more foreign investors to step in. According to the Bank of Greece, during the first three months of 2019, property prices have risen by 4%. Together with the advantageous property prices and the three-year tax holiday, this Mediterranean country will continue to attract more individuals to invest in real estate.
Moreover, the Greece Golden Visa programme is attractive for those individuals seeking to obtain residency within Greece. Although applications for the Greece Golden Visa have decreased, the elimination of the 24% VAT is expected to escalate interest in the programme in light of the considerably reduced costs.