12th Greek Australian Legal and Medical Conference
Samos, Greece 2009

TAXATION AND REAL ESTATE IN GREECE

John Tripidakis

The two basic parts of our today’s subject will be Taxation in Greece and Real estate in Greece. Those two law fields, are inevitably connected and will be examined under the perspective of the Greek-Australian capacity.

A. TAXATION IN GREECE

With regard to Taxation, we will review briefly five (5) chapters of the Greek taxation system namely: income tax, annual tax on real estate properties, Capital taxation, parental gifts and capital gains tax.

A.1. INCOME TAX

According to Greek taxation law, any person (Greek or foreigner) who earn income in Greece has to declare this income annually to the competent Tax Authority. Income Tax statements are filed annually in the beginning of May of each year.

However, regardless of their annual income, foreign residents are obliged to file Income tax statements, in case that:

  1. They own a house in Greece of size over 150 sq.m.;
  2. They have purchased an estate or raised a building in Greece;
  3. They run business in Greece;
  4. They are members of personal companies, limited companies, societies or partnerships in Greece;
  5. They have acquired ownership of properties in Greece through any means, such as purchase, inheritance or Gift;
  6. They are owners of a car, a boat or an airplane in Greece,

A progressive scale is applied for the taxation of the total income received in Greece from 5 to 40%.

Self-occupied houses are excluded from taxation as long as they do not exceed 200 meters in square footage.

A.2. ANNUAL TAX ON REAL ESTATE PROPERTIES

It is an annual tax which is imposed on real estate properties, that natural persons or legal entities are in possession in Greece, on January 1,2008 and for the following years. It is calculated on the value that the properties or the real estate property rights have on January 1 of the year of taxation

The annual Tax which is imposed on the value of the real estate property arises to the percentage of 0,1% for natural persons and to 0,6% for legal entities.

A.3. CAPITAL TAXATION

One of the major issues that Foreigners often encounter, is the taxation on property acquired in Greece, through inheritance, gift or parental Gift.

An indispensable prerequisite for the acceptance of an Inheritance, is the previous filing of Inheritance Tax statements, declaring before the competent Tax authority, the inherited property and paying the relevant tax.

The tax is calculated progressively and by 3 categories (A,B and C) corresponding to the consanguinity level of the heir to the deceased.

A recent law has changed the previous tax system on Inheritances for deaths that occurred after December 13, 2007, replacing the past progressive tax with a tax imposition in the percentage of 1% for Inheritances exceeding in value the tax free amount of categories A and B, i.e. 95,000€ and 20,000€ respectively. For example, in case that a deceased passed away and left to his child his property in Greece, of tax value 120,000€, there will be a 1% tax imposition on the 25,000€, i.e. the amount that exceeds the 95,000€. However, in cases of deaths that took place before December 13, 2007, the previous tax system applies, imposing a progressive tax on the “tax” value of the property.

Moreover, a tax exemption from the Inheritance tax applies for the deceased’s surviving spouse and minor children, who inherit his property in the amount of 300,000.

The deadline for filing the Inheritance Tax Statements is 6 months after the deceased’s passing or the Will’s probate and is extended to one year in case the deceased passed away abroad or if the heir resided abroad at the time of the death.

A.4. PARENTAL GIFTS

Tax is also imposed on the conveyance of property (real or personal) from Parents to their children. As for Inheritances, according to the law previously in effect, a progressive tax was imposed on the Estate’s value exceeding the tax free amount of 95,000€. Pursuant to the new law, a tax exemption of 95,000€ is provided, while the remaining “tax” value of the property which exceeds the tax exemption of 95,000€, is further taxed in the percentage of 1%. This tax imposition applies only to Parental Gifts, executed after the 13th of December, 2007.

The same tax system applies on gifts that take place after the implementation of the new law. Depending on the relation of the grantor to the grantee, there is a respective tax imposition, proving a tax exemption of 20,000€ if the grantee is the grantor’s brother, while the remaining is further taxed in the percentage of 1%.

A.5. CAPITAL GAINS TAX

According to the first tax system, regulated by a law that came into force in the early 50’s, a tax is imposed on conveyance proceeds, rising to 11% aprx and it must be paid in full by the person acquiring the property, prior to the execution of the Deed.

The second tax system is the Capital gains tax system, a tax imposed on real estate properties acquired after the 1st of January of 2006. According to this tax system, any sale, distribution, etc… of properties acquired after that date is subject to capital gains tax.

The tax scale decreases from 20% to 5% of the “tax value” of the property, depending on the time that the seller was in possession of the property. On the other hand, the purchaser is obligated to pay a transaction fee in the percentage of 1% of the value of the property, as depicted in the conveyance Deed.

Finally, in cases of buildings raised by constructors a Value Added Tax is imposed in the percentage of 19% on the property’s value.

Exemption from Tax

An exemption from conveyance tax applies on purchases of primary residence in Greece, of size up to 200 sq.m. which will be used as primary residence. This tax exemption is provided not only to Greek residents, but also to Greeks who live abroad or foreign residents that are of Greek descend who have been working abroad for at least six years and are registered with a Greek Municipal Registry.

Another exception applies for interest gained from bank accounts held in a Greek Bank. In general, a tax is imposed on interest received from Greek bank accounts in the percentage of 10%, without any further tax impositions. However, an exemption applies for non Greek residents who hold bank accounts in any Greek bank in foreign currency.

B. REAL ESTATE PROPERTY IN GREECE

Let us now come to our second part of our today’s subject, i.e. real estate property. This matter will be reviewed under the perspective of 5 different issues, that is: title searches, Land Registry Bureau, joint ownership, adverse possession and real estate in border territories

B.1. TITLE SEARCHES

The first and absolutely necessary step in determining whether a person is the owner or entitled to some property in Greece is conducting a title search before the competent Land Registry of the property’s location. Any acquisition of a property through any means such as Inheritance, Gift, and Purchase is affected through the Deed’s registration before the competent Deed Recorder archives, where all information regarding the property is enlisted. In Greek Land Registries, it is the name of the owner of a property that appears in the relevant listings, and not the real estate property itself. So, being a Registry by name and not by property, means that any relevant investigation is based upon the name(s) provided and not the property’s address/location. Attorneys are the only ones entitled under Greek law to perform title searches and have to search through several volumes and numerous entries, going many years back (in some cases the beginning of the 20th century) in order to be able to determine the current legal status of a property and advise whether a person is entitled to a property or not.

Land Registries are also competent for the registration of any lien/encumbrance registered against the property in question. Any mortgage, seizure, lien, encumbrance, lawsuit related to the property has to be duly registered in the competent Land registry archives in order to be valid.

As you understand, although sometimes it is like looking for a needle in a haystack, title searches are the only and absolutely necessary way in order to monitor the legal status of a property and determine whether any liens, mortgages, seizures have been imposed against a property without the owners’ knowledge.

B.2. LAND REGISTRY BUREAU

The system of the Land Registry is about to change by the newly established Land Registry Bureau system (“Ktimatologio”), which is already in effect for some areas of Greece. In the Land Registry Bureau system, it is the property itself that is registered in the relevant archives, receiving a Land registry Bureau registration number, the so-called “KAEK”. A specific region is proclaimed as under registration by a Decision of the Minister of the Environment. For the year 2008, the Ministry of Environment has proclaimed 107 new areas to be registered to the Land Registry Bureau system such as the Municipality of Athens, Municipality of Zakinthos, Nafplion, Municipalityof Thessaloniki, Sparti, etc…

The goal of the Greek Government is to provide owners of properties in Greece with a more accurate system of information registration on properties in Greece, replacing the old Land Registry system.

B.3. JOINT OWNERSHIP

Moreover, I believe that most of you are familiar with the issue of joint ownership, being in possession of a property with other co-owners. Many have been given properties in Greece, by their parents or other relatives, owning them jointly with their siblings, cousins and other relatives. Many disputes and trials have been brought before the Greek Courts, since some of the joint owners have often tried to exploit the property, without the other co-owners’ consent, excluding them from their legal share gained from such exploitation. Furthermore, the use of a property held in joint ownership is often impossible, where the other joint owners are negligent, resulting to the property’s abandonment. No potential buyer would be interested in purchasing an undivided interest share on a property which he could not exploit without the other co-owners consent. As you understand this is a one way road, forcing the joint owner to be bought out by the other joint owners or even request the distribution of the property before a Greek Court, which would distribute the property to all joint owners, according to their respective shares on the property, if this is applicable or sell it through an auction.

B.4. ADVERSE POSSESSION

Another issue I would like to bring to your attention is the matter of adverse possession (“hrisiktisia” or the so-called “squatter’s right”). In many cases, foreigners have lost ownership of their Greek properties due to adverse possession. Adverse possession is a provision of the Greek Civil Code, granting a person with ownership of a property, if he alleges and proves that he has been occupying that property for a period of more than twenty years, even though he is not in possession of the property’s legal title. Many foreigners who have left properties that belong to them (passed down from their relatives, friends in Greece) unattended in Greece or even entrusted them to their relatives and neighbors in Greece, have very often encountered the issue of losing ownership due to adverse possession. It is very often the case that relatives, who claim to “take care” of the Greek property, are actually trying to gain ownership of it, through adverse possession.

You should be wary of Greek relatives/ friends, residing in or near your Greek property for a period of 20 years (or in sometimes, even less): all too often, they will end up with the title to the property, if the situation is not identified in time and defended as appropriate.

B.5. BORDER TERRITORIES

It is highly likely that many of you have considered of purchasing real Estate in some regions of Greece. However, such purchase is often impossible for certain areas of Greece, since many have been characterized by law as “border territories” and the purchase of land there is permitted only to those who have the Greek nationality, following a permit issued by the competent authority. These border territories include not only areas in the borders of Greece with other countries, but also areas in the center of the Aegean Sea (such as the islands of Skiros and areas in Crete), which are also considered “border territories”. The acquisition of real estate within the “border territories” by foreign citizens without Greek nationality or other foreign individuals is very difficult or even impossible, since a special permit is required by the National Council of Defence of the Ministry of Defence. In fact this permit is only given in rare cases and after careful consideration due to national security reasons. The same limitation applies to E.U. citizens, yet the matter is about to be regulated. Foreign citizens descended from Greece, have the Greek nationality and so they don’t have any of the above problems in purchasing real estate in any region in Greece. In fact, Greek Australians do have the Greek nationality.