Tax obstacle for property transactions

By Nikos Roussanoglou

Property owners with debts to the state are facing additional trouble selling their assets with the capital gains tax that has caused the market to freeze.

Estate agents claim that if the agreed price for a property – which in virtually all cases is below the objective value (used for tax purposes) – is less than the seller’s debt to the state, tax authorities will not allow the transaction. They will only accept a sale at the objective value or above in order to cover the entire debt.

The issue stems from a provision in the tax procedures code: This means that anyone with debts to the state can only secure tax clearance to sell a real estate asset if the sale is conducted at the objective value (or above) to cover their debts, so as to avoid any transactions involving falsified low prices between sellers and buyers.

However, in practice, this means that the state not only loses the part of the debt repayment it would have received if such a sale went ahead, but also misses out on the 3 percent transaction tax it would have collected.