Flexibility on VAT from 2025
New framework allows Greece to maintain reduced rates on islands, cut them on property
As of January 2025, the government will have the option of permanently reducing value-added tax rates by up to 30% on the Aegean islands, as well as slashing the VAT on realty from 24% to 13%, or even bring it down to zero. It could also cut the VAT rates on agricultural machinery, cotton and solar panels.
According to the Finance Ministry, the draft directive adopted at Tuesday’s council of European Union economy and finance ministers (ECOFIN) allows Greece to apply specially reduced tax rates if the fiscal conditions allow for it. What matters most, ministry sources say, is that the country can now apply the reduced rates whenever it deems fit.
This draft guideline on a new VAT framework across the EU comes after four years of negotiations. It grants member-states great flexibility on VAT policies, while taking measures for reducing distortions in competition and for promoting the key priorities of the bloc (the digital and green transitions and public health). The previous framework was already 30 years old and it was in urgent need of modernization.
Athens made a point of being represented at the highest possible level in those talks in order to express the political positions and choices of Greece as clearly as possible, regarding the securing of national interests and the restoration of tax rights, mainly concerning reduced VAT rates.
Finance Minister Christos Staikouras drew particular attention at the ECOFIN meeting to the issue of maintaining the special VAT rates for certain islands in the Aegean, by connecting the Greek demand with the approval by Athens of the final agreement on the VAT framework. He also highlighted the peculiarities of Greek insularity as well as legal arguments in favor of the Greek position.
As of 2025, Greece will also be able to reduce the VAT rate on realty – on the sale of newly built properties – though this has been suspended in Greece until the end of 2022.
