Tax evasion rampant in property sales
Urgent need for housing and investments shelves sanitization of the real estate market
The sanitization of the real estate market and the prevention of the gray economy in construction have been sacrificed to the growing problem of housing and the need to increase investments – at least for the next two years.
With property prices heading for new record highs this year, the capital gains tax will be shelved, value-added tax will remain on ice until the end of 2025, while the gap between commercial values and taxable rates (known as “objective values”) will widen further, especially in areas where high demand and explosive price growth have been recorded.
That will happen even with the compulsory payment of the purchase price of a property through a bank, a measure which has had limited performance in terms of detecting illegal money.
With property prices up more than 60% from their 2017 lows and the housing supply falling short of demand by at least 200,000 apartments, the government’s priority is to continue the upward trend in real estate investment even if this keeps the door open to tax evasion through property buying, selling or building.
The following story has been circulating in recent weeks in real estate circles as an extreme example of speculative games today: A plot of land in a southern suburb at the center of buying interest due to the Elliniko projects was sold for 4 million euros a few weeks ago and is now up for sale again, only this time the price has risen to €5.5 million. Its objective value is determined at €1.97 million per the original contract.
How much lost taxable material does this transaction hide? The capital gains of €1.5 million – the difference from €4 million to €5.5 million – will not be taxed as that provision remains on ice. And the seller will acquire a big weapon to deal with their finances’ scrutiny for the next investment.
The attempt to detect black money via the mandatory payment through banks will not succeed, because the huge difference between the objective value and the real price allows any amount to be written in the contract, with the difference paid in a suitcase.
