Offshore firms gearing up for 3 percent tax

Notaries public report a spate of inquiries from owners of offshore companies (OSC) weighing the impact of recently introduced tax levies on their real estate holdings. «Their intentions should become apparent in about a month’s time, given that the grace period they have been given to declare their holdings expires in July,» says Maria Poulatza, vice president of the Athens Notaries Public Association. About 2,500 OSC own real estate items in Greece today, without engaging in any other activities. The secrecy which surrounds the legal ownership status of OSC enables the real property owners to remain anonymous and evade taxes. According to the new measures which aim to battle the phenomenon, owners of offshore companies with real estate holdings in Greece are liable to an annual 3 percent tax, effective as of January 1, 2003. Owners will have to file the relevant declarations (in case they decide to keep their OSC) with their local tax office by July 20, and the tax will be paid in a lump sum, together with the submission. The owners of offshore companies who decide to sell their real estate by July will not have to pay the special 3 percent tax, while the buyers will pay 50 percent of the property transfer or gift tax. According to Finance Ministry estimates, the total market value of real estate held by offshore companies is about 2.93 billion euros. Of the 2,500 OSC, 260 hold 400 properties on the island of Myconos, with a total value officially set for tax purposes of about 120 million euros, but an estimated total market value of 400 million euros. A further estimated 1,200 OSC hold properties in Attica with a total of officially set values of 558 million euros. In central Macedonia (including Thessaloniki), 230 OSC hold properties with official values totaling 103 million euros. On the whole, ministry officials do not believe that the new measures will be very effective, in view of the fact that the committee which probed the matter came up against a host of legal problems arising from bilateral national agreements, internal legislation and international law which did not allow it to propose any bold measures. Nevertheless, they note that interest in setting up new OSC in the last two years has waned, and contend that the aim of the new measures has primarily been to prevent the creation of new ones. The ministry hopes to raise about 30 million euros from the new OSC tax.

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