ECONOMY

Properties posing as offshore firms get a big tax break

Last year, Economy and Finance Minister Nikos Christodoulakis had declared that those who had set up offshore companies to hide their ownership of property would no longer get off free from the taxman. He declared the imposition of a 3 percent tax on properties belonging to offshore firms. Now, this measure, trumpeted as a one of equity, is being diluted almost to extinction. An amendment to be tabled the next few days will exempt from the taxation all offshore firms constructing buildings or other installations that they intend to use for industrial, commercial or tourist purposes. Last year, when he said he was going to catch tax-evaders, Christodoulakis had presented data showing that there were 2,500 offshore companies in Greece whose only asset was a single piece of property. In this way, Greek taxpayers did not have to declare the capital used to build these properties, or its provenance. This amendment, in fact, provides property owners with a perfect excuse to avoid taxation. For example, the owner of an offshore company can set up, say, a commercial enterprise that engages in an activity, such as import of artwork, declare an extremely low amount in turnover and avoid paying taxes altogether because his or her property would be named as the commercial company’s headquarters. Of course, there are countless other schemes to be found along the same lines – one is constrained only by the limits of the imagination. The end result would be the same, however – avoidance of taxes. The measure to tax such offshore firms, as it was presented last year, had been widely praised but also much criticized. Critics said that it would impede the inflow of investment funds. However, if the government really wanted to boost entrepreneurship, all it needed to do is exclude from the amendment’s favorable clauses those properties used for housing. On the contrary, it mentions buildings under construction or other installations as being exempt from the tax. This definitely includes houses among the tax-exempt buildings. Specifically, the amendment says that «this exemption includes companies which are constructing buildings or other installations for their own use for an industrial, tourist or generally commercial purpose.» The exemption from tax only ends if the industrial, commercial or tourism company does not begin operations within seven years of the issuing of the building permit or if the property is transferred or leased to another person or company within 10 years after the building permit was issued. It is also interesting to note that there is no floor on the turnover of the commercial or industrial company. There are many vague points in the amendment. For example, can the property be transferred for free after a decade has passed since the building permit was issued? It also leaves us completely in the dark concerning already existing built property. The same amendment postpones the deadline for those who wish to transfer property from an offshore company to themselves or another person or company from September 30 to November 28. Those who do not submit proof of the property transfer by that date will be called upon to pay the 3 percent tax until December 19, unless, of course, they choose to set up a small company, as the new amendment allows them to. That would be the truly painless solution.