VAT on property transactions is prohibitive for potential buyers

VAT on property transactions is prohibitive for potential buyers

Purchasing a house or apartment in Greece that was built in the last 12 years is forbidden fruit for the majority of foreign buyers or for locals who have already bought their main residence. The reason is not so much the cost of the property – as prices have dropped 40-50 percent since 2008 – but rather the tax load, concerning the 24 percent value-added tax that has to be paid.

With the exception of people purchasing main residences, VAT must be paid by all buyers of property with a building permit dated later than January 1, 2006. Greece’s 24 percent rate means the tax load is very high on those assets, so hardly anybody is looking at them. When one adds the various other costs involved, such as registration at notaries and the cadaster, the estate agent’s commission etc, Greece is the fourth most expensive country in the European Union in terms of the total cost the transaction of a newly built home entails, forcing buyers to pay an extra 33 percent of the property’s price.

If the capital gains tax is also reintroduced as of next year, having been suspended until the end of 2018, Greece will likely top the charts of such costs in Europe.

At the moment the most expensive country in the EU for buying a property and then reselling it after a few years is Italy, with a 37.7 percent cost, followed by Hungary with 37.2 percent and Croatia with 35 percent. In all those countries the main reason is the high VAT rate (in excess of 20 percent). Nevertheless, owners in those states do not face huge annual payments in the form of ownership taxes, as Rome, Budapest and Zagreb have chosen to tax property transactions and not possession.

The above data further strengthen the case for the reduction of the VAT rate on the sector from 24 to 13 percent in Greece, as the buyers of properties dating from before 2006 are taxed 20 percent less, so new homes are overlooked.

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