ECONOMY

Problems with homes’ VAT exemption

problems-with-homes-vat-exemption

Complications are emerging in the introduction of the measure suspending the 24 percent value-added tax on transactions involving properties built with a permit issued after January 1, 2006. Sources say a number of technical matters have surfaced that render this favorable regulation rather difficult when it comes to unsold housing stock.

As a result, various alternative scenarios are being examined: The easiest concerns the application of the tax’s suspension only for any properties constructed as of the present day, or at least to set the exemption date at the start of the year, to apply to licenses issued since January 2019.

The case of buildings constructed with permits issued before January 2006 that remain unsold is more difficult; they incur VAT unless they constitute primary residences.

Property market professionals say the problem lies in the fact that if the VAT suspension applies, companies with a backlog of housing stock that sold some properties in previous years could be entitled to a tax rebate by the state.

For a solution to be found, the president of the Federation of Building Constructors in Greece, Dimitris Kapsimalis, has proposed either that the VAT rebate only be added to the companies’ financial accounts as an expense, or that it not be returned at all.

“Unless a solution is found and the unsold properties are excluded from the VAT suspension, a significant problem will emerge in the market, as a large stock of older unsold units will be on sale at prices 24 percent higher than those constructed in the coming years,” Kapsimalis told Kathimerini.

“Yet at the same time, if we do not get to sell those properties, we will not have the necessary liquidity to finance new property developments,” he added.

In the last few days the Association for the Quality and Development of Buildings (SEPAK) also intervened: It noted that “the new law will have to include all licenses since 2006 and not just new ones, as that would create problems of unequal treatment for buildings.”

It went on to add that it is important the measure be applied as soon as possible, as at the moment sales of new homes have frozen in anticipation of the intervention.