A survey of five Balkan countries (Bulgaria, Greece, Romania, Serbia and Turkey) shows that Greece has the most complex and costly property-tax regime in the region. Greece has the highest taxation on house acquisition, with the exception of new buildings whose construction permit was issued after January 1 and which are subject to value-added tax (VAT). Given that those new houses have not yet become available on the market, housing transactions are made on the basis of the property-transfer tax which has two rates (9 and 11 percent). Regarding new houses, the seller would be liable to pay an «automatic added-value tax» that will vary with the number of years he or she has owned the property, while the buyer will pay 1 percent of the property’s value as transaction tax. The gradual elimination of the property-transfer tax for houses whose construction permit was issued by December 31, 2005, will, however, help attract foreign investors to the Greek market. Real estate experts say the replacement of the transfer tax by the added-value tax will help the market. The added-value tax has long been adopted in Western countries, especially English-speaking ones. VAT is also being introduced in other countries, including Greece’s Balkan neighbors. The VAT rate in Romania, as in Greece, is 19 percent, while it is 18 percent in Serbia and Turkey, and 20 percent in Bulgaria. Greece has by far the highest property-transfer tax: In Romania it varies at between 1-3 percent, depending on the property’s size and value, in Bulgaria it is 2 percent and in Turkey 1 percent. Chasing foreign capital Bulgaria and Romania, especially, have made big efforts to modernize their property market in order to attract foreign investors. Both countries are to join the EU in early 2007 and foreign capital has already started to flow, in the knowledge that EU entry will provide a boost to property values. A few months ago, Bulgaria allowed foreign individuals to directly purchase property, instead of setting up companies to do so. Bulgaria has also begun to return properties confiscated by the communist regime (1944-1989) to their rightful owners. In the case of Greece, the problems for foreign investors, besides high taxation, are compounded, first, by the existence of two property values, the market value and the objective value assessed for tax purposes and, second, the existence of several taxes in favor of third parties, such as local community fees, the annual property tax, stamp duty and the local tax on properties with electricity. Real estate managers specializing in sales of holiday houses to foreigners say that they spend most of their time with prospective buyers trying to explain the difference between market and objective values, as well as on informing them about the multitude of taxes and fees they have to pay. «We spend more time on these issues than in finding them a suitable property,» one says. As a result, several prospective foreign buyers are discouraged from buying property in Greece. Comparison with their own tax systems, or those of neighboring countries, works to Greece’s disadvantage.