Newly Elected Government of Greece Eliminates VAT on Real Estate Investment
VAT, meaning value-added tax, is one of the main reasons that hold foreign investors back from participating in another country’s real estate market. Current Greek government, however, took a step to prevent foreign investors to have cold feet. New government announced that for the next three years, there will be no VAT collection on property investments. This makes Greek real estate market much more desirable now.
Greece’s GDP is projected to grow by more than 2% this year. Yet, the country’s GDP is still 25% lower than its peak in 2007, before the great financial crisis. Newly elected Prime Minister Kyriakos Mitsotakis of the center-right New Democracy party has presented a tax reform that concerns all tax-payers of Greece; however, the main subject of the bill is the people in the real estate sector.
Tax Reduction is Aimed to Reach as High as 50 Percent in Two Years
On July 21st, Mitsotakis announced an immediate 22% reduction in property tax with an aim to lower it by a total of 30% during his first two years in office. He also plans tax deductions of up to 50% for renovation and property investment over the next three years, as well as a three-year tax holiday on real estate capital gains and on VAT for construction-related activity.
It is not very hard to deduce that the new tax bill will have a positive impact in Greece’s Golden Visa Program thanks to its item that puts a three-year pause on real estate VAT. Greek VAT which was applied to buyers who were not Greek and who did not use the real estate as their primary residence, was at 24%. With the new tax bill, this high percentage will be eliminated, and thus, the foreign interest in Greek real estate will inevitably go up. In addition to the fact that foreign investments in Greek property increased in recent years, new tax bill is predicted to cause a boom in foreign interest in Greek real estate market.
Along With the Country’s Golden Visa Program, Now is the Right Time to Enter Greece’s Real Estate Market
Real estate market is always a go-to place for individuals who are able to pay big sums of cash upfront. As an option where investors often choose to put their accumulated funds into, real estate sector is a great opportunity when the market is bullish. Already showing signs of recovery in recent years, the Greek property market is now more desirable than ever with the new tax bill that pauses VAT.
This is the right time to buy property in Greece, because:
- Prices are still far below their 2006 peak.
- A three-year tax holiday on VAT and property-related capital gains has just been instated.
- Chinese investor interest in Greece is at an all-time high.
Companies will Also Benefit from the New Tax Bill
Kyriakos Mitsotakis says that the bill will empower the middle class, and also, reduce tax rates for companies. The corporate earnings tax will drop from 28 per cent today to 24 per cent next year and to 20 per cent in 2021. Taxes on dividends will fall from 10 percent to 5 percent next year.
Reduction Regarding the Individual Tax Payers
The new tax scheme for individuals includes the lowest rate to drop to nine percent from 22 percent today and the highest to 40 percent from 45 percent today. The tax-free ceiling will remain at 8,636 euros per year.
Also, VAT on construction activity, as said, will be paused for three years. The general VAT rates will drop from 13 percent and 24 percent today to 11 and 22 percent, with the lowest rate of 6 percent remaining unchanged.
Greece Real Estate Market Presents the Best Numbers in a Decade
Central Bank data showed on September 2nd, 2019 that the recovery in Greece’s housing market improved. It has been more than a decade since the country experienced these numbers of growth. Country’s recovering economy and growing foreign interest are the contributing factors.
According to the data provided by the Bank of Greece, apartment prices rose 7.7 percent in the second quarter of 2019 compared to the same period a year earlier. More specifically, prices rose by 11.1 per cent year-on-year in Athens, where home-sharing platforms such as Airbnb have grown very popular.
Competence of the Government is an Incentive for Investors
Kyriakos Mitsotakis, who is the leader of the current government, is a graduate of Harvard University. He also has a lot of experience in the sector of finance in London. With his presidency, a foreign interest which already started to come back to the country increased again. As a qualified and competent person, he manages to gain trust from the international and local business circles.
Aiming to combine the boost of investor trust with tax incentives, the new government introduced tax reductions and provided all the business circles with new opportunities while at the same time clearly demonstrating their policy which centralizes foreign investment as the leading factor of economic growth.
EU Bail-Out Program is Completed
As of August 2018, Greece successfully completed the EU bail-out program which suggested the official end of the financial crisis in the country. In the last few years, the Greek economy has shown strong signs of recovery and improvement. Last year’s GDP growth was around 1.8 percent, and with the new tax bill and the reform program which aims to increase foreign investment in the country, the new government is set to surpass two percent growth rate next year.
Annual Property Taxes Are Reduced
According to the new bill, the new government made a reduction in annual property tax to 22% on average to be applied as of September 2019. The small property owners will see 30 percent cut while middle class owners will experience 20 percent. With all the reductions, Greek real estate is much cheaper than it was a few months ago. In order to lure foreign investment into the country, Mitsotakis government makes substantial tax reductions and it would be no surprise to see a boom in the foreign investor interest in Greek real estate soon.