Special tax on real estate property (15%)
In order to combat tax evasion through the use of offshore entities the Greek legislator, by virtue of law 3091/2002 introduced an annual tax on the value of real estate, initially @3% and recently, by virtue of law 3943/2011 @15%. The tax is imposed on the value of real estate situated in Greece and which are held by the taxpayer on the 1st of January of each year.
The law provides for such a wide range of exceptions, that the payment of tax may be seen as the exception rather than the rule. The exceptions may be classified as
i) “objective” exemptions i.e. that are related to the type or the activity of the company that owns the real estate.
ii) “subjective” exemptions i.e. that are related to the disclosure of the ultimate owners/beneficiaries of the company/real estate.
Because of the extremely heavy burden of this tax, it is important to list the “objective” exceptions available according to i) and also to list the disclosure requirements that will have to be observed if the buyer does not fall under i).
i. “Objective” exemptions [the categories are not direct translation of the law – we provide with a summary list to be analyzed upon request]
a) companies listed in a recognized Stock Exchange
b) companies that exercise a business, manufacturing, industrial activity, or that provide services, under the condition that their gross income from such activity is higher than the gross income from real property.
c) companies that construct buildings or other establishments that are intended to be used for the exercise of a manufacturing, touristic, or general commercial activity. The exception is valid for 7 years after the application for a planning permission. If the company does not initiate the purported activity within 7 years from the application for a planning permission, the exception is annulled with a retrospective effect. Similarly, the exception is annulled if the company sells, leases out etc the real estate to a third party within 10 years from the application for a planning permission.
d) Shipping companies established in Greece under law 89/1967 for the buildings used by them in the exercise of their activity.
e) Companies owned or managed by the Greek State.
f) The Greek State, foreign States with the pre-condition of reciprocity, religious institutions, the Church etc.
g) Charitable institutions for real estate that is used by them, for real estate that produces income which is given for their charitable purposes and for real estate which is not used at all or does not produce any income.
h) Social security institutions and real estate mutual funds that are supervised by an authority based in the country of their corporate seat (with the exception of offshore jurisdictions as defined in the Greek Income Tax Code)
ii. “Subjective” exemptions
a) S.A. companies, Limited liability Companies, personal companies (partnerships) that are based in Greece or in another EU member State or in a country with which Greece has entered into a co-operation agreement for the combat of tax fraud and under the condition that they declare their shareholder/ultimate beneficiary (individual); The ultimate beneficiary/individual must be in possession or acquire a tax registration number in Greece.
b) Companies in which the sole shareholder/beneficiary is a charitable institution with a charitable cause in Greece for the real estate that is used for that purpose;
c) State corporations, charitable institutions, workers unions, museums, social security institutions etc.
If the shares of the above entities are owned by companies listed in a recognized stock exchange, mutual funds, regulated investment funds, insurance companies, provided that these institutions are not established in an offshore jurisdiction as defined by article 51A of the Income Tax Code, then the disclosure of the ultimate beneficiary/shareholder is not necessary for the exemption.