Taxation of rental income in Greece: individuals versus companies

Taxation of rental income in Greece: individuals versus companies

Quick answer

Individuals pay tax on Greek rental income on a progressive scale from 15% to 45%, with very limited deductions. Companies pay corporate income tax at a flat 22% on net profit after deducting operating expenses, financing costs and 4% annual depreciation of buildings. Rental income of an individual is reclassified as business income, taxed at 9%–44%, when three or more properties are let short-term, or when hotel-type services are provided. For a high-value property with substantial rental income and running costs, corporate ownership usually produces a lower effective tax rate.

How individuals are taxed

Income from leasing, owner-occupation or free use of Greek property is taxable regardless of the owner’s residence. Individuals report it annually on Forms E1 and E2 and pay tax at the following rates.

Annual rental income	Tax rate
€0 – €12,000	15%
€12,000.01 – €24,000	25%
€24,000.01 – €36,000	35%
Above €36,000	45%

Income from owner-occupation or free use is deemed to equal 3% of the property’s objective value.

Deductions available to individuals are narrow: a flat 5% of repair, maintenance, renovation and other fixed or operating costs; rent paid in a sublease; 10% of flood-protection and drainage works; compensation paid to a tenant to terminate a lease; and a tax credit, spread over five years and capped at €16,000 of expenditure, for energy, functional and aesthetic upgrades not covered by a subsidy programme (goods capped at one third of the services spend). Mortgage interest, management fees and most running costs are not deductible.

When rental income becomes business income for individuals

An individual is treated as carrying on a business, and taxed on the business income scale instead, in three situations:

• short-term letting (under 60 days) of up to two properties where services beyond furniture and linen are provided, such as hotel-type accommodation services;
• short-term letting of three or more properties, regardless of services provided;
• long-term letting where hotel-type services are provided.

Annual business income	Tax rate
€0 – €10,000	9%
€10,000.01 – €20,000	20%
€20,000.01 – €30,000	26%
€30,000.01 – €40,000	34%
€40,000.01 – €60,000	39%
Above €60,000	44%

Business status also brings VAT registration, bookkeeping and reporting obligations, covered in the VAT article in this series. Note that each separately registered unit in the Short-Term Rental Registry (each AMA) counts as a property for the three-property test.

How companies are taxed

All Greek resident companies and Greek branches of foreign companies keep accounting books and pay corporate income tax at 22% on their profits. Rental income is treated as business income and taxed after deducting business expenses, depreciation and bad-debt provisions.

Deductible expenses. Expenses are deductible if they relate to real transactions at market value, are recorded in the books and supported by proper documentation, and are not on the statutory non-deductible list. Typical deductible items for a property company include management and agency fees, maintenance and repairs, insurance, professional fees, utilities and financing costs.

Financing costs. Interest on bank loans, bond loans issued by SAs and related-party loans is deductible, subject to transfer pricing rules for related parties. Interest on other third-party loans is deductible only up to the Bank of Greece reference rate for non-financial enterprises. Under the interest limitation rule, net interest above €3 million is deductible only up to 30% of EBITDA.

Depreciation. Buildings are depreciated at 4% a year on the building value, excluding land. For a newly built villa this is a significant annual deduction that has no equivalent for an individual owner.

Deemed income. The 3% deemed income on free use or self-use applies to companies too, but where the property is used for the company’s own business the deemed expense is deducted, producing a tax-neutral result.

Losses. Tax losses carry forward for five years; carry-back is not allowed. Losses are forfeited if more than 33% of ownership or voting rights changes and, in the same or following year, the business activity changes by more than 50% of turnover.

Individual or company: the comparison

	Individual	Company
Tax rate on rental income	15%–45% progressive	22% flat
Operating expenses	5% flat allowance only	Fully deductible
Financing costs	Not deductible	Deductible subject to limits
Building depreciation	None	4% a year
Compliance	Annual E1/E2 return	Books, financial statements, CIT return
Profit extraction	Direct	Dividend, 5% withholding or 0% under Parent-Subsidiary Directive

The tipping point arrives early. Once rental income exceeds €12,000 the individual rate rises to 25%, above the corporate rate, and climbs to 45%. Combined with full expense deductibility and depreciation, corporate ownership is generally more efficient for a high-value property let commercially, provided dividend extraction is planned, as described in the withholding tax article in this series.

Frequently asked questions

What is the tax rate on rental income in Greece for non-residents? The same as for residents: 15% to 45% for individuals, 22% for companies.

Can I deduct mortgage interest from Greek rental income as an individual? No. Individuals receive only a flat 5% allowance for costs. Companies can deduct interest subject to the limitation rules.

How many Airbnb properties can I rent before it becomes a business? Up to two, provided you supply only accommodation and linen. Three or more properties, or any hotel-type services, make it a business.

Do companies depreciate land? No. Only the building component is depreciated, at 4% a year.

 

* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.