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Real estate company ownership in Greece : individual ownership VS company – a comparative table

Iason Skouzos - TaxLaw > Practice Areas  > Real Estate  > Real estate company ownership in Greece : individual ownership VS company – a comparative table

Real estate company ownership in Greece : individual ownership VS company – a comparative table

 

Legal entity
Advantages Disadvantages
1. Income from property is taxed as profit from business activity at the flat tax rate of 22%.

Apart from the flat tax rate for the income from property, the further distribution of dividends by the company to the shareholders is taxed as well at the tax rate of 5%. However, in case there are also other sources of income except from the property income, there may be a flexibility in arranging when to receive the dividends and pay the dividend tax.

2. Α legal entity which acquires real estate income in Greece has the right to deduct the total of its business expenses which are related with the operation of the business, subject to the applicable deductibility rules (including loan interest etc.)

Establishment and operational expenses (cost for the establishment of the company and further ongoing corporate expenses, legal and accounting costs etc.)

3. For the determination of the taxable profits from business activity, the tax depreciation of real estate assets is deductible by the legal entity in all cases. In the case of a plot on which buildings have been erected, tax depreciation is carried out only on the value corresponding to the buildings and not on the value corresponding to the plot. For buildings, constructions, installations, industrial and special installations, non-building installations, warehouses and stations, including their annexes, a depreciation rate of 4% is provided.

Any capital gain which the legal entity acquires from the transfer of the property is taxed at the fixed rate of 22% as income from business activity.

4. Flexibility in future tax planning for inheritance purposes.

Property tax (ENFIA) is imposed on the rights in rem of any type of ownership of immovable properties, which are located in Greece and belong to a legal person or legal entity on the 1st of January of each year.

ENFIA = the principal tax (on any real estate property) + supplementary tax (on the total value of the rights on the property of the taxable legal person)

a.      The method of calculation of the principal tax is the same for legal entities and individuals, based on the classification of real estate in three (3) different categories, i.e. buildings, land within a city plan or settlement (plots) and land outside a city plan or settlement (fields).

b.     The supplementary tax is calculated on the total value of the rights on the real estate of the legal person or entity at a rate of 5,5%ο. For properties which are self-used for the production or exercise of any kind of business activity, regardless of the object of work, the supplementary tax is calculated at a rate of 1%ο.

5.  

 

Income from owner-occupation of the property is presumed to consist of 3% of the objective value of the property and is considered as income from business activity and consequently for tax purposes it is included in the taxable result of the business.

However, the imputed rent from owner-occupation is deductible provided that it does not exceed 3% of the objective value of the property, so the ultimate effect is tax neutral.

6.

Legal entities established in non-cooperative countries (in the field of taxation) that have rights of full or bare ownership or usufruct to real estate located in Greece, pay an annual special real estate tax of fifteen percent (15%) on their value. This tax is in principle applicable to all legal entities owning real estate property located in Greece, unless they fall under one of the many exemptions provided in the law that effectively result in the tax being imposed in cases where there is insufficient declaration of the ultimate beneficial owners (individuals). Indicatively, an exemption would apply for a Greek established company whose UBO has been disclosed and has a Greek tax identification number. The supporting documentation evidencing the applicability of the exemption must be made available to the tax authorities upon request.

  Individual
Advantages Disadvantages
1.

Only the following expenses are deducted from real estate income:

§  Any expenses that will be incurred from 1/1/2020 until 31/12/2024 for the provision of services related to the energy, functional and aesthetic upgrade of buildings at a rate of 40% of their amount with a maximum total expenditure of 16,000 euros.

§  5% of all costs related to repair, maintenance, renovation, or other fixed and operating costs of the property.

§  The rent paid in cases of subleasing.

§  10% of all costs related to flood protection systems and drainage works.

§  The amount of compensation paid by the lessor to the lessee for the termination of the lease of the property.

Income from property is taxed according to the following scale:

Income (€)  Tax rate (%)
0-12.000 15%
12.001 – 35.000 35%
35.001 – 45%

 

2.

The law provides that any capital gains derived for individuals from the transfer of real estate property is taxed at the fixed rate of 5%, however, said legal provision has never been applied due to subsequent suspensions of its application. Currently, the suspension is effective until 31.12.2024.

In case that more than three transfers of real estate properties take place within a 2-year period, they are considered as systematic transactions in the market with the aim of achieving a profit and the income derived is considered as income from business activity and is taxed according to the following tax scale:

Income (€) Tax rate (%)
0-10.000 9%
10.001 – 20.000 22%
20.001 – 30.000 28%
30.001 – 40.000 36%
40.001 – 44%

 

3. Special Real Estate Tax is not applicable for individuals. The tax depreciation of real estate property is not applicable for individuals.
4.

Property tax (ENFIA) is imposed on the rights in rem of any type of ownership of immovable properties, which are located in Greece and belong to individuals on the 1st of January of each year.

ENFIA = the principal tax (on any real estate property) + tax on the total value per right in rem on the property of the taxable individual.

a.      The method of calculation of the principal tax is the same for legal entities and individuals, based on the classification of real estate in three (3) different categories, i.e. buildings, land within a city plan or settlement (plots) and land outside a city plan or settlement (fields).

b.     The tax on the total value per right in rem is calculated according to a tax scale based on the value of property in which the taxable value begins from 400.000 euro and the applicable tax rates from 0,20% up to 1,00%.

Further, EN.F.I.A. is increased according to the total value of the immovable property as follows:

a.      for the value of up to 650,000 euros, at a rate of 5%,

b.     for the value of up to 800,000 euros, at a rate of 10%,

c.      for the value up to 1,000,000 euros, at a rate of 15%,

d.     for the value of 1,000,000.01 euros or more, at a rate of 20%

5. Imputed income from owner-occupation of the property is not applicable in the case of individuals, unless the latter derive income from business activity as sole-traders. In such case, the same rules as for legal entities apply.

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