Holding Greek Real Estate

This part of the RSM Greece Real Estate Tax Guide, provides an overview of the tax implications in regards to holding real estate in Greece. Specifically, it focuses on the following matters:

• Direct holding of real estate
• Indirect holding of real estate

For more information on acquiring, selling and transferring Greek real estate please visit the relevant articles of the RSM Greece Real Estate Tax Guide, or contact our trusted advisors.

Direct Holding of Real Estate

This section discusses the key tax implications of the direct holding of real estate. First the impact for resident individuals and non-resident individuals is considered. Then the impact for resident companies and non-resident companies is considered.

Resident individuals

Personal income tax
Income derived from the real estate such as rental income is subject to individual income tax at the following rates:

Deductibility of costs, interest and depreciation
Individuals may not deduct actual expenses. A deduction of 5% of the rental income is given in lieu of actual expenses. In addition to the above 5%, 40% of renovation and energy saving expenses are deducted from income tax, over a period of 4 years and up to a maximum of Euro 16,000.

Losses
As a result of the way taxable income from real property is calculated, losses may never arise.

Non-resident individuals

Non-resident individuals are treated in the same manner as resident individuals.

Resident companies

Corporate income tax
Business income, such as rental income and capital gains, are subject to corporate income tax at the rate of 22%. All income gains and expenses of companies are taken into account on an accruals basis.

Deductibility of costs, interest and depreciation
Companies can deduct interest costs and depreciation costs from rental income. Buildings are depreciated for tax purposes at a rate of 4% on an annual basis. This is generally based on the acquisition costs and improvement costs, if applicable. However, land is not depreciable.

Anti-tax avoidance directive 
Thin capitalisation rules were introduced in 2014 and limit the deduction of interest expenses where net interest expense is in excess of 30% of business profits and total interest expense is more than €3 million.

Losses – carry forward
Losses may arise if deductible interest expenses and depreciation allowance exceed rental income. Such losses may be offset against all Greek taxable income of the current year and the next five years. However, if a Greek company changes  its activities to an extent over 50% and change its ownership for at least 33%, relief for carried forward losses may be denied.

Non-resident companies

Non-resident companies are treated in the same manner as resident companies, since Greek real estate held by a foreign company is considered to give rise to a permanent establishment in Greece.

Indirect Holding of Real Estate

This section discusses the key tax implications of the indirect holding of real estate (i.e. through holding shares in a company that owns real estate). First the impact for resident individuals and non-resident individuals is considered. Thereafter the impact for resident companies and non-resident companies is considered.

Resident individuals

Personal income tax
Individuals holding shares in a real estate owning company are subject to dividend tax at the rate of 5%.

Deductibility of costs, interest payments and depreciation
Interest costs on loans to buy shares and dividend withholding tax are deductible from investment income.

Losses
Losses will be offset against income from other sources and, if unrelieved, may be carried forward for up to five years.

Non-resident individuals

Non-resident individuals are treated in the same manner as resident individuals. However, losses can only be offset against other Greek taxable income.

Resident companies

Corporate income tax
Income derived out of shareholdings qualify as business income for companies. Corporate profits are taxed at a rate of 22%. Dividend income is exempt under the provisions of the EU ‘parent – subsidiary’ directive.

Deductibility of costs, interest payments and depreciation
Interest and depreciation costs may be deductible from business income.

Anti-tax avoidance directive 
The anti-tax avoidance directive (ATAD) is a directive published by the OECD which will be implemented by countries in the EU. ATAD contains certain interest restrictions that may affect investors in real estate.

Distribution of income and gains
Dividends paid to another Greek resident who owns at least 10% of the payers share capital are exempt from dividend withholding tax on the basis of the EU parent subsidiary directive. If a company stops its activities, the liquidation distributions paid to the shareholders are taxed in the same manner as dividend.

Non-resident companies

Non-resident companies are treated in the same manner as resident companies since the holding of Greek real estate by a foreign company is considered to give rise to a permanent establishment in Greece.