An important issue that concerns all those who have income from selling their
properties is undoubtedly the tax policy for the income derived from these
transactions. The possible imposition of taxes on these revenues, as well as
the amount of the tax, are important parameters for the planning and conditions
of implementation of any investment. However, the complexity of the tax
legislation, the clarity of which in some cases is not sufficient, creates
doubts and insecurity for traders.
IS INDIVIDUALS’ INCOME FROM THE SALE OF REAL ESTATE
TAXABLE?
The
tax legislation provides for the imposition of capital gains tax from the
transfer of real estate, namely on the difference between the value paid by the
seller to acquire the property and the sale price or the value of the amount
paid to them by the buyer. The method of calculating the acquisition value and
the sale value of the property is regulated in detail by the relevant
provisions of the Income Tax Code.
However, from the regulation’s enactment until December 31, 2022, the
implementation of the provisions regarding the imposition of this tax has been suspended. Thus, for as long
as this suspension lasts, the rule is that the income earned by persons from
the sale of real estate is not subject to tax, without the need for the
contribution of any other condition.
WHEN IS IT POSSIBLE TO IMPOSE TAXES ON PERSONS’ INCOME
FROM THE SALE OF REAL ESTATE?
Nevertheless,
the possibility of imposing a tax on the income earned by a person from the
sale of real estate cannot be ruled out. If it is considered by the tax
authority that the sale of real estate constitutes a business activity, the income obtained from that, is taxed as a
profit. In this case, and given that the tax rates are high, the income deriving
by this is significantly burdened.
WHEN IS THE SALE OF REAL ESTATE BY A PERSON CONSIDERED
A BUSINESS ACTIVITY?
According
to the law, profit from business activity is considered the total income from
business transactions, after deducting business expenses, depreciation and
provisions for doubtful receivables.
The
content of the term “business transaction” is defined in the Income
Tax Code. As such is considered every individual action, with which a
transaction is made, or the systematic
(repeated)
execution of transactions in the financial market, in order to achieve profit.
Especially in the case of real estate transactions, it is provided that
every three (3) similar transactions that take place within two (2) years are
considered systematic (repeated) transactions. However, from the phrasing of
the relevant legal provisions, it is not excluded that a single sale of real
estate can be considered as part of the business activity of a person. If it is
found that it has a for-profit purpose, then the profit resulting from it will
be taxed as income from business activity, while additional charges will be
imposed on the taxpayer, if this finding arises from a tax audit.
WHAT ARE THE CRITERIA IN ORDER FOR THE SALE OF REAL
ESTATE BY A NATURAL PERSON TO BE CONSIDERED A BUSINESS ACTIVITY?
In
addition to the presumption of three (3) similar transactions within two (2) years
the criteria that must be met in order to be considered a business activity the
sale of real estate by an individual are found in the relevant court decisions
and administrative decisions that are competent to adjudicate taxpayers’
appeals.
In
general, the cause of the acquisition of the property by the seller, the
interval between the acquisition and the sale, the difference between the
acquisition value and the amount received at the sale, as well as other data
that exist in each case and from which the taxpayer’s intention to make a
profit from the sale of real estate arises, are taken into account for the
characterization of the transactions as business activity.
On
the other hand, the law specifically stipulates that the act of sale of an
asset by aν individual,
which has been acquired by inheritance or a donation from close relatives up to
the second degree or has been held for a period longer than five (5) years, is
not taken into account in order to judge whether an individual is engaged in
business activity with the sale of real estate.
Our law firm receives
many relevant inquiries from real estate investors regarding the taxation of
their investments. It is clear that taxpayers who operate in the real estate
sector, as well as those who plan to use their property by transferring it,
should be aware of the possibility of being taxed in the income deriving from
these transactions. Avoiding unforeseen burdens that may disturb the financial
balance of an investment and even a long time after its completion, is an issue
that requires careful planning
