The taxation of real estate owned by foreign companies in Greece

Our law firm represents many foreign investors, with a strong interest in investing in the Greek real estate market, primarily through international intermediate companies. A different legal regime may be applied in such cases, and thus they should be handled accordingly (by lawyers with an expertise on this field).

What is the special property tax and when was it first imposed?

The special annual tax on the value of the rights to full or bare ownership or usufruct of real estate was imposed for the first time, under a law of 2002. This tax was at the rate of 3% on the objective value of the property until 2010, when it rose dramatically to 15%. Given that this is a major financial burden on the companies investing in real estate in Greece, the question of who is subject to this property tax arises.

Who is subject to this tax?

First of all, all those who have rights of full or bare ownership or usufruct on property in Greece, other than natural persons, are in principle and without any further criteria, obliged to pay this tax. That means that all associations of persons and all sets of property, irrespective of whether or not they have legal personality according to Greek law, are required to pay this tax, unless they are exempted from it, under specific provisions.

The occasions on which there is an exemption from the property tax are many and broad, and thus few are eventually subject to this tax. The approach of the legislator is the following: The tax is imposed on all, in principle, (except for natural persons), and then, most of them are exempted from the obligation to pay it, resulting in few being liable to the tax. In other words, all those who are not exempt from the tax, are liable to pay it. This approach is followed due to the inability of the tax legislator to describe precisely to whom he wishes to impose this financial burden. It should be obvious by now that in order to answer the initial question, namely who is subject to the special property tax, the exemptions from the tax should be examined first.

Who is exempt from the obligation to pay this tax?

Among the other exceptions provided for by the above-mentioned law, the ones that are particularly interesting are those regarding foreign companies with rights on property in Greece. Specifically, the following are exempt from the obligation to pay this special property tax:

1. Companies whose shares are traded on an organized stock market (listed companies), irrespective of their registered office.
2. Companies engaging in any business activity, providing that their gross income from this activity surpasses their gross property income. Under specific provisions of the law, these companies may be exempt from the obligation to pay the tax for certain property. Their registered office is of no interest.
3. All personal and capital companies, on the condition that is possible to ascertain to which natural person(s) the shares belong, and provided that these natural person(s) obtain a Greek Tax Registration Number in Greece. In this case, the legislator distinguishes between companies that have their registered office in Greece or in another EU Member State and companies, that have their registered office in a third country.

 EU Companies?

In the first case, namely for companies domiciled in Greece or any other EU Member State, no further requirements, other than the disclosure of the natural persons, are to be met for the exemption from the tax. In the second case, however, that is for companies domiciled in a third country, this is not the only requirement. The latter should have their registered office in a country or territory that is not identified as a “non-cooperative” one. “Non-Cooperative States” are those identified as such by a relevant Decision of the Minister of Finance, which is annually issued. The list with these states is exhaustive. These are states, whose tax authorities do not cooperate with the Greek ones.  It is underlined that EU Member States cannot be characterized as non-cooperative States. The concept of non-cooperative states should not be confused with that of states with a privileged tax regime, which may also include EU Member States.

In conclusion, companies having their registered office in a non-cooperative state are subject to the special property tax, unless they fall under the exemptions, for which domicile is irrelevant (e.g. listed companies), and thus it is not even required to disclose the natural persons to which these companies belong. The other companies, irrespective of whether their registered office is in Greece, in an EU Member State or in a “cooperative” third country are exempt from this tax, provided that it is possible to identify the natural persons to whom they belong and provided that these natural persons have issued a Greek Tax Registration Number. The burden of proof of fulfilling the requirements for the exemption is borne by the person who relies on them, while the necessary supporting documents are determined by a relevant decision of the Secretary General of Public Revenues.

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