The Greek government is exploring the possibility of another extension of two key tax incentives in the field of residential and commercial real estate. We are talking about suspending the 24% value added tax (VAT) on new buildings, as well as zeroing out the 15% capital gains tax on the sale of properties. The relevant bill is expected to be submitted to Parliament in the autumn of this year.
According to sources close to the Ministry of Finance, the moratorium may be extended by one or two years.
It is important to note that both tax regulations formally remain part of Greek law. VAT on new buildings was introduced back in 2005 and came into force in January 2006 as part of the harmonization with EU standards, but its actual application was repeatedly suspended as an exceptional measure to stimulate construction and revitalize the housing market. The same fate befell the capital gains tax, which was frozen in response to the protracted crisis in the industry.
Market participants positively assess the long-term effect of maintaining benefits. In their opinion, against the background of steady demand, especially in Athens, Thessaloniki and popular tourist regions, the abolition of VAT relief would inevitably lead to a sharp increase in prices: developers and sellers would almost completely shift the tax burden to end buyers. In the case of capital gains tax, the situation is different - it is levied directly from the seller, not from the buyer, so its possible restoration would put much less pressure on prices, although in conditions of high demand, part of this burden could be offset by increasing the asking price.
Analysts agree that extending the moratorium for 1-2 years would be a prudent step to avoid additional cooling of construction activity at a time when the sector is actively recovering from a multi-year recession.
Source: Ekathimerini
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