Ownership of Real Estate in Greece and related Tax Obligations

Clients often come to our office and request our assistance in transferring their real estate assets in Greece. And when they do, the first question I always ask is: “have you complied with your tax obligations?”. The answer I receive in the majority of cases is either “But of course! All is in order, I always pay my taxes on time” or “I have no tax obligations, I just own a small parcel of land“.

After years of experience in handling property matters for clients, I finally decided to write this Article in hope that it will enlighten some of us regarding tax obligations that arise from the ownership of real estate. Unlike what many believe, the type of property one owns in Greece is most of the times irrelevant; ownership alone is taxed by the Greek State and the presumption of “income” due to mere ownership. Paradox? Certainly. Mandatory? Of course. You do not need to own a luxurious condo, a mere parcel of land will still need to be declared to your E9 statement (the real estate tax statement that one must file every time something changes regarding their ownership rights on real estate). A small studio apartment you maintain just to have a place to stay when you visit Greece, a place that leaves you no income and costs you more in fact than possibly its value, must still be declared. And for as long as you own it, you will still need to file E1 tax statements (income tax statements) yearly. Why? Well, because ownership of real estate is often treated as a “presumption of income“. Whether you find this illogical or not, it does not matter; when dealing with the State, guess what: the State always wins!

So what happens if you are unaware of your obligations (for years, as it happens, in many instances) or if you decide you simply do not need to act because all of this is just “outrageous”? Well, lets go back to those clients that declared with certainty that “all is in order”. So I get retained, I open a file for the client, I get the authorisation needed to act and I start working on the case. I issue all the certificates required for the transfer of the property (whether a sale to a third party, or a parental gift to the client’s children, it really does not make much of a difference) and the time comes to go to the Tax Office and file the transfer tax statements. And then I hear the same old story: “Your client has not filed income tax statements for the past five years” or “your client has not filed real estate tax statements to declare the ownership of this property” or in the worst of cases both. Take a wild guess at what happens when I have to call the client and explain that, in order to convey his or her property, they must pay me to prepare retroactive tax statements and on top of that they must pay late filing fines, penalties and retroactive taxes.

At the end of the day, being prompt and complying with one’s tax obligations costs a lot less than having to deal with this years later. It costs less, it simplifies things for all parties involved (the client, his or her children, our office and anyone that has to manage the subject property at any given time) and it protects the client/owner of the property from potential severe consequences (such as foreclosure on the property by the State for tax debts). If you own real estate in Greece (whether a house, an apartment, agricultural land, a plot), you may likely have various tax obligations. Paying your yearly real estate tax (which by the way has changed many names in the past few years, from FAP to ENFIA and who knows what it will be called next year) does not absolve you of these obligations. Income tax and real estate tax are separate and they often coexist. When in doubt, ask a lawyer or an accountant. Do not rely on your uncle’s, cousin’s, distant relative’s or friend’s advice (just because they live in Greece, it does not necessarily mean they know); they may mean well but if they are wrong, it will be you that will have to pay the cost of the advice you were given.

Tax Laws are being amended constantly in Greece for the past few years now. The financial crisis and the bad economy are causing each Government to look for an easy way to increase public revenue and taxation is unfortunately almost always the tool of choice. Even as this Article is being written, there is a possibility that things are changing, that laws are being amended. So my advice to all of you that have any right whatsoever on real estate in Greece (whether you own it or you have a life estate right, whether the property is being leased or farmed or simply vacant), contact your lawyer or your accountant and find out if you have been doing all that is required of you. As my father likes to say “Better to be safe than sorry“.

Foreign Account Tax Compliance Act in Greece

More and more Greek-Americans that have bank accounts in Greece are receiving notices from their Banks requesting that they sign W-8 or W-9 (in some instances -though incorrectly-) statements. Some have actually reported that the Banks are taking measures such as freezing their accounts (an act that is not legal under Greek Law) until they comply with the bank’s demand. This is expected to become a serious issue, as many Greek Americans are unaware of the obligations that come along with their United States citizenship. The United States is one of the few countries that impose a mandatory tax filing obligation to all their citizens, regardless of their place of residency or whether they actually earn any income in the United States. This mandatory tax filing obligation applies for all single persons with an annual income of more than $10,000 and married persons with an annual family income exceeding $20,000. The law refers to world-wide income; this means, in essence, that even a person that has been born in the United States but has never lived there or earned any income there, is obliged to file U.S. income tax returns as long as said person earns more than the above minimum amounts anywhere in the world. FBAR (Report of Foreign Bank and Financial Accounts) also requires that U.S. citizens report any and all foreign bank accounts (or financial accounts) they have world-wide if the total balance in said accounts exceeds the amount of $10,000 at any given point. This affects a vast number of people who (although not living in the US) will now need to file yearly taxes in the United States. The penalties for non-compliance are quite severe: imprisonment for up to 5 years and/or a fine that may amount up to 50% of the person’s total savings.
It should be noted that the obligation to file tax returns does not necessarily mean that the person will actually be taxed. In fact, there is currently a tax exemption for a yearly income up to approximately $97,000 and there is a bi-lateral Treaty between the U.S. and Greece preventing double taxation for the same income. Therefore, it is imperative that all persons that have U.S. citizenship comply with their US Tax obligations to avoid exposing themselves to potentially severe penalties (both criminal and financial).