Brief summary:
An Israeli investor purchasing property in Greece should be aware of the purchase tax, tax on rental income, and capital gains tax. The tax treaty between Israel and Greece is intended to prevent double taxation, but it is important to conduct a detailed review.
In recent years, more and more Israelis have been showing interest inbuying a home in Greece. It’s unclear whether it’s the breathtaking scenery, the rich culture, or the attractive real estate prices that make Greece a sought-after investment destination and the dream of nearly every Israeli investor. Despite this amazing combination, as with any overseas real estate investment, it’s important to understand and familiarize yourself with the situation in advance, the local tax system. This article will review the main aspects of real estate taxation in Greece for foreign investors and address components such as purchase tax, rental income tax, and capital gains tax—all of which, as is well known, are critical factors in the investment decision. We will also compare the Greek tax system with those of other European Union member states.
Greece, with its enchanting beaches and spectacular Mediterranean islands, offers not only breathtaking scenery but also interesting investment opportunities. At the same time, it is important to remember that investing in real estate abroad requires navigating legal and tax systems that differ from those we are familiar with in Israel. Therefore, it is important to remember that understanding the Greek tax system is an essential step toward successful real estate investment in Greece, whether the property is purchased for residential purposes or as an investment for rental income.
The Tax Treaty Between Israel and Greece
In the age of globalization, Israeli tax policy has undergone a fundamental change. In the past, it was based on the principle of territoriality, according to which Israeli residents were taxed only on income generated within the country’s borders. Today, the policy has shifted to a personal taxation system, which requires Israeli citizens to report and pay taxes on all of their income, regardless of its geographic source.
This transition created a significant challenge: the risk of double taxation. An Israeli investor abroad may find himself paying taxes twice on the same income—both in the country of investment and in Israel. To address this issue and encourage international investment, Israel has signed tax treaties with many countries, including Greece.
The tax treaty between Israel and Greece is an excellent example of a solution to the problem of double taxation. A key provision of this treaty deals with capital gains from real estate. It stipulates that gains from real estate will be taxed only in the country where the property is located. Thus, an Israeli in Greece will pay tax only to the Greek authorities.
For the purpose of determining tax liability, Greece defines a “tax resident” based on two main criteria: staying in Greece for at least 183 days a year, or having a “center of interests” in the country. The second criterion is more complex to define and is based on the assessment of the Greek tax authorities, who consider factors such as the acquisition of property or significant business activity in the country.
For companies, the definition is based on three possible criteria: having an office registered in Greece, actually managing the business from Greece, or being incorporated under Greek law.
Purchase Tax: The First Step in Buying Real Estate in Greece
When planning to buying a home in Greece, the purchase tax will be one of the first expenses you’ll need to take into account. In Greece, this tax is called the “Property Transfer Tax” and applies to all real estate purchases, including those by foreign investors. The tax rate currently stands at 3.09% of the property’s value, as determined by the Greek tax authorities. It is important to note that the value does not necessarily reflect the purchase price in practice, but is based on a valuation by the local tax authorities. In addition to the purchase tax, you must also take into account other necessary associated costs (such as a local lawyer’s fees, registration fees, and notary costs).
In each case, it is important to seek the services of a local attorney who specializes in real estate transactions to ensure that all aspects of your purchase—both legal and tax-related—are properly handled.
Taxation of Rental Income: Managing an Investment Property in Greece
For investors planning to to rent out the property they have purchased, understanding the tax system for rental income is critical. In Greece, income from real estate rentals is subject to a progressive income tax. Tax rates vary depending on the amount of annual rental income: up to 12,000 euros—15%, 12,001 to 35,000 euros—35%, and over 35,000 euros—45%. It is important to note that foreign investors (including Israelis) are also required to pay this tax on their real estate income in Greece.
And here is a ray of hope in the darkness—since there is a tax treaty between Israel and Greece, it prevents double taxation.
In addition to income tax, Greece also has a Solidarity Contribution levied on high incomes. This tax can be as high as 10% on annual incomes exceeding 220,000 euros.
We would also like to note that, in recent years, this tax has been temporarily suspended as part of Greece’s investment promotion policy, but it is important to monitor possible changes in legislation, as things can change quickly.
In addition to income tax, it’s important to take into account the total annual as well as additional expenses (such as the annual property tax (ENFIA), property insurance, and ongoing maintenance costs). Along with all of this, it is very important to be familiar with local laws regarding short-term rentals (for example, through platforms like Airbnb). In any case, it is recommended that you consult a local accountant to file your annual tax returns and ensure that you are complying with all legal requirements.
Capital Gains Tax (Capital Gains Tax): Planning an Exit Strategy
When planning a real estate investment in Greece, it is important to also consider your exit strategy and the taxes that will apply at the time of the sale of the property. In Greece, the capital gains tax on the sale of real estate currently stands at 15% of the profit. The profit is calculated as the difference between the sale price and the purchase price, minus expenses defined as “deductible,” including costs such as renovations and upgrades to the property. It is important to note that there are several circumstances that may exempt you from paying capital gains tax (particularly for properties purchased before 1995 or properties held for more than 5 years and used as a permanent residence); however, these exemptions are generally not applicable to foreign investors.
Especially when it comes to buying a home in Greece or purchasing real estate in Greece as an investment, it is important to take capital gains tax into account in your overall investment planning and when calculating the investment’s profitability. Since this involves economics and legislation (both of which are flexible areas that change from time to time), tax rates may change in the future; therefore, be sure to stay up to date on the relevant legislation.
In the case of real estate in Greece as an investment intended for future resale, you should take into account the additional costs involved in selling the property, most notably real estate agent commissions and attorney fees.
In addition, you’ll also need to understand the tax implications that will apply to you in Israel as a result of selling a property abroad, as you may be required to report your profit to to the Israeli tax authorities.
Accordingly, it is advisable to consider various strategies for minimizing tax liability (for example, timing the sale or taking advantage of potential tax benefits provided for under Greek law). Professional guidance and advice from a firm specializing in this field can be of great assistance in planning the exit strategy that is best for you.
Tax benefits Israelis receive under the tax treaty between the countries
Greece offers attractive tax incentives to foreign investors, including Israelis, with the aim of encouraging real estate investment in Greece. The tax treaty between Israel and Greece allows investors to benefit from reduced tax rates and additional benefits. Taxation on real estate in Greece includes a purchase tax, a tax on rental income, and a capital gains tax upon sale. As of 2024, there is a VAT exemption on property purchases and a capital gains tax exemption for foreign investors who own up to three properties. It is also worth noting that, as of 2024, there is no capital gains tax in Greece. This situation arose following the Greek government’s decision in 2010 to temporarily suspend the capital gains tax, which stood at approximately 15% at the time. This suspension, intended to encourage investment, remains in effect. In contrast, Israel’s capital gains tax stands at 25%, making real estate investment in Greece particularly attractive to Israeli investors.
It is important to note that these benefits may change from time to time, depending on Greek government policy, so it is recommended that you stay up to date.
The Importance of Professional Advice, Especially When Investing in Real Estate in Greece
As can be understood from the above, investing in real estate in Greece offers interesting opportunities for Israeli investors; however, despite the cultural and geographical proximity between Israel and Greece, the Greek tax system is quite different from the Israeli one and, as a result, requires a thorough understanding. In light of this, it is very important to seek the assistance of a professional firm specializing in real estate investments in Greece. Professional advice can help you navigate the intricacies of the local tax system, strategically plan your investment, and maximize your return while minimizing your tax liability.
Questions and Answers
How many days a year must one stay in Greece to be considered a "resident for tax purposes"?
There is also a second criterion, known as the “center of interests,” which is less clear-cut and is based on an assessment by the Greek tax authority.
This criterion examines factors such as the purchase of a permanent home, the acquisition of other property, or other actions that indicate that the person considers himself or herself a resident of Greece
Important Exceptions:
Stays for tourism or medical treatment (up to 365 days) are not included in the calculation
Tax treaties between Greece and other countries may affect the determination of residency Up to what annual rental income does the lowest tax rate apply?
In Greece, rental income is subject to income tax at progressive rates.
The lowest tax rate, which is 15%, applies to annual income of up to 12,000 euros.
For income between 12,001 and 35,000 euros, the tax rate rises to 35%, while for income above 35,000 euros, the tax rate is 45%.
In addition, it should be noted that investors may benefit from lower taxes under agreements between Greece and Israel, which help alleviate the tax burden.
It is also important to mention the concept of the “solidarity tax,” which applies to income over 12,000 euros and can be as high as 10% of income. What is the maximum solidarity tax rate in Greece on high incomes?
The maximum solidarity tax rate in Greece on high incomes is 10%. This tax is levied on an individual’s total taxable income, with the rate increasing as income rises. The maximum rate of 10% applies to income exceeding 220,000 euros.
Above what annual income threshold does the maximum tax rate of 45% apply?
In Greece, the maximum tax rate of 45% applies to annual income exceeding 35,000 euros. The tax rate is structured in brackets: 15% on income up to 12,000 euros, 35% on income between 12,001 and 35,000 euros, and finally 45% on income above 35,000 euros.
How many properties can a foreign investor own to qualify for a capital gains tax exemption?
A foreign investor may own up to three real estate properties in Greece to qualify for a capital gains tax exemption. The Greek government does not levy capital gains tax on privately owned real estate properties up to a limit of three. Beyond three properties, holding real estate will be considered a commercial activity, in which case capital gains tax will apply to all properties.
As of 2024, there is an additional benefit for foreign investors: if the property is sold after being held for more than five years, further capital gains tax exemptions may apply. In addition, in accordance with the provisions of the tax treaty between Israel and Greece, Israeli investors are not required to pay capital gains tax to the Israeli tax authorities upon the sale of properties in Greece, which may simplify the investor’s tax obligations; therefore, the viability of investing in Greece may be influenced by tax planning.
How many years must one own a property used as a primary residence to qualify for a capital gains tax exemption?
In Greece, as of today, there is no requirement to hold a property intended for permanent residence for a specific number of years in order to qualify for a capital gains tax exemption. The Greek government has implemented a lenient policy regarding real estate taxation; the Greek government does not impose a tax on capital gains from the sale of privately owned real estate.
Investors who own properties used as permanent residences may qualify for a capital gains tax exemption upon the sale of such a property. The exemption applies to capital gains from the sale of up to two residential apartments and is time-limited. Currently, if the property owner has used the property as a primary residence for more than 5 years, there is a high likelihood that they will qualify for the capital gains tax exemption on the sale of the property. This is assuming there have been no changes to the law and that the property owner meets the conditions set forth by the law, such as using the property as their primary residence. It is important to verify this information with the relevant local authorities, as tax regulations are subject to change.
