EVERYTHING A FOREIGNER NEEDS TO KNOW BEFORE BUYING PROPERTY IN GREECE
Our country is undoubtedly a pole of attraction for foreign individuals and/or legal entities seeking to acquire real estate within its territory.
However, the implementation of such investment projects requires special attention and thorough investigation in many areas.
A. CHECK OF PROPRIETARY TITLE DEEDS
Abroad (mainly in the European Union countries), the notary is the sole coordinator of any purchase and sale. He is the one who prepares the contract of purchase and sale, receives in his bank account the advance payment – guarantee from the buyer, checks the property titles, the Land Registry, any encumbrances on the property, often even the building permit. If he deems it necessary, he also commissions a specialist to check the surface and boundaries of the property. Thus, in most foreign countries (mainly in the European Union), title control is a relatively simple matter, due to the existence of a definitive Cadastre, in which the ownership status of each property is accurately and securely recorded. In many cases it is not even necessary to involve a lawyer in the purchase and sale of real estate.
On the contrary, in Greece, the notary is assisted at all stages, even during the drafting of the contract, by the buyer’s lawyer, whose role is particularly enhanced. Ιn Greece, the investigation of the property title deeds of prospective sellers remains a difficult and demanding task, which is entrusted to specialized lawyers (and other professionals). Reason being, that at most areas of the Greek territory, there is still not a finalized and definitive Cadastre. Accordingly, the lawyer who undertakes the relevant control (in order to ascertain whether the property to be purchased actually belongs to the persons posing as sellers, but also whether there are encumbrances and claims on it) must refer to the old deeds (contracts dating at least twenty years back), through which the property in question came into the ownership of the sellers. The title deed investigation is therefore extended to the locally competent Land Registry Offices. At the same time, of course, it also checks the validity of these titles according to the legislation in force at the time they were drawn up. The lawyer’s task becomes even more difficult when the property is located outside a town or settlement plan, in which case questions arise as to whether it is a forest land or even whether it is located within or outside the coastal zone. Finally, in the case of parcels of land on which urban development is not permissible, a crucial issue is the correct recording of the boundaries of the parcel, as in many areas the boundaries of the parcels are disputed, especially by neighbouring owners. Particularly useful for the identification of the actual boundaries of each parcel of land is the study of its previous transfers (and the boundaries of the property described in them) and especially the previous topographic maps but also the tax returns of the parcel in question by the sellers. Finally, of paramount importance is also the actual implementation of these boundaries and the time in which it took place, without question. Many of the aforementioned investigated items (forest character, coastline – beach, investigation of the implementation of boundaries, etc.) are beyond the scope of the legal expert’s work, so that the assistance of a special technical consultant (of the choice of the interested buyers) is required for greater security.Similarly, for the tax issues that arise, the assistance of a competent tax advisor is needed. Consequently, a whole team of competent professionals must be organised around the lawyer.
Β. CONTROL OF THE URBAN PLANNING REGIME OF THE PROPERTY
The same technical consultant (usually a civil engineer or surveyor) checks the property from an urban planning, topographical, spatial and environmental point of view, but also from the point of view of the installation and operation of the desired use (since not all desired uses are permitted everywhere). If it is a parcel of land, which is obviously intended for the construction of a building, the building’s buildability is checked, as well as the permitted location of the building, based on the shape and dimensions of the parcel and, of course, the permitted use. In the case of a building, the legality of the building is checked on the basis of the building permit already issued and its permitted use, as well as the possibility of extending it to a larger area on the plot or even in height (with additional floors). In the case of an existing horizontal property, the construction of the entire building in accordance with its planning permission and the existence of any unauthorised premises is of course checked. Already, since the entry into force of Law 4178/2013 (article 3), for every legal transaction in life, which has as its object the transfer or creation of a lien on a property, including real estate without a building, it is required that a “certificate of legality” of the property is attached to the relevant contract, signed by a licensed civil engineer of the Technical Chamber (TEE – TCG), certifying that no unauthorised constructions have been carried out on the property, in excess of the building, coverage and height and that no unauthorised uses have been installed. This certificate is usually signed by the sellers’ engineer and checked for completeness by the buyers’ technical adviser. The sellers’ engineer also undertakes (usually in the case of plots of land) to draw up an updated topographical map, which is also checked by the buyers’ engineer.
C. COLLECTION OF THE NECESSARY DOCUMENTS FOR THE TRANSFER
Under the supervision of the notary (also chosen by the buyer), before whom the intended contract will be signed, all the certificates required by law are collected and attached to the contract. This is mainly and essentially a required written pre-check of the ability of the sellers to transfer the property in question, which they are not allowed to do, indicatively if the property in question has not been registered with the tax office to which they belong or if there are debts owed to the competent tax office and/or insurance bodies or even to the municipality to which the property belongs [payment of Real Estate Tax (RT)].
On the buyers’ part, if they do not have a Greek tax registration number (A.F.M.) as they have a tax residence abroad, they must ensure that it is issued. For this purpose, buyers should appoint a tax representative in Greece, with an explicit reference to the reason for his/her appointment – purchase of real estate – and the latter should expressly accept his/her appointment by means of a relevant Declaration of Responsibility under Law 1599/1986. Theoretically there is no obligation for foreign persons, who want to acquire real estate in Greece, to open a bank account in a Greek bank either for the payment of the price or for the payment of the relevant taxes and fees, let alone for the payment of their associates. For practical reasons, however, it is recommended to open a bank account in a Greek bank.
D. DRAFTING AND MONITORING OF THE CONTRACT
An equally important task undertaken by the legal adviser of the buyers, in cooperation with the appointed notary and the legal adviser of the sellers (if appointed by them), is the drafting of the draft contract, in order to accurately reflect the intended transfer and the individual agreements of the parties (e.g. At this stage, the completeness and validity of all the certificates submitted by the sellers and buyers and attached to the contract are also checked. The aim is to ensure the absolute validity of the contract. For this validity, the immediate transfer of the contract, after its signature, to the competent Land Registry (and now the Land Registry) is required.
E. TAX OBLIGATIONS OF PURCHASERS
The acquisition of property in Greece is accompanied by certain tax obligations. In addition to the payment of the property transfer tax (FMA), which is borne by the buyers, the latter, in cooperation with an accountant of their choice, must declare the acquisition of the property and declare their annual income from it, if they use it for business purposes (even by renting it out). Each year they will also be liable to the Single Property Tax (EN.F.I.A).
In case of purchase of the property by a foreign legal entity, the tax obligations become more complex, as, in addition to the above obligations (payment of FMA, declaration of the purchase of the property and payment of ENFIA annually) the foreign legal entity:
1. Will end up holding books and records in Greece and bearing the corresponding costs. And we explain:
a) First of all, the mere acquisition of real estate or the construction of real estate in Greece, without the acquisition of income from it, does not impose the obligation to keep books and records, although there is an obligation to declare income tax even for zero income.
b) However, if foreign legal entities acquire income from real estate in Greece, since from 1/1/2014 such income is considered as income from business activity, these entities are obliged to hold books and records. In fact, if it is a legal entity, a tax resident of a country with which Greece has concluded a Double Tax Avoidance Convention (DTA), then the income from real estate is considered as income from business activity regardless of whether or not it acquires a permanent establishment in Greece.
c) Income from real estate is considered in Greece, not only the income obtained from leasing but also in case of concession of use of the property (e.g. by the company to its shareholder or legal representative for private purposes) or even in case of self-use of the property. In all these cases the company appears to have income from business activity, which amounts to 3% of the property’s objective value.
Therefore, from the first day of the lease of its property or the concession of its use, the company will be obliged to hold books and records, even if it does not have a permanent establishment in Greece.
This procedure will of course ensure that the company will be able to make tax depreciation deductions in accordance with Greek tax legislation. For the deduction of VAT expenses, in addition to legally issued and registered documents, the property must be used for an activity subject to VAT (e.g. a business lease subject to VAT). In order for it to enjoy this privilege as well, the foreign company must have taken the necessary steps from the outset (proper initiation of activity at the tax office, holding the relevant books, etc.). In such cases, it may be more appropriate to choose to establish a branch of the foreign company in Greece.
2. It is at risk of being charged with the annual Special Real Estate Tax (SRT).
According to Article 15 of Law No. 3091/2002, as amended and in force, ‘Legal persons and legal entities of par. 3 of Article 51A of the Code of Taxation, which have rights in rem, full or partial ownership or usufruct in real estate located in Greece, shall pay a special annual tax of fifteen percent (15%) on the value of such real estate, as determined in Article 17 of this law.” In order for the company not to be subject to this onerous tax, it must fall within one of the exceptions expressly provided for in paragraphs 2 and 3 of the same articles. Indicatively, for foreign legal entities, which have their registered office within the EU, it should be clearly indicated which natural persons are the shareholders/partners of the company and that they also have a VAT registration number in Greece.
It is immediately apparent that the procedure for a foreign natural person to acquire and operate a property in Greece is much simpler and safer than that for a foreign legal person.