Greece: Law no. 5024/2023 amends VAT rules

Introducing Law no. 5024/2023, the most recently enacted law in Greece, focusing on capital gains, commercial leasing and immovable property. We’ve unpacked the most significant changes and how it could potentially affect your business activities and VAT recovery in Greece. 

An overview of Law no. 5024/2023

In an attempt to provide a strong incentive for the establishment of holding companies in Greece, a recently enacted law (Law no. 5024/2023) offers a deferral of capital gains tax on specific securities transactions, provided that certain conditions are met. In addition to the new deferral scheme for income tax, Law no. 5024/2023 brings about significant change to the VAT landscape by amending a few significant VAT rules. 

These amendments impact the option-to-tax procedure on leasing property as well as the eligibility criteria for what constitutes investment goods. Here’s what you need to know about the latest law changes in Greece for VAT on property. 

Greece simplifies the option-to-tax procedure for commercial leases

As per the new law, commercial leases can now be subject to VAT as opposed to stamp duty. Applications may be submitted at any time. However, the effective date will be the start of the next taxable period. This option-to-tax procedure mainly applies to professional leases of immovable property, enabling the lessor to charge VAT on the rent, which the lessee can then recover if they are VAT registered. 

Prior to this amendment, the application had to have been filed before the first use of the property or within 30 days of the start of the accounting period. According to Article 30 in the new law, lessors are now allowed to apply with the tax administration (where the lessor is registered) at any time to have the property subject to VAT.

Although there is still limited information regarding the new law, authorities have confirmed that if the application is filed after commencing the use of the property, the option to tax will apply from the next tax period. In addition, the opportunity to tax can apply to an entire real property, a building complex or a part thereof. However, the part of the building subject to VAT must be described in the application. 

It’s also important to note that the option to tax can be revoked by applying to the tax administration. The revocation will apply as of the following tax period.

Amendments to the definition of “investment goods”

The newly enacted law redefines the conditions for third-party immovable property to qualify as investment goods. This amendment abolished the nine-year lease agreement requirement in order for buildings and other types of construction to be treated as investment goods. This change means that property constructed by a VATable business with the right to VAT deduction on real estate no longer has to have a nine-year lease in place to constitute “investment goods.”

Pay by the rules with VAT IT

With recent developments, it’s important to assess whether and how these new amendments may affect VAT recovery for expenses relating to constructions or

improvements on third-party immovable property. However, navigating the VAT world can be challenging when the rules are quick to change, especially regarding long-term investments. 

Fortunately, you don’t have to feel left in the dark. With VAT IT experts by your side, you can successfully reclaim VAT that’s rightfully yours when conducting business abroad.