Capital Control Issues

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Kilkis
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Re: Capital Control Issues

Postby Kilkis » Wed Oct 26, 2016 10:30 am

Mixos wrote:... But surely most people selling property today will be taking a huge hit on the price they paid for it, therefore there will have been no gain, so no tax to pay?...


If you look at what you actually paid and what you would get today, I agree with you Mixos. Unfortunately it is not as simple as that. There are some pretty strict rules on how the original price is determined. If you don't fit into one of the categories they assign a nil value for the original purchase price.

Today the transfer of ownership contract must show the actual market price paid for the property. Provided your original transfer of ownership contract also shows the actual market price that you paid then your assertion is correct. Unfortunately, back in the day, that was not necessarily true and contracts often showed the objective value, which could be much less than the market price you paid. Capital gain would then be calculated based on the difference between the market value today and the objective value back then and that could be a significant amount.

Worse still many people, including me, bought a plot of land and then paid a developer/builder to build a house for them. The official transfer of ownership contract only shows the price of the land, again possibly the objective value not the market value. The cost of building the house was then a private contract between the owner and the developer/builder. As far as I can see that would not be taken into account by the tax authority. Thus the capital gain would be calculated as the difference between today's market price and the price of the land or possibly zero.

Another situation would be where somebody bought a run down property and then paid a builder to renovate it. Obviously the price in the transfer of ownership contract would be much lower than if the house had been fully renovated first. Filippos has stated before on this forum that he did exactly this and his contract with the builder was a handwritten estimate on a scrap of paper and a handshake. I'm not sure how you can submit that to the tax authority. Again there would be a large apparent gain.

Warwick

Kathleen
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Location: North East UK/Rethymnon

Re: Capital Control Issues

Postby Kathleen » Wed Oct 26, 2016 10:35 am

As you say Warwick, capital gains tax was introduced on property from 2014, I, potentially, was going to be hit with it if I had sold my house (a second home) in Crete then. Subsequently, it was suspended fairly quickly I seem to remember, and as far as I know that situation remains the same. I would have been able to offset the charge against UK tax liabilities, however.

Paying the tax in Greece and offsetting it was a cheaper option to the exorbitant bill which I will now probably get clobbered with in UK if and when I sell :cry:

Kathleen

Kilkis
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Re: Capital Control Issues

Postby Kilkis » Wed Oct 26, 2016 11:01 am

Kathleen wrote:...Subsequently, it was suspended fairly quickly I seem to remember, and as far as I know that situation remains the same...


You may be correct, Kathleen. I have no intention of selling any time soon so I have no personal experience. If that is the case, however, it seems strange that lots of web sites are still quoting it as applicable and many of those are up-to-date, including a 2016 Tax Highlights document by Deloitte one of the world's biggest accountancy firms. Search capital gains tax on google.gr

Warwick

PS It is worth noting that, as far as I can tell, the capital gains tax only applies to properties acquired by the purchaser after 1 January 2006

footscapes
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Location: Crete no longer!

Re: Capital Control Issues

Postby footscapes » Wed Oct 26, 2016 11:31 am

As Kathleen says, CGT was introduced on sales from 1/1/14. We sold in Jan 2015 and it was a live issue for us during the lead up to the notary contract. A few weeks before our completion, the government suspended CGT on property sales until 31/12/16. It went away for us in Jan 2015.

I can't find a Gazette announcement, but it's news here in Kathimerini and also on the POMIDA (Hellenic Property Federation) website about CGT (red banner announcing suspension) http://www.pomida.gr/foroi/fya.html. POMIDA are also currently lobbying to extend the suspension.

I'm pretty sure it's still suspended and that Deloittes (and others) are wrong.

Kilkis wrote:.........................

Worse still many people, including me, bought a plot of land and then paid a developer/builder to build a house for them. The official transfer of ownership contract only shows the price of the land, again possibly the objective value not the market value. The cost of building the house was then a private contract between the owner and the developer/builder. As far as I can see that would not be taken into account by the tax authority. Thus the capital gain would be calculated as the difference between today's market price and the price of the land or possibly zero.

..............................

Warwick


Not so (my bold). This was exactly our case. The law derives a notional cost (including building) in such cases quite simply. Take the selling price and derive a cost based on SP by applying a coefficient based on the movement in the (central bank published) property price index. For properties built in the boom period and sold now, there will be a high notional cost and a whacking great loss. The rules are in this document, as well as a worked example (No 4, towards the end) of the sale of a property where there was a plot and subsequent building that never went on to the deeds.

Paul
Last edited by footscapes on Wed Oct 26, 2016 12:06 pm, edited 1 time in total.

Hector
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Joined: Tue May 03, 2016 5:42 pm

Re: Capital Control Issues

Postby Hector » Wed Oct 26, 2016 12:03 pm

Thanks Andrew. It would otherwise seem impossible to sell a house here even if you could find a buyer. I certainly wouldn't want money in a Greek bank while I sat transferring 420 euro a week :) still a bit confused about the capital gains because like others have said there is confusing information about it, like there is about most things. We have a house that we bought as a ruin and renovated so I am assuming the renovation costs would be taken into account if any CGT was payable.

Very happy to hear that money can be exchanged without it having to come into Greece :)

Much appreciate your response, thanks.

Kilkis
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Re: Capital Control Issues

Postby Kilkis » Wed Oct 26, 2016 6:15 pm

Many thanks for that information, Paul. That is the first time I have seen that method of calculating the price of acquisition using the price index. I did some more digging after reading your post and there is an article in Euro2day published in 2014 that gives some more information including the price index values from 1994 to 2013 and the reduction factors for each year of ownership. Might be useful to people.

Warwick

PS Kathimerini quoted the price index for the first quarter of 2016 as 86.32 so about one third of its value at the peak in 2008 of 261.1!

footscapes
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Location: Crete no longer!

Re: Capital Control Issues

Postby footscapes » Wed Oct 26, 2016 7:06 pm

I was steeped, if not marinaded, in the whole CGT issue when we sold. We too only had plot value on the deeds, with a subsequent building put in place. The notary told our lawyer that the gain was sale proceeds less the plot value - "and here's a big CGT bill for your client". The clarification document (my link, above) was issued around this time, and I managed to convince our lawyer of the correct calculation methodology. She did, eventually, also convince the notary, but by then the suspension of the tax was in place anyway.

One peculiarity of the method, if you haven't spotted it, is that the notional date of acquisition for a "plot + later build" is building permit + 5 years. In our own case, the permit was issued in 2005 and the building completed same year. Had we needed to calculate cost by derivation, the acquisition year would have been 2010 rather than the true date of 2005. (The formula would still have generated a loss).

If you want the full indices, updated quarterly, they are on the Bank of Greece website. This page http://www.bankofgreece.gr/Pages/en/Statistics/realestate/default.aspx, fourth link down ("Index of prices of dwellings (Historical Series)") will give you an Excel spreadsheet. The CGT examples all use the first table only ("Urban Areas"), so I assume that this is the one to be used generally.

Paul

YoMo2
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Re: Capital Control Issues

Postby YoMo2 » Thu Oct 27, 2016 7:34 am

footscapes wrote:.........I'm pretty sure it's still suspended and that Deloittes (and others) are wrong.


And I'm certain it's suspended, and yes, they are all wrong.

Andrew
"It's all in the implementation"

Kilkis
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Joined: Sat Apr 21, 2007 3:58 pm
Location: Near Chania

Re: Capital Control Issues

Postby Kilkis » Thu Oct 27, 2016 8:19 am

Thanks for the BoG link, Paul. Yes, I noticed the completion date is the permit date + five years. Our permit was 2005, we took possession and moved in in 2006. There isn't a massive difference between the 2006 index and the 2010 one so it doesn't matter much which one they use. I think it will be a long time before prices rise sufficiently to increase the index above 2010 sufficiently to show more than a €25,000 gain on the original price that I paid for my house and land. Depending on how many years it took it would need to get more than 42 % above its peak value in 2008 and I can't see that happening in my lifetime.

Warwick

Kilkis
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Location: Near Chania

Re: Capital Control Issues

Postby Kilkis » Tue Dec 06, 2016 12:15 pm

There is an article in ekathimerini briefly discussing the fact that foreign buyers of Greek property are often paying the purchase price into banks outside Greece. If it is being discussed as an issue in mainstream media, it raises the question how long before the government does something to stop it? I am not sure that they can do anything about it within EU rules but the current capital controls break EU rules on free movement of capital so I wouldn't bet on it.

Warwick

YoMo2
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Re: Capital Control Issues

Postby YoMo2 » Tue Dec 06, 2016 12:21 pm

It's only a rule when "they" want it to be. I'm sure you can think of a long list of examples.

Andrew
"It's all in the implementation"

bobscott
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Re: Capital Control Issues

Postby bobscott » Tue Dec 06, 2016 4:47 pm

Kilkis wrote:There is an article in ekathimerini briefly discussing the fact that foreign buyers of Greek property are often paying the purchase price into banks outside Greece. If it is being discussed as an issue in mainstream media, it raises the question how long before the government does something to stop it? I am not sure that they can do anything about it within EU rules but the current capital controls break EU rules on free movement of capital so I wouldn't bet on it.

Warwick


Yes, Warwick - the same thought about that crossed my mind when I read the article earlier. Watch this space!!!!! Bob.
Yesterday today was tomorrow. Don't dilly dally!


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