Transferring proceeds of villa sale

[footscapes]

Also what do you do if there wasn't a purchase price for the while property? I bought a plot of land and had a house built so there is a transfer of ownership contract for the land BUT NO transfer of ownership contract for the house. There is only a private contract which the developer and I signed showing what he was charging me to build the house. How do you show capital gain, or loss as it would be at the moment, in that situation?

Warwick

That was exactly our own position. The law was clarified for this very situation in one of the many MinFin clarification circulars. It works by deriving a notional acquisition cost from the selling value and looking at the house price indices at time of build and at time of sale. From memory, the acquisition date is derived from date of building permit + 5 years. Example - land bought 2003. This is the value in the deeds. Building permit issued 2004. Sale for 100k in 2015. Notional acquisition date is 2009 (2004 + 5). Notional cost is 100 x (249.8/163.1)= 153k. Loss of 53k, no CGT. (The indices are the top table in the spreadsheet in the 4th link down of http://www.bankofgreece.gr/Pages/en/Statistics/realestate/default.aspx ) In this example, where the selling date index has not yet been published (2015), go back to the first available year = 2014.

As it happens, CGT was very live when we started our sale (back end 2014). We spent a lot of time discussing it with our lawyer and a notary, who eventually we managed to convince about the methodology above. As the transaction progressed, a new law was published which suspended CGT on property sales following pressure from real estate associations. The suspension was intially for 2 years, covering completions in 2015 and 2016. We faced no CGT calculation in Jan 2015, and I believe the suspension remains in force today (but I'm not as close to the subject, so don't rely on this).

I am aware of one sale that completed in 2014 that did attract CGT. The seller, in their original purchase contract way back when, had fiddled things by putting only 40 or 50% of the value in the contract, the rest being "off the books" and paid outide of Greece. CGT was calculated on the 40 or 50% value in the deeds and the seller paid a fair chunk of CGT. As far as I know from my research at the time (extensive, painful) objective values were never used in calculating CGT.

Paul

[filippos]

I thought the taxman just raised a wet finger into the breeze, cogitated for a few seconds then told you what you have to pay.

[Jeffstclair]

This thread reminds me of the old Beatles song.... Taxman ahh the music of my youth.....


http://www.youtube.com/watch?v=Oyu5sFzWLk8 .... enjoy jeff

[footscapes]

I thought the taxman just raised a wet finger into the breeze, cogitated for a few seconds then told you what you have to pay.

The way the original law re CGT was drafted would make you think exactly this. There were howls of protest from the notaries, who were the ones responsible for making the calculation, collecting the tax and paying it over. They would face sanctions if they got it wrong. On the back of this, the clarification was published and gave some very comprehensive notes and calculated examples covering many possible scenarios. The clarification note is http://www.gsis.gr/gsis/export/sites/default/gsis_site/Services/documents_polites/pol_1122_2014-1.pdf

Paul

[Barbary Coaster]

I thought the taxman just raised a wet finger into the breeze, cogitated for a few seconds then told you what you have to pay.

Probably a very accurate assessment of the process !!

[Brian]

Sorry, just one other query. Is it true the buyer now pays three per cent of property transfer tax and that the vendor pays fifteen percent of capital gains
tax. Thanks in advance for any help.

[footscapes]

There is a property transfer tax that is now 3% of the value of the property being transferred. (It used to be 8% on the first €20k, plus 10% of the balance, but reduced to a flat 3% from 1/1/14). This is for the buyer to pay.

CGT was suspended at the end of 2014 for transactions in 2015 and 2016. See http://www.kathimerini.gr/796633/article/oikonomia/ellhnikh-oikonomia/anastelletai-gia-2-xronia-o-foros--ypera3ias-stis-metavivaseis-akinhtwn The suspension was certainly in place in January 2015 and I haven't seen anything to say it's since been rescinded. If still in force, your friend should have no CGT to pay if the sale completes in 2015 or 2016. Prior to this CGT was (very broadly) 15% of the gain, subject to write downs of the gain depending on the age of the property and an exemption against the first €25000 of gain if the property had been held for 5 years or more. There are lots of worked examples in the link I posted above, but if it's being sold between now and end 2016, I don't think that CGT will arise.

Paul

[Barbary Coaster]

As I mentioned earlier, I am selling a property but things were on hold due to the buyer being unable to open a Greek bank account.

It has now been confirmed that it is ok to transfer funds direct from the buyers Dutch account to my UK account. In fact I now know of over 10 similar sales taking place in my area alone.

Incidentally, Capital Gains Tax is not payable now. I have to pay a tax of €181 to the Municipality for heaven knows what, but others have had to pay the same so it must be ok !!

[bobscott]

As I mentioned earlier, I am selling a property but things were on hold due to the buyer being unable to open a Greek bank account.

It has now been confirmed that it is ok to transfer funds direct from the buyers Dutch account to my UK account. In fact I now know of over 10 similar sales taking place in my area alone.

Incidentally, Capital Gains Tax is not payable now. I have to pay a tax of €181 to the Municipality for heaven knows what, but others have had to pay the same so it must be ok !!

I don't know at what point rumour (my post of August 6th) becomes fact, but this appears to shift towards its becoming fact that one can avoid Greek banks if it is non-Greek selling to non-Greek. However, the other side of the coin is that there is so much confusion amongst the tax and accountancy people, that who knows what is fact, rumour, or fiction. A nice conundrum for a Sunday afternoon. Bob.

[Danny]

As Barbary Coasters just confirmed what I stated weeks ago which is that any property can be paid for outside of Greece, the contract merely transfers ownership of the property, there is no mention of monies changing hands. The contract is similar to one that would be written if a family wanted to pass the ownership of a house down to their son or daughter.

[Kilkis]

...the contract merely transfers ownership of the property, there is no mention of monies changing hands...

Unless things have changed recently, Danny, that statement is not true. In every case that I have seen, the contract transferring ownership of property includes within it the amount paid plus the taxes and Notary fees paid. Both parties also have to declare the transfer of ownership to the tax authorities on an E9 form with a copy of the contract so the tax authorities know how much has been paid or at least the objective value. For someone who has worked in Greece for a number of years and been paying taxes on those earnings, it is quite possible that the tax authority will simply accept that the prson has earned enough money to pay that amount. That is what happened to me but since I was only buying the land and the contract contained the objective value, which was quite small, it was quite feasible.

In the case of someone coming into Greece for the first time the tax authority have a tendency to ask the question, "Where did the buyer get the money from". If the buyer transferred the money into his own bank account in Greece he would be able to get a "Pink Slip" proving that he did so. If, however, the payment is made outside Greece the buyer has no proof of where the money came from so he may be liable to pay income tax on that money as though he had earned it inside Greece. That is certainly how the tax authority used to operate. Unless the law has been changed in some way it used to be vital for at least the value shown on the contract to pass through Greek banks.

Warwick

[filippos]

Just looked back at our contract of sale when we sold our place and I can confirm to the figures you said should be contained in the contract, Warwick, are all included.

A suspicious taxman might even suspect attempted money laundering somewhere along the transaction trail.

[Danny]

I know that the lawyers handling this contract are based in Athens and are part of one of the three biggest accountancy groups in the world. The value of the property is not written in the contract, the contact does not state the property has been sold only that there is a legal change of owner Transfer fees and legal costs will have been documented within the contract.

[Kilkis]

All the contracts about property are transfer of ownership contracts, Danny. What other sort of contract is there? The contract we signed for our land was to transfer ownership from the previous owner to us.

As far as I am aware contracts transferring ownership in Greece can only be drawn up by a Notary not by a lawyer. I think it also has to be a Notary registered in the Nomos where the property exists. It even used to be the case that you had to use whichever Notary had drawn up the previous transfer of ownership contract so effectively Notaries had a captive customer base. I have no idea if that is still the case. Similarly lawyers can only represent someone in court in the Nomos where they are registered.

I have no idea if the law has changed recently but it used to be a legal requirement on the Notary drawing up the contract to include a price which couldn't be less than the objective value of the property. Even where a parent was transferring ownership to a child the contract still had to contain a value, again usually the objective value. The contract also contains the fee paid to the Notary and the transfer tax, which are percentages of the value shown. Parents preferred to pay these taxes/fees because they were less than the death duties that would be owed if transfer occurred after death. That tends not to be so much the case today although the habit continues.

Warwick

[Danny]

Can't disagree with what you say Kilkis other than state what I was told by a lawyer in Chania who had knowledge of the transfer.