The Greek government is leaning toward extending two tax suspensions that have become fixtures of the country’s property market, a move that would support construction and investment but leave longstanding distortions in the sector largely untouched.
Rather than bringing two dormant taxes back into force, Athens is considering keeping both the value-added tax on newly built properties and the capital-gains tax on property sales on hold. The approach reflects the government’s reluctance to impose additional costs on a real-estate market that has become an important engine of investment and economic activity.
Greece is unusual among European Union countries in having a legislated VAT on new construction that has remained suspended for years. A similar fate has befallen the 15% capital-gains tax on profits from property sales. Neither tax has been abolished. Instead, successive governments have repeatedly postponed their application, effectively creating a special tax regime for a sector that has historically been vulnerable to undeclared transactions and tax evasion.
ΔΙΑΒΑΣΤΕ ΕΠΙΣΗΣ
Keeping the suspensions in place sends a clear signal to developers and investors: For now, supporting construction and avoiding new tax burdens take precedence over a broader overhaul of the way property transactions are taxed.
The trade-off is that some of the market’s most persistent problems remain unresolved. Property transactions can still involve contracts recording values below the actual purchase price, undeclared payments and off-the-books cash. The problem is compounded by the widening gap in some areas between Greece’s official property valuations, which are used for tax purposes, and actual market prices.
Tax professionals argue that restoring VAT on new construction could create a chain of mutual enforcement across the industry. To deduct the VAT paid on building materials, equipment, engineering work and other services, developers would need proper invoices. Contractors, tradespeople and suppliers would consequently have a stronger incentive to document the full value of their transactions.
The suspension, however, has another beneficiary: the Greek state itself.
Under the current arrangement, the government collects VAT on construction materials and related inputs without subsequently having to offset those receipts against VAT charged when a newly built home is sold. If VAT on new properties were restored, part of that revenue would effectively remain in the tax-credit system until the property was sold. For developments that take years to complete and market, the final tax settlement could be delayed considerably.
That helps explain why a measure presented as support for construction can also be fiscally convenient for the government.
The argument that the suspension is necessary to protect ordinary home buyers is also less straightforward than it appears. Greece already provides preferential tax treatment for qualifying purchases of a primary residence. At the same time, newly built apartments in Athens and other major urban centers have become increasingly expensive, putting much of the new-build market beyond the reach of middle-income households. A significant share of demand instead comes from investors and higher-income buyers.
The government therefore faces a choice between preserving a system that has helped fuel construction and moving toward a tax framework that could improve transparency.
One option would be to introduce a reduced VAT rate on newly built properties while maintaining protections for primary residences. Athens could also activate the capital-gains tax while introducing reasonable exemptions, including provisions designed to avoid penalizing long-term homeowners or transactions where gains are limited.
Such an approach would allow the government to soften the economic impact without leaving the taxes indefinitely dormant.
Instead, Greece appears poised to choose another extension of what was designed as a temporary reprieve. That may offer developers and investors greater certainty in the near term and help sustain construction activity. But it also preserves an exceptional tax regime in one of the economy’s most valuable sectors, while leaving some of the property market’s most persistent channels for undeclared income largely undisturbed.
