Tsaks Consulting Greece

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The Hellenic Republic (Greece) has become an attractive tax destination for high net worth individuals, family offices and fund managers / entrepreneurs looking to tap into an optimised tax regime. The Article 5A non-dome regime, 5% flat tax on carried interest, and Golden Visa program all make Greece more attractive. Once people decide to migrate to Greece, they usually face an interesting decision – to purchase real estate or invest in a regulated fund!

  • Integrating into your lifestyle, where buyers purchase a holiday home or something of the like (a vacation home for their family) and use that in order to get the Golden Visa.
  • Looking for long-term capital gains, and that is the potential for capital appreciation and growth in the real estate. There has been significant capital appreciation over the last 5 years.

On the other hand some of the benefits of investing in a mutual fund or an alternative investment fund are:

The reality that our team here at Tax Consulting have identified is that the advantages of investing in a mutual fund often outweigh the benefits of investing in real estate. Some of the reasons for this are:

  1. The speed in order to secure residency is a lot faster with investing in a mutual fund or an alternative investment fund than it is through purchasing property. It can happen in, actually, a number of weeks when you invest in a mutual fund or an alternative investment fund or even a Greek government bond. The reason for that is because it’s a direct clean-cut transaction that can generally be undertaken by power of attorney.
  2. Purchasing a property is a lot more complicated and takes a lot more time. The reason is that, firstly, you need to find a property that’s a reasonable value so you’re entering a market that you generally don’t know. There are a lot of real estate agents that actively target the Golden Visa but you need to be careful to make sure that the price of the property isn’t inflated and is only, for example, €250,000 or €400,000 to target a Golden Visa applicant. Therefore there’s an opportunity cost in time spent communicating with real estate agents and attending properties to identify suitable investment opportunities. You need to undertake deep research into the market and gain a real understanding of the local property market you’re looking at investing in, which is not always that transparent.
  3. The timing factor does not always end there. You then need to have engineering checks and legal checks undertaken on your property and on the property that you’re looking at purchasing. As a result of that it takes additional time and sometimes adds unnecessary costs or costs that you will have to incur whether you purchase the property or not. Finally we’ve seen clients go through the purchasing process and then not be aware that you need to allocate, generally speaking, about 10% of the value of the property for legal, public notary, engineering, and, of course, property tax registration expenses and transfer tax. Essentially this creates an additional cost, also takes time, and affects the speed of making the transaction and therefore securing residency or being eligible for the tax incentive.
  4. Managing properties is a lot more active and hands-on.
    • If you’re going to rent the property, then you need to pay income tax on the rental income and that scales from 15% to 45%. Income tax on the rental is a cost to consider.
    • You also have to pay property tax, which is called ENFIA on a yearly basis. That involves a sum of money as a percentage, depending on your overall portfolio size and the location of the property. That is a yearly cost.

    Managing the property, complying with Greek laws and regulations, complying with tenant laws, and maintaining the property from abroad can become highly time-consuming. It’s also time-consuming even if you are based in Greece and based locally where your property is. Greek tenant laws are inherently complex and they are a challenge that most of our clients find to be substantial. You can appoint a real estate agent; however even then a lot of the responsibility for communicating with tenants and providing maintenance and other requirements to tenants is undertaken by the owners not the real estate agents in Greece. That’s a surprise to some of our clients.

  5. Finding suitable tenants can be difficult as there is a culture in Greece of simply leaving a tenancy if, as a renter, you are not happy anymore and leaving everything up to the owner. That means you need to conduct thorough due diligence on potential tenants and you need to have a comprehensive understanding of the tenancy laws in order to rent your property out. For some of our clients that are interested in  AirBnb, they’ve now discovered that there are even more onus requirements for running an Airbnb property in Greece. Therefore it is generally commercially worth it but it does take a lot more time and it is a much more complex investment or operation.
  6. A final hidden cost or real unknown limitation of investing in real estate, and another reason why many of our clients here at Tax Consulting actually decide to invest in one of the mutual funds or banking funds that we put them in touch with, is the lack of liquidity in the property market. The reality is that real estate in Greece is very slow to exit. If you have a different tax strategy or if you have a need to liquidate a high-end villa, even a small property or apartment in Athens or on an island, it can be very difficult to find a potential buyer. It can be extremely difficult to get a return on your investment or even find a buyer and have that buyer successfully get a loan or purchase the property. There are also exit costs in terms of real estate agents’ fees, which are generally 2%. The real challenge is actually liquidating the asset and that’s something that we find can take months, sometimes years, to do. Buyers know that and if they sense desperation they generally make low offers and bargain really hard. This is something that may not be as common in other countries. It certainly isn’t a transparent property market in Greece and selling a property and realizing your value can be a real challenge.

How Tsaks Consulting will help you navigate your transition to Greece

Our team can help you manage your transition to be a Greek tax resident and take advantage of some of the incentives that Greece provides. We will partner with you throughout the journey. With respect to investment decisions we can provide you with input on our experience with our clients to date: what has worked for them and what hasn’t, and some of the challenges and pitfalls associated with investing in real estate. We can also introduce you to providers of mutual funds and EU-regulated and accredited alternative investment funds, which may be of interest, as well as help you manage the application process.

Arrange a confidential discussion with our team of advisors today to talk about how we can help you with the relocation process and assist you in making decisions that are best not only for yourself, from a financial perspective, but also from a family and lifestyle perspective, as they may apply to you.

We help clients from across the Globe move to Greece including from China, Israel, America, the United Kingdom and many other countries.

 

Disclaimer: This article is provided for general information purposes only. It does not constitute personalized legal, tax or investment advice or a recommendation to purchase any financial product. Investments in mutual funds involve investment risk. The value of fund units may rise or fall, and neither the return of the invested capital nor any specific investment return is guaranteed. The eligibility of each investment and applicant must be assessed individually under the applicable legal and regulatory framework.