08 Aug Investment in Real Estate for Legal Entities and Individuals: what you need to know
Investment in Real Estate for Legal Entities and Individuals : what you need to know
Nowadays, several investors are looking for alternative forms of investing their funds in order to secure and increase their profit, resulting to an increased investment interest to all categories of real estate.
The most common dilemma faced by investors has to do with what kind of real estate to invest their funds. Apartments, offices, hotels, shops and plots are the products that are offered for investment in the real estate market with special features and each one should in every case be considered thoughtfully by the investor, depending of course on the risk he accepts to handle and the capital he has to offer.
Examples of investment property:
- land held for a long-term increase of the capital value, rather than a short-term sale in the normal course of business,
- land held for future use, which use is undefined at present,
- a building owned by the entity (or owned by the entity under a finance lease) and leased with one or more operating leases,
- a building that is empty but is occupied for lease by one or more operating leases.
- properties that are under construction or exploitation for future use as investment properties (eg to be rented)
It is important to emphasize that real estate is a form of investment with stable returns without high risk and ideally should be combined with both future surplus value and stable income. Plots are usually the real estate investment that offers high surplus value, where investors usually choose to build homes, offices, shops or hotel units.
Owners of real estate in Greece are divided into two categories with different tax treatment:
Individual: the property belongs directly to an individual for ownership, exploitation or investment.
Legal entity: the property belongs to companies for ownership, exploitation, investment, construction or rebuilding.
A. Individual
The income resulting from the rental or concession of real estate is taxed with the following rates
- 15% up to € 12,000
- 35% for amounts over € 12,000
- 45% for amounts over € 35,000
The owner of a sole proprietorship when he/she also has real estate income does not affect the above tax treatment for property income, hence it remains as income from real estate rather than income from business activity. When the individual enterprise has the object of commercial exploitation, development and investment in real estate, it is subject to income tax at a rate
- 22% for annual income of up to € 20,000
- 29% for amounts over € 20,000
- 37% for amounts over € 30,000
- 45% over the amount of over € 40,000
that is, income from business activity and not income from real estate exploitation.
B. Legal entities
Legal entities in Greece are taxed on their income both domestically and abroad. Foreign companies in Greece are taxed only on the basis of income derived in Greece. The corporate tax rate is 28% for all earnings from business activity. Rentals received from property are also considered as profits from a business. Dividends and other distributed profits by a Greek company are subject to withholding tax at a rate of 10%.
Regarding the holding of shares and shares of foreign companies, income tax exemption is granted for intra-group dividends received or distributed by a legal entity resident in Greece, provided that the following conditions are met:
- The payer or the payee respectively is covered by Directive 2011/96 / EU on the common tax regime applicable to parent companies and subsidiaries of different Member States, is a tax resident of an EU Member State and is subject to one of the taxes provided for in that directive,
- The receiver owns a minimum of 10% in the distribution company’s capital, shares, voting rights or profits,
- This percentage is retained for at least twenty-four months. The exemption may also apply without the minimum holding time being reached, if provided a letter of guarantee equal to the amount of the tax exemption is provided.
For real estate investments, it is preferable to choose an investment through a legal entity, mainly for tax purposes and facilitation and development of the business and investment activity. The two most prevalent ways of acquiring real estate are the following
- the immediate acquisition of an asset, which follows the same procedure as the transaction between individuals
- the indirect acquisition of the asset by acquiring the majority of the shares/units of a legal entity that owns the property
The acquisition of shares / shares of a legal entity is more often used as it allows faster and easier ownership change, while providing a quick exit strategy for the buyer when he eventually wants to transfer the property. In addition, another important advantage is that companies owning real estate for commercial purposes (exploitation, development, investment) have the right to deduct from their total income of expenses, such as ENFIA, other operating expenses related to real estate, the amount of insurance contributions of the manager, etc. In addition, depreciation on the value of buildings is calculated and deducted from the total income. All these discounts result in a significant reduction in the taxable income of the company, the possibilities and advantages that are not granted to individuals. The corporate types that are most suitable for the occupation and exploitation of real estate are the SA and the Private Companies.
If you’re interested
- for investment opportunities in real estate
- for transferring your real estate to a legal entity and for the establishment of a company
- for the optimal tax planning of real estate, whether it is for a legal entity either for an individual
- for proposals of optimal returns on investment properties