VAT suspension for newly developed real estate properties

According to Article 39 of Law no. 4646/2019, a VAT suspension covering the period from 12 December 2019 to 31 December 2022 has been implemented, applicable to construction companies for sales of newly developed buildings.

The VAT suspension is optional and companies have to submit applications in order to be included in the VAT suspension regime. Tax authorities review the application and issue the final decision for each applicant. If a property is included in this regime, the deductible input VAT related to the construction period can be settled.

Furthermore, instead of VAT, a real estate transfer tax of 3% shall be applicable to the sale of properties (or inheritance) for the companies under this regime. In the case of a new building permit, issued after the application and before the tax authority’s decision, a new application is required.

Application process

• Submission of application to the tax authorities
• Submission of an unsold/unallocated properties list
• Submission of a general ledger for construction costs

Deadline for submission

• 6 months as of 12 December 2019 for previously issued building permits
• 6 months as of the issue date for new building permits issued after 12 December 2019

Tax office review & decision

Following the submission of documents, the tax office reviews and reconciles the list of unsold/unallocated properties with deductible input VAT based on the information provided by general ledgers of construction costs books. The decision will be issued within 10 days of receipt of the application.

Extraordinary VAT return

Construction companies that are subject to this regime file an extraordinary VAT return before the transfer of properties (as sale, inheritance or gift) in order to remit the adjusted VAT related to this property. The VAT due is paid in a lump sum with the submission of a VAT return. The VAT return will be submitted in hardcopy to tax office and the VAT is settled with no further tax audit.

VAT return

Construction companies that are subject to this suspension regime are obliged to submit future VAT returns to deduct input VAT related to the properties sold with VAT and which are under construction. However, construction companies do not deduct input VAT related to unsold properties and properties sold as a first residence for the buyer. Construction companies which have an additional activity code that is subject to VAT can deduct input VAT related to this activity using the pro-rata methodology.