Does the VAT suspension help construction activity?
According to data published by ELSTAT, the construction activity showed steady growth in 2019, despite some fluctuations. Generally, there was a 13.3% increase in the Total Private Building Activity in Greece, which is calculated on the basis of the number of issued building permits, as well as a 9.2% increase in the surface and a 9.8% increase in volume, compared with the corresponding period of 2018. The building permits for the Private Building Activity issued in the Attica region in 2019 amounted to 3,625. In comparison with 2018, there is an 18.1% increase in the number of building permits. As for the other regions, the biggest increase was recorded in the region of Eastern Macedonia and Thrace (86.4%), followed by Crete (32.4%), and Western Macedonia (32%). On the contrary, it was a 25.9% decrease in the pace of construction in Central Greece, as well as in the Ionian Islands (22.1%), and the Peloponnese (18.1%). However, it is expected that the projects that have already started, as well as the new ones, will invigorate the construction activity.
The Deputy Finance Minister, Apostolos Vesyropoulos, signed a three-year VAT suspension on the property, giving the green light to the signing of new construction contracts. Property market professionals point out that following the implementations of these provisions significant funds will be mobilized and directed to the real estate market. This, in turn, will boost the purchase-and-sales of real estate properties and reconstruction activity.
Moreover, the three-years VAT suspension covers all new building permits but also the unsold properties built after 1, January 2006. The VAT exemption virtually eliminates the obstacles that have been making any foreign investor reluctant to purchase property in Greece for years. Finally, it should be noted that 24% VAT was damaging for the Greek economy since not only did it hindered foreign investments, but also it made only a very minor contribution to the country’s budget since the corresponding revenues did not exceed 15 million euros per year.
The process and the details of the new measure are set out in Independent Authority for Public Revenue order. More precisely, according to the order, the VAT suspension measure is optional and implemented only when claimed with an application by the interested party. As for the licenses that were issued after the new regulations entered into force, the application can be submitted within 6 months from the date of issue of the license. The provision is valid until 31.12.2022. The application deadline for older licenses is 12.6.2020.
These new provisions are expected to ease the stock of unsold properties, which resulted from high taxation. According to the experts, more than 100,000 objects will be put up on sale after the measure’s implementation.