According to the provisions of Law 4110 / 23.1.2013 (Government Gazette 17Α) and the Decision of the Minister of Finance 1180 / 2013, there is now the option granted for subjection into VAT of all business property leases, in contradiction to a former law provision, according to which the taxation option applied only for the commercial and goods centers, under specific conditions.

The subjection into VAT is carried out upon the choice of the property's lessor - exploitation operator, which is realized with the submission of the application for the taxation option to the competent tax authority. 

The taxation option can refer to the whole or a part of a property or a construction complex. The application explicitly defines the spaces for which the taxation option is to be followed. It should be pointed out that the taxation option also refers to lease relationships which had been concluded before 01.01.2013, provided that there shall be an application for the taxation option submitted, which shall apply since its submission. 

The choice of this taxation option is granted to the property exploitation operators who lease the property to other undertakings (companies) for the exercising of a business activity regarding the delivery of goods or the rendering of services. 

As property exploitation operator is considered to be both the person having the property in his / her possession, as well as any person owning in any way its exploitation right (for example, sublease, limited ownership, etc.).

The taxation option in this case applies since the time the application had been submitted. Despite the fact that the choice of the taxation option is carried out by the property's lessor - exploitation operator, it is in any case understood, that for the possible VAT imposition on a property lease and for the taxation option there is the consent required on part of the counterparty (lessee), in order to avoid any disputes, particularly with regards to contracts which have been signed before the choice of the taxation option, which (disputes) apparently have to be amended to this point.

In the case that the owner or the exploitation operator of the property grants the exploitation right to another person, the choice of the taxation option belongs to both, the property owner and the property exploitation operator, while the choice for the taxation option of the one person is independent from the choice or non - choice of the other person. 

In the case of the property's joint ownership, it is not necessary to exercise the right for the taxation option jointly, provided that not all joint owners wish the subjection into VAT. It is possible that the ownership percentage of the one person is burdened with stamp duty, and the ownership percentage of the other person submitting an application for the choice for taxation option is burdened with VAT.

Examples:

For the better understanding of the aforementioned, there are the below cases indicatively mentioned, regarding the existence or non - existence of the taxation option:

• A Company (Α) constructs (raises) a property on a proprietary land and as the Company does not wish the property's direct exploitation, it leases the building with sublease right concerning the whole building or a part of it. Both companies are entitled to the choice for the taxation option. It is obvious that the choice for the taxation option is carried out independently and separately by the companies concerned and the option does not necessarily has to be exercised by both companies. 

• A Company (Α) grants a property free of charge to another Company (Β) which, according to a contract, is entitled to an exploitation right on the property. A choice for the taxation option is then only granted to Company B, as Company A does not exercise a taxable transaction in order to be entitled to such a right.

• A natural or legal person (Α) leases a land of its ownership to another natural or legal person (Β), which (Β) shall raise a property and shall operate its exploitation with a lease relationship. Both persons have the right to the taxation option, which they shall exercise for expenses deduction purposes, more specifically, person B of the construction expenses, and person A of any further expenses related to the property land. The same applies for property concession contracts against counterpart for the construction of a building for the purposes of establishment of the lessee's undertakings. 

• A natural person (Α) and legal person (Β) are undivided owners of a property which is leased. The application for the choice of the taxation option does not necessarily have to be carried out jointly (by both persons), since they do not both wish to be taxed with VAT. It is possible that the percentage of person Α is burdened with stamp duty, while the percentage of person B who submits an application for the choice of taxation option is burdened with VAT.

The right of taxation option is exercised, as foresaid, with the relevant application, which is submitted by the exploitation operator to the local competent Tax Office. The application for the choice of taxation option can be submitted, either at any time before the start of the property's use, or within thirty (30) days from the beginning of the financial period, in case the choice of taxation option is carried out at a later time stage following the start of the property's use. 

In the case that an application for the choice of taxation option is submitted, the taxable person is entitled to the right of VAT deduction on inputs, by which the construction or maintenance of the property has been burdened, for which there has been the choice of taxation option exercised as well as any input related to the property concerned, according to the VAT Code. In other words, the property's construction cost shall be reduced by the VAT percentage, burdening the purchase of materials and services for the construction of the property concerned. 

For the exercising of the deduction right, there is the necessary precondition of the existence of an invoice or another proof document considered to be valid as an invoice, as documentation for the deliveries of goods and the provisions of services, which are made to the property owner and of the relevant tax burden. 

Concerning the property for which there is a choice of taxation option with VAT made, the tax deducted is settled within ten (10) years from the date of the beginning of the property use and for the part of 1/10 of this tax, for each year, depending on the changes on the deduction right. In case the choice for the taxation option is carried out after the beginning of the property use, the deduction right only exists for the year which is remaining until the completion of the five years period after the beginning of the property use.  

The deducted tax in this case, is observed and settled for the rest years remaining for the completion of the ten (10) years period, from the beginning of the property use.

It is pointed out that, as starting date of the property’s use, is the date considered of the actual beginning of the lease relationship. As a result, the ten years period of settlement starts from the year in which the lease

agreement was concluded, meaning, from the date set with the lease agreement as starting date of the lease relationship, regardless the fact whether the lease agreement has been signed with a prior date. 

Below we are listing some examples for a better understanding of the issue of the possibility of taxation and tax deduction on leased commercial properties.

Examples:

• A Company constructs in 2010 4 shops with the purpose of leasing them. The VAT burdening those shops is in amount of € 20.000. The Company leased the shops concerned in the year 2011 without VAT. During the year 2012 the shops kept on being leased. The Company submits in the year 2013 an application for the choice of the taxation option and the lease relationship is now subjected into the VAT scheme. In this case, the Company does not have any right of deduction for the proportion of two fifths (2/5) corresponding to the years 2011 and 2012, due to the fact that for those years the property was used for transactions with no deduction right (20.000:5=4.000X2=8000), however the Company does have the right to deduct the VAT corresponding to the proportion of the three remaining fifths (3/5), meaning 12.000 (4.000X3). The tax in amount of € 12.000, which shall be deducted by the company, must be settled by the company for the rest eight (8) years remaining for the completion for the ten years period from the use into a taxable transaction, a proportion of one eighth (1/8) for each year (2013 until 2020).

• A Company purchased in the year 2011 a newly built shop with VAT 50.000€. The company used the shop within 2011 and 2012 as "small wares" shop (transactions with and without a deduction right) carrying out the foreseen settlements for those years. In the year 2013 the company decides to transfer its activities elsewhere, it submits an application for the choice of the taxation option and leases the shop with VAT. The company has the full right of VAT deduction on the VAT amount of € 30.000 (50.000:5X3=30.000), which the company is obliged to settle in the next eight years (1/8 for each year).

The choice of the taxation option can be revoked with a relevant revocation application on part of the property exploitation operator concerning the whole property or a part thereof, which has to be clearly defined in the relevant application. The revocation application must be submitted to the competent tax office within 30 days after the beginning of the financial period and is valid from its start. With a VAT return which is to be submitted within four (4) months after the financial year end, within which the revocation took place, the settlement of the tax is carried out, which (tax) has been deducted and corresponds to the remaining proportion out of tenth until the completion of the ten years period of settlement. 

The VAT Department of each Tax Office in competence is obliged to register the applications for the choice of the taxation option and the revocation into a list in which also the following data must be listed such as the company's firm name, the tax registration number, the application submission date for the choice or the revocation, and also the information if the choice is made before the starting date of the property use or after this date. 

It should be pointed out that, according to the provisions of article 63 of the VAT Code, as those are interpreted by the Management, there is no stamp duty due on the property leases which are subject to the Value Added Tax (VAT). As a result thereof, the companies / undertakings operating the exploitation of real estate, choosing the imposition of VAT on the leases of spaces to commercial companies, according to the data mentioned in the present article, have no obligation of stamp duty payment for those lease relationships. 

Lessors who have charged their counterparties (lessees) with stamp duty during the period from 01.01.2013 until the issuance of the present article and then chose the taxation with VAT, are not obliged to attribute (pay) the stamp duty to the Greek Fiscal Authorities. It is understood that in this case the lessor must refund to the lessee the amount corresponding to the stamp duty charges already paid for this specific period. According to paragraph 3 of Article 33 of the VAT Code, it is foreseen that for the property for which there is the choice of taxation option made: a) There is a lump sum settlement carried out in the case of delivery or final termination of the property use into taxable transactions within a ten years period from the beginning of its usage. b) There is the obligation of the settlement of the tax deducted by the choice of taxation option, in the case that the property does not get used within a ten years period from the date the relevant expense was realized.

Actually it is foreseen that the settlement period for the property subjected to tax is differentiated. Those are observed for ten years, in contradiction to the rest investment goods, which are observed for five years. Thus, in the case of a property lease which is subjected to taxation upon the choice of taxation option, provided that the property is delivered or its usage into taxable transaction permanently stops within the ten years period, there is a lump sum settlement to be performed within the same year, and it is considered that the property was used into taxable or non - taxable activities. 

NOTE: This article does not cover advisory, but only informational purposes, and cannot serve, as a basis for further actions, on the part of   the reader. Reception of specialized advice is required.

Our company does not hold any responsibility for any actions, taken by the readers, based on the present article.