REAL ESTATE SALES IN GREECE: AVOIDING CLASSIFICATION AS BUSINESS ACTIVITY BY THE AUTHORITIES

4 days ago
3 min read

In accordance with Article 21 §3 of Law No. 4172/2013, income derived by an individual from the sale of real estate may be classified as business income and is therefore subject to taxation as such. One of the key criteria is whether the transactions are carried out on a systematic basis.

REAL ESTATE SALES IN GREECE: AVOIDING CLASSIFICATION AS BUSINESS ACTIVITY BY THE AUTHORITIES

According to the explanatory notes to the law, a “systematic” activity is deemed to exist where an individual carries out three (3) similar transactions within a two (2)-year period, provided that such transactions involve the disposal of real estate assets and are undertaken with the intention of generating profit (sale of property). In this context, the decisive factor is the number of concluded transactions as independent legal acts, rather than the number of properties sold within each transaction.

When determining the number of transactions, the following should be taken into account:

The sale of multiple real estate assets to a single buyer under one notarial deed is treated as one transaction, regardless of the number of properties involved;
The sale of multiple properties to the same buyer on the same day, even if documented under separate contracts, is also considered a single transaction;
The sale of properties to the same buyer under different contracts concluded on different dates is treated as multiple independent transactions, with the number of contracts being the determining factor;
Where different types of assets are sold under a single transaction, the assessment of systematic activity is made separately for each asset.

Accordingly, the legal qualification for tax purposes depends primarily on the manner in which the sale is documented.

For better illustration of the practical application of the law, the following examples are provided:

Sale of an apartment together with a parking space and a storage unit — one transaction;
Sale of three separate apartments in the same building to one buyer under a single contract — one transaction;
Sale of an apartment in 2019, a parking space in 2020, and a storage unit in 2021 — three separate transactions;
Sale of an apartment on 25.05.2023 and a storage unit on 27.05.2023 — two transactions, despite functional linkage between the assets;
Sale under a single contract of properties located in different regions (e.g. an apartment in Athens, an apartment in Thessaloniki, a commercial property in Patras, and land plots in Phocis) — one transaction;
Consolidation of three previously acquired office units into a single property followed by their sale — one transaction;
Division of a single property (e.g. a 250 sq.m. apartment) into three separate units and their subsequent sale to two buyers — three transactions.

The above examples demonstrate that a formalistic approach by the tax authorities may lead to situations where the factual circumstances do not clearly indicate the existence of entrepreneurial activity. For instance, phased disposal of assets may be driven by personal or financial considerations, yet still formally meet the criterion of systematic activity. Conversely, a one-off disposal of a substantial real estate portfolio may not meet the numerical threshold required to qualify as business activity.

Exceptions

The law provides for certain cases in which transactions are excluded from the assessment of entrepreneurial activity.

The following are not taken into account:

sales of property acquired through inheritance;
sales of property received by gift from relatives up to the second degree of kinship;
sales of property held in ownership for more than five (5) full years.

For example, if an individual received five real estate properties by gift in 2018 and sold them in 2023, such transactions are not considered for the purposes of determining the existence of business activity.

Thus, the classification of income from real estate sales as business income depends not only on the intention to generate profit but also on formal criteria — primarily the number and structure of transactions carried out within the prescribed two-year period.

It is important to note that the method of structuring contracts, timing of disposals, and the legal nature of asset acquisition significantly affect the tax implications. To minimise risks, it is recommended to conduct a prior legal and tax analysis of each individual transaction in light of applicable legislation and tax authority practice.

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