The hospitality industry in Greece is attracting a considerable number of international investors in the past couple of years, resulting to a rapid growth in the industry which is expected to reach 14 billion EUR by 2020.
What are the key tax points an investor should consider prior to the acquisition, holding and divestment of a hotel business?
Acquisition of a hotel business
Upon acquisition of an operating hotel, including the legal title over the respective real estate, a 3,09% real estate transfer tax is due by the buyer. In very limited circumstances involving the sale of new hotel buildings prior to their use, such tax is replaced by 24% VAT.
The transfer of business as a going concern triggers a 2,4% stamp duty imposed on the net asset value of the business being transferred.
Holding of a hotel business
Any business income realised by the operation of the hotel is subject to the currently applicable corporate income tax rate of 29%.
The annual deductible depreciation rate for buildings is 4%. For equipment (other than PC and software) and other fixed assets of the business, the depreciation rate is 10%.
Foreign or domestic entities holding a hotel in Greece are exempt from the 15% annual special real estate tax provided that the hotel is fully operating.
The hotelier services are subject to VAT at a reduced rate of 13%. However, F&B and other services sold to clients separately, fall in principle in the general 24% rate. Especially for all-inclusive services, 30% of the total price is subject to 24% VAT, while 13% VAT is imposed on any outstanding amount.
Construction and refurbishment works are subject to a 24% VAT.
Real estate property in Greece is subject to the annual Uniform Real Estate Property Tax consisting of a principal and a supplementary tax. The principal tax on buildings is calculated by multiplying the square metres of the building by the principal tax ranging from EUR 2-13/sqm and other coefficients affecting the value of the property (e.g., location, use, flour of the property, etc.). The property self used by the hotel is subject to a 0,1% supplementary tax.
As of 1.1.2018, a duty will be imposed for the use of hotel rooms and touristic residences on a daily basis as per the table below:
Net interest expenses exceeding the amount of 3m EUR is deductible up to 30% of the EBITDA after tax adjustments.
Disposal of a hotel business
Any gain realised by the transfer of the touristic business will be subject to the CT rate of 29%.
In case the disposal of the touristic business is structured as a share deal, no Greek direct or indirect taxation (e.g. capital gains tax, RETT, stamp duty, etc) may be due for the foreign investor.
Partner, Tax Leader