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Financial Matters Concerning Your Home in Crete
If you are planning to buy property in Crete with cash from overseas, you will need to convert your money into Euro currency thus avoiding extra charges by the receiving bank in Crete. For UK residents this can be expensive if you use a UK high street bank. Fortunately there is growing competition from foreign currency specialists. They usually offer a better rate which is referred to as the "commercial rate", rather than the "tourist rate" offered by the banks. Generally they do not charge fees and provide the option of taking out a "forward contract" so that you can fix your exchange rate and not have to worry about currency fluctuations. Obviously currency rates can fluctuate up and down and can have an important impact on the cost of your house in Crete. For example, if you’re buying a home in Crete costing €150,000 and are paying in pounds sterling, this would be equal to £103,500 at an exchange rate of £1 = €1.45 (January 2005). However, if the £/€ exchange rate ‘falls’ to €1.35, it will cost you £111,000 – an increase of £7,500!
When you import funds into Crete to buy a property, you should transfer the money to your own Greek bank account. The Greek bank will issue the corresponding ‘exchange certificate’, popularly known as the ‘pink slip’ but you (or your Greek attorney) will need to specifically request them. You should present this certificate with your first tax return to prove that the funds for your house purchase originated from overseas in order to avoid having to pay income tax in Greece. People buying a property in Crete will need to do at least one tax statement. We can put you in touch with a local accountant who will submit your tax statement for you.
There are two main ways of financing the purchase of your property in Crete if you don't have the cash. One is to remortgage your property in your home country and the other is to take out a mortgage on your Crete property. There are practical advantages to taking out a mortgage on your Crete property as interest rates on loans in Crete can be lower than in your home country and the lending bank here in Crete will want to make sure that the property is properly valued and offers adequate security for your loan. The local banks offer varying mortgage packages and the pros and cons of each should be weighed up. Action Constructing can give you the necessary assistance when it comes to looking for the best mortgage to buy your house or apartment on Crete.
With reference to the purchase of new buildings in Greece the previous transfer tax has been replaced by VAT at 19%. This taxation has been in place for new buildings since the 1st January 2006. All the prices on our website already include the VAT of 19%. If you sell a house in Crete bought after the 1st of January 2006 your transaction may be due for capital gains tax. Fortunately Greece has double tax treaties with many countries, including the UK, which means that you won't have to pay twice. The capital gains tax payable on your Crete property varies depending on the length of time that you have owned your house in Crete. The tax is calculated on the estimated difference between the amount that you paid for your house compared to its selling price. To receive specific information about tax issues you should consult an accountant. Action Constructing can put you in touch with qualified accountants who will give you accurate advise concerning the tax issues with reference to the sale of your home on Crete. Tax may also be payable on rental income from your property in Crete although you will normally be able to offset mortgage interest if you have taken out a mortgage for your property in Crete and there would be tax deductions for maintenance, documented expenses and depreciation to be taken into account. A qualified local accountant should be consulted with regard to the yearly tax return that you will file as a Crete property owner and they will be able to guide you through the tax maze.
Your house in Crete can be insured either locally, through a Greek agent, or it can be arranged by an insurance company based in your home country. Wherever you take out insurance either locally or at home you should make sure that the insurance covers you for periods when your Crete property is unoccupied. Some insurance policies do not apply if your property is unoccupied for a certain number of days a year. Please note that if you have taken a mortgage out with a Greek bank against your home in Crete your lending bank will more than likely have a mandatory insurance policy anyway. This is something that your lending bank will able to explain to you.
On of the most important issues surrounding real estate taxation in Greece is the concept of the so called "objective" value of the property. This is a deemed value determined according to a formula prescribed by the tax authorities and is regularly revised. These values do not coincide with book or market value, and vary between different areas. Generally speaking they are significantly lower than the actual market value of the property. The "objective" value of the property is the value used when calculating the amount of tax payable with regard to the property. For example municipal tax; which is a yearly tax of 0.025 % - 0.035 % of the "objective value" of the property and is incorporated into the bi-monthly electricity bill. It is also the value that would be used to calculate if there is any capital gains tax payable on any subsequent sale of Crete property and if the property owner is liable for yearly real estate tax.
Yearly real estate tax is payable by individuals only on property that has an "objective" value of more than 243,600€. For married couples the objective value threshold is greater (487,200€) and increases with the number of dependents below the age of 18 that the married couple have. For properties exceeding the threshold the taxation starts at 0.3% and increases to 0.8% depending on the value of the property.
Lawyers Fees- According to Greek law you must have legal representation while buying your house in Crete when the "objective" value of the property exceeds 11.739€. Lawyers fees are typically between 1-2% of the value of the property. This fee normally includes the title deeds search that is carried out on the property and this can be clarified with your lawyer beforehand. Notary's Fees- This is 1.2% of the objective value of the Crete property. Land Registry Fee- This is paid at the Land Registry and is calculated at 0.475% of the objective value of the property. Water and Electricity Connection Fees- These are not normally included in the purchase price and vary according to the size of the property and the location. Estate Agents Fee- This varies from agent to agent, but we have set up agreements with our collaborating estate agents which means that the prices shown on our websites include the normal estate agents fee payable by the property buyer. VAT- As above a VAT amount of 19% is payable and our prices are inclusive of VAT
Building The Home Of Your Dreams In Crete
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