From 1 October 2021, a major tax break has been introduced by the Greek government.
Parents who wish to transfer to their children any type of asset, including real estate, cash, company stakes, will not pay transfer tax for the gifting of property worth up to 800,000 euros. The tax-free parental gift of 800,000 euros applies to each parent gifting property to each child. In other words, the two parents can gift property to their two children worth up to 3.2 million euros (800,000 x 4) without any transfer tax, since each parent can gift to two children property worth up to 1.6 million euros tax-free. The same applies vice versa, for gifts from children to parents, although such transfers are rare.
Given the value of properties held by the average Greek household, which is less than 800,000 euros, the new tax-free amounts will cover virtually every family in Greece. The previous tax-free amount was 150,000 euros, which makes the new tax-free threshold of 800,000 euros look like an extraordinary measure.
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Up until now, the tax-free limit for the parental gift was the same as the tax-free limit for acceptance of estate (inheritance). In both cases, the amount was 150,000 euros. From 1 October 2021, the tax-free limit for the parental gift is skyrocketing to 800,000 euros, while the tax-free limit for the inheritance remains at 150,000 euros. This suggests that the usual question for a parent, whether it is better to give assets to the children now with a parental gift, or leave them for after the passing of the parents, the answer is that, tax wise it is preferable to gift assets to the children now, since the tax-free limit is very high (800,000 euros), compared to the 150,000 tax-free for the estates.
The tax-free limit applies also to free gift transfers from children to parents. Therefore, with the new law, after 1 October 2021, even siblings can transfer assets or cash between themselves worth up to 800,000 euros, without paying any transfer tax. This can be achieved if the child gifts first to the parent the asset or the cash and subsequently the parent can further gift it to the other child.
Even grandparents can transfer assets or cash to grandchildren, without paying any transfer tax up to the amount of 800,000 euros.
With regards to cash transfers, however, there is a catch. Any free gift from parent to a child or from a child to parent or between grandparents and grandchildren, must be executed through the bank. Consequently, the amount which will be gifted must exist in the bank account of the person who makes the gift and must be transferred through a bank transaction to the account of the person who receives the cash gift. Moreover, the additional precondition is that the person who makes the cash gift must have declared the amount as income during the last several years. The higher the amount to be gifted, the more likely the Greek tax authority to enquire whether the person who makes the gift has sufficient income tax filings the last many years, in order to justify the acquisition of such funds. Another way to justify the source of the funds to be gifted, is the sale of assets the previous years by the person who makes the free gift.
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The free gifting of real estate assets in Greece is done through a deed of free gift, called “goniki parochi”, drafted usually by lawyers and executed before a notary. The deed subsequently must be registered at the local land registry, which will make the deed valid before any third party. If the free gist involves cash / funds at the bank, the two parties sign and file tax declarations to the tax office.
Christos IIliopoulos is an attorney at the Supreme Court of Greece , LL.M. www.greekadvocate.eu e-mail: firstname.lastname@example.org