The new government of Greece is expected to increase the inheritance taxes within the next few months. The increase will also apply to the transfer tax for real estate property from parents to children (parental donation or “goniki parohi”, in Greek).
The last few years the inheritance and parental donation taxes have been slashed to record lows, as an incentive of the Greek state for people in and out of Greece, who own or claim properties and inheritances, to settle their estate and family affairs. At the moment the inheritance tax is only 1% of the tax value of the properties of the estate. This covers the inheritances of those who passed away from 1-1-2008 and onwards with regards to their first degree heirs, usually children, the spouse and the parents of the deceased.
It is noteworthy that the very low inheritance tax of 1% for the close relatives is only applied after the first 95,000 euros worth of inheritance share is deducted, for which there is no inheritance tax at all!
As a simple example we take the estate of someone who passed away in March 2008 and left as closer relatives his two children and his spouse. The deceased left property located in Greece, at a tax value of 800,000 euros, which usually means that the real value of the estate is much higher that the tax value of 800,000. Provided the deceased left no Will, he is inherited by his spouse at 1/4 of his estate (which is worth 200,000 euros), while each of his children inherits 3/8 of his estate, meaning each of his children is entitled to a share worth of 300,000 euros.
The spouse, with whom the deceased was married for a period of at least five years prior to his passing, will pay no tax at all, since her tax free threshold is 300,000 euros. Each of the children will deduct from their share the amount of 95,000 euros, for which they pay no inheritance tax at all, and they will pay 1% inheritance tax for the next 205,000 euros of their share.
The new Greek administration is in dire economic straights urgently needing money to stabilize its finances. Within this economic context, among many other measures regarding a more strict tax system, the government is likely to announce within the next couple of months the significant increase of the inheritance and parental donation taxes.
The details of the new system and especially what tax rates will be applied is something which has not been decided yet. However, it is widely expected that the resulting taxes will be much higher compared to what they are today.
One can expect that the new, increased inheritance and parental donation taxes will apply from 1-1-2010 or even later, as it would be extremely unlikely the new system to have retroactive effect. As a result of such speculation about the imminent increase of this type of taxes, many people who own properties in Greece turn to their lawyers and notaries, to safeguard a quick transfer of some of their real estate assets to their children, taking advantage of the present favorable tax system, which nobody knows for how many more weeks will be in force.
(Posting date 30 Novmber 2009)
Christos Iliopoulos is an attorney at law, LL.M., in Athens, Greece, specializing in International and European Business Law. For more information about him, see his brief biographical sketch under the HCS section for Contributing Authors at http://www.helleniccomserve.com/christosiliopoulosbio.html. He has submitted many articles to HCS; readers can browse these in the archives section bearing his name at the URL http://www.helleniccomserve.com/archiveiliopoulos.html. He can be contacted by e-mail at email@example.com or by phone (from the US) 011-30-210-6400282; mobile 011-30-693-2775920, fax 011-30-210-6400282, or by postal mail at the address: 105 Alexandras Ave., Athens, 11475, HELLAS
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