Class in the market of short-term leases the Ministry of National Economy and Finance is trying to put them on the same level – in terms of taxation – with those of hotels and rooms for rent, while also limiting the use of “black money” for the purchase and sale of real estate.

At the same time as Airbnb’s first move into the market, the Solidarity Fund for the restoration of damages from natural disasters is being strengthened.

Briefly, the measures that are coming for the next period of time are focused on the abolition of cash in real estate purchases, on the establishment of even stricter penalties for property owners and managers who do not declare to the Tax Office the properties intended for Airbnb-style short-term rentals.

With the latest intervention, an attempt is made to deal with the negative consequences in the real estate market and especially in the part that concerns rental housing.

Also of key importance is the intervention that foresees the introduction of VAT for short-term rentals with opening of the books, for all those who operate more than two short-term rental properties, as well as the imposition of accommodation tax on 170,000 properties, similar to that applicable to hotels and dressing rooms.

According to the data published by AADE, it appears that natural persons own the vast majority of properties intended for short-term leases, and specifically, 8 out of 10 properties registered in the Short-Term Leasing Registry are owned or managed by a natural person.

At the same time, within the next year, 7,440 property owners and managers will be asked to pay VAT and a resident tax unless they convert short-term leases into long-term ones.

Let’s look in detail at all the interventions that will be activated from January 1, 2024 as announced by the Ministry of Finance.

In the field of short-term leases, a combination of interventions is instituted with the aim of dealing with unfair competition with hotels (in cases where the activity in them acquires business characteristics without, until now, being accompanied by the corresponding obligations), but also to deal with the secondary negative effects on real estate market and rents. The development of short-term rentals, which are an important source of income for thousands of property owners and for the country as a whole, is not affected.

Interventions include:

1. Modification of the definition of Short-term Lease: Short-term lease will be defined as the lease or sublease for a specific period of time, less than 60 days, of a property that is posted on a digital platform and as long as no other services are provided except for accommodation and the provision of bed linen.

2. A new Activity Number Code (KAD) is created specifically for Short-Term Rentals. All legal entities and natural persons who engage in short-term rental business activity will be required to start or add an activity based on the new KAD.

3. Obligation to start a business activity for natural persons who have on a digital platform three or more to rent/sublet for short-term rental purposes. With this specific intervention, individuals who post for lease (or sublet) three or more properties on a digital platform, will become businesses (individual or legal entity) and will be required to start as legal entities that carry out the specific activity are already required, (with corresponding insurance contributions, property tax and VAT from the first property).

4. Imposition of VAT, Resident Tax and Climate Change Consequences Tax which replaces the residence tax: For lessors/sublessors legal entities/individual businesses with a short-term rental business: a) the income from short-term real estate rentals will be subject to VAT, b ) will be subject to a non-immigrant fee and c) will be subject to a climate change mitigation fee that replaces the residence tax.

It should be noted that the new fee, which replaces the residence tax, will also apply to short-term leases of lessors/sublessees of natural persons (individuals) with one or two properties. (more information on how to deal with the consequences of climate change at the end of the note, in the section on natural disasters).

The old accommodation tax scale and the new climate change mitigation fee according to accommodation category are as follows:

Category Amount per day today New Price Increase

1-2 stars 0.50 Euro 1.50 Euro 1.00 Euro

3 stars 1.50 Euro 3.00 Euro 1.50 Euro

4 stars 3.00 Euro 7.00 Euro 4.00 Euro

5 stars 4.00 Euro 10.00 Euro 6.00 Euro

Rooms for rent 0.50 Euro 1.50 Euro 1.00 Euro

Short-term rental 0.00 Euro 1.50 Euro 1.50 Euro

5. Intensification of controls, based on the data of the electronic platforms and imposition of sanctions in cases of tax evasion or provision of additional services other than accommodation and the provision of bed linen.

6. Stricter penalties: In case of non-registration in the Register of Short-Term Rental Properties, the fine is tightened and is set, per use, at 50% of the gross income of the last tax year and at least 5,000 euros (today the fine is horizontal and amounts to 5,000 euros). In case of recurrence for the next use, the above fine will be doubled.

7. Rental of all apartments in an apartment building: In the event that all apartments in an apartment building or residential complex are available for short-term rental, it will be considered a tourist accommodation, which must have the corresponding permit.

It is noted that 168,819 properties belonging to 107,719 VAT numbers (legal and natural persons) are registered in the AADE Short-term Accommodation Property Register. From those:

* 27,367 properties belong to 5,297 legal entities

* 141,452 properties belong to 102,422 natural persons. Of these, up to 2 properties are owned by 94,982 natural persons (92.7% of natural persons). Three or more properties have 7,440 natural persons and correspond to 30,329 properties.

Consequently, a total of 7,440 individuals and 5,297 legal entities with 57,696 properties (34.2% of the properties) will be required to pay VAT and non-immigrant tax, unless they choose to convert part of them into a long-term lease. It is noted that 4,100 natural persons have exactly three properties (and an additional 1,687 natural persons have four properties).

Finally, from now on, all real estate purchases and sales will only be made by bank means of payment. In this context, real estate purchase and sale contracts will obligatorily indicate the payment of the transfer price exclusively by bank means of payment. The aim is to abolish the possibility of buying real estate with cash, which perpetuates the phenomenon of tax evasion and money laundering, as there are not a few cases of transactions with “unknown origin” money.

Based on the data of the Ministry of Finance, since the launch of the myPROPERTY platform in March 2021, 42,613 property transfer declarations have been registered, the price of which was paid exclusively in cash and totals 462,493,710.3 euros. An additional 41,741 declarations have been registered transfer of real estate, the price of which was partially paid only in cash and totals 2,980,580,395.13 euros without any information on the amount paid in cash.