In response to questions from its members and homeowners from across Greece regarding the three-year tax exemption for rents derived from the lease of vacant homes, or homes that had been made available for short-term rental under Law 5162/24, POMIDA announces and clarifies the following:
1. General
Article 9 of Law 5162/2024 of the Ministry of National Economy and Finance accepted the proposal of POMIDA, which was adopted and announced at the Council of Ministers by the Prime Minister, Mr. Kyriakos Mitsotakis, for a 36-month full tax exemption on income obtained from the rental of the two above categories of housing, as an incentive for their offer in the long-term rental market, in order to narrow the gap between supply and demand.
This is a state intervention of historic importance for the housing problem with a significant social impact, given that the main beneficiaries of its widespread implementation will be not only the owners of these homes, but mainly their tenants.
However, instead of this measure being specified as a unique tool for increasing the supply of housing for rent in relation to the particularly high demand for it, it was ultimately legislated as a tax measure and with excessive fiscal caution. The result, a dramatic limitation of its scope and effectiveness for the benefit of society, given that on the one hand large categories of vulnerable tenants are unjustifiably left out of the regulation and on the other hand many interested owners risk losing their tax exemption afterwards. This could happen either due to the behavior of the owner or managers tenants, or due to the excessive procedural requirements provided for by the above provision.
2. Exemptions: approved tenant types
- Public and private sector workers who need to stay in places of work other than their permanent residence for a period of less than three years, due to the requirement to sign a residential tenancy agreement of at least three years’ duration.
- Large families, who by definition have an obvious need for a property of more than 120 m2 , shall be subject to an exemption.
3. End of lease date
The regulation includes leases that were signed between 8.9.2024 up to and including 31.12.2025. Therefore, the tax exemption is permanently lost for leases from properties that will not have completed the three-year vacancy period or the one-year short term lease disposition by 31.12.2025.
4. Tax exemption, period of validity
The full exemption from personal income tax arising from the rental of residential properties will apply for the first thirty-six (36) months following the month of the lease of a residential property falling into the two categories in question.
5. Tax exemption, conditions for residential properties
The property must have a main floor area of no more than 120 sq m.
It must be leased with a three-year contractual lease for residential use.
The legal conditions must arise only from timely declarations of information and income tax.
6. Conditions for vacant properties
It must be declared on the E2 form of the income tax return as a vacant property; or
NOT be declared as a leased property, neither as a primary nor secondary residence of the lessor, nor as owner-occupied nor free-rental property, on Forms E1 and E2 of the income tax return for the tax years 2022 and 2023 and for the year 2024, if leased in the year 2025.
It must NOT have been submitted to the AADE with a declaration of information on another lease of the property during the year of the lease and until its commencement.
7. Conditions for properties allocated for short-term rental
To have been allocated legally and exclusively for short-term lease in the tax year 2023, or, in the tax year 2024 if the lease is drawn up in 2025.
The short-term leases concluded have been declared to the tax administration.
To have submitted a short-term lease declaration in the year of the lease and until its commencement.
8. When does the tax exemption cease to apply
The tax relief ceases to apply and is lost to the landlord if within the three years of its term the property becomes vacant, i.e. if it remains vacant and without a next tenant, in which case it ceases to apply from the tax year in which the property becomes vacant.
The correct and real interpretation and application of this provision requires that it be accepted that, since the obvious purpose of the legislator is to increase the supply of housing for rent, if immediately upon the tenant’s early departure for any reason, always on their own initiative (e.g. due to force majeure or if they falsely declared that they intend to remain for the entire three years), or due to their fault (they were evicted by a court because they do not pay the rent), the residence is immediately made available for a new three-year lease that will be declared to the AADE, the tax exemption should also apply to the new tenant’s rental payments until the 36-month period.
Indeed, if the landlord is unable to find a new tenant immediately, the loss for any interim months that the property remains vacant is entirely his or her own. But this cannot be a reason to forfeit the remainder of the tax exemption until the 36-month period has elapsed. Besides, the provision provides for the existence of a lease of three years’ contractual duration as a precondition, but does not state that this will be a single lease.
This view is based on the fact that any early termination of the lease will be the sole responsibility of the tenant (early departure or expulsion for non-payment of rent), and never of the landlord, since the landlord has no reason to cause an early termination of the lease and no such possibility, given that the three-year protection of the tenant is legally inviolable. It is therefore totally unfair and unjust for the landlord to be literally ‘hostage’ to the actions or omissions of their first tenant throughout the term of the lease, even losing the entire tax exemption because of vacating the lease for a reason that is entirely their fault.
If within the three years of its term the residence is made available for short-term rental, the exemption will cease to apply retroactively from the first year of the rental, at which point the issue of retroactive income tax will arise for all previously received rentals that were exempt from income tax.
9. Counting time of tennancy
Given that in the law on tenancies the time of the licensor is always taken into account and that the new law does not stipulate the contrary, in calculating the time of the three-year declaration of the property as vacant and the previous one-year disposal in the short-term tenancy, the corresponding time spent in the person of a previous owner, legatee or donor shall also be counted, provided that it was declared as provided above in the relevant tax returns of the current lessor’s tennancy.
10. Vacancies due to change of use
The phrase in the title of section 9 “… from the leasing of real property declared vacant…” and the subsection under item i) “…has been declared in the tax return as vacant property (form E2)… or has not been declared as leased property ….. or as property granted free of charge….”, undeniably reveals the will of the legislator to allow to be subject to this regulation also residential properties which in the recent past were vacant buildings of commercial or industrial etc. use, and were converted into modern residential properties. This is in line with the whole policy of encouraging the supply of rental housing. A similar treatment is already in place for GOLDEN VISA homes, which can be purchased at the low threshold of €250,000 if they were former business premises that have been converted into renovated modern homes.
ARTICLE 9 READS AS FOLLOWS
Tax exemption for thirty-six (36) months on the income of natural persons from the letting of immovable property declared as vacant or made available for short-term rental – Addition of par. 91 to Article 72 of the Income Tax Code.
In Article 72 of the Income Tax Code (Law 4172/2013, A’ 167), on transitional provisions, paragraph 91 is added as follows:
“91. a) For the first thirty-six (36) months after the month in which the relevant lease contract is concluded, the income of natural persons derived from the rental of properties with an area of up to one hundred and twenty (120) square metres shall not be taxed, provided that:
(aa) the income is derived from a lease contract with a duration of at least three (3) years concluded between 8 September 2024 and 31 December 2025.
(ab) the leased dwelling:
i) in the tax years 2022, 2023 and, if the lease is concluded in 2025, and in the tax year 2024, has been declared in the income tax return as vacant property (form E2) or has not been declared as leased property either as the main or secondary residence of the lessor or as owner-occupied or free-of-charge property (forms E1 and E2) or
(ii) in the tax year 2023, or if the lease is drawn up in 2025, in the tax year 2024 it has been made available exclusively for short-term rental, as defined in par. 1 of Article 111 of Law No. 4446/2016 (A’ 240), and the concluded short-term leases have been declared to the tax administration, and
ac) the lessor has not submitted to the tax administration a property lease information return for the property in the year of the lease and up to the commencement of the lease or for the same period has submitted a short-term lease return for the property.
(b) If within the three (3) years of subsection (a) the property:
(ba) becomes vacant, the exemption shall cease to apply as of the tax year in which it becomes vacant,
bb) is made available for a short-term rental, the exemption shall cease to apply from the first year of the lease.
Compliance with the conditions of the exemption herein shall be proven only by timely declarations of information and income tax returns and, especially with respect to the years 2022 and 2023, by returns filed by the date of publication of this Act.”
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