Short-term leasing of properties through platforms like Airbnb has experienced rapid growth in Greece in recent years. During the difficult years of the economic crisis, many Greeks earned some very needed extra income by managing properties, the whole country’s tourism got some much needed help and unused properties that had been neglected for many years were reutilized.
However, 2024 brings significant changes to the industry, aiming for stricter regulation and taxation of short term rentals in Greece. New legislation brings upheavals to the tax regime, imposing new fees and obligations, and property owners are facing challenges and limitations.
In this article, we will analyze the key changes, the new tax bill, the reasons for the changes, and who are mostly affected.
What are the main points of change regarding Airbnb in 2024?
Airbnb is a phenomenon that emerged in recent decades and has significantly disrupted the real estate market. In Greece today, the number of homes rented through platforms approaches 500,000, whereas in 2016 it was around 57,000. The new tax bill passed in Parliament aims to alter the landscape of short-term rentals.
The new legislation revolves around the following axes:
• Managing 3 or more properties will be considered a business activity.
Individuals who generate income from the short-term leasing of 3 or more properties will now be subject to VAT obligations, forcing them to register a business activity with the tax authority and maintain accounting books. Naturally, this also entails more expenses for the entrepreneur as cooperation with an accountant is now deemed necessary.
• Property management by legal entities
Income derived by legal entities from the short-term leasing of property, starting from the first property, is considered income from business activity and is now subject to VAT.
• Imposition of a climate resilience fee
Short-term leases will be subject to the old accommodation fee, as is already the case with hotels. The newly named Climate Change Resilience fee is imposed per daily use and per apartment, which during the months from November to February is set at €0.50 per day. If the properties offered through short-term leasing are detached homes over eighty (80) square meters, the fee is set at €4. For the months of March to October, the resilience fee increases to €1.50 and €10 respectively.
The goal is to raise €300 million to strengthen the special reserve for natural disasters.
• Residence tax for non-residents
Short-term leases are now subject to a municipality tax, which is set at 0.5% of the total revenue. The municipality tax applies to all business short-term leases, so for individuals managing 3 or more properties and all legal entities.
• What leases are considered short-term
Short-term leasing is defined as the lease or sublease of a property for a specific duration, less than sixty (60) days, and provided that no other services are offered apart from accommodation and provision of bed linens.
Thus, for example, it will be allowed to lease a property for 100 or 150 days within the year, on the condition that each lease separately does not exceed 60 days.
Why are tax changes being made to Airbnb?
The shift of property owners towards short-term leasing has significantly complicated the process of finding housing for purchase or rent for the average citizen, with rent prices constantly increasing due to low housing availability and high demand.
Therefore, the new tax bill aims to put a brake on the number of properties offered for short-term leasing. Another aspect of this legislation is, of course, revenue generation. As mentioned above, short-term leases through Airbnb will be subject to VAT, climate resilience fees and municipality taxes, similar to hotels and rented rooms.
Who are affected by the changes?
The changes in Airbnb affect both individuals and legal entities renting out properties for short-term stays. Many individuals will be forced to start a business activity and keep accounting books. Even if they are not obligated to do so, they will have additional obligations regarding climate resilience fees and, as before, declaring all bookings at the online short term rental government platform.
Until December 31, 2023, legal entities had the option to rent out properties for short-term stays without charging VAT, provided they did not offer additional services. With the new bill, all companies, regardless of type, will be required to charge VAT at a rate of 13% on all short-term leases.
Who is at risk of fines?
Penalties are being tightened for failure to register in the Short-Term Property Rental Registry. Property managers face an autonomous administrative fine per year, equal to 50% of the gross income for the tax year in which the violation occurred, which cannot be less than €5,000.
Once the violation is established, the property manager of the short-term rental property must take compliance measures within 15 days.
If the conditions are not met again within one year from the issuance of the penalty order, the fine is doubled.
How are short-term rentals taxed?
For individuals managing up to two properties, the tax remains unchanged, meaning 15% for incomes of €0-12,000, 35% for €12,001-€35,000, and 45% for amounts exceeding.
For individuals with three or more properties, there is an obligation to start a business activity and charge 13% VAT. Therefore, profits are taxed based on the scale of freelancers (9%, 22%, 28%, 36%, 44%).
For all legal entities, every short-term rental is now considered income from business activity, creating an obligation for VAT registration at 13%. Profits from short-term rentals are taxed like all types of income at 22%.
All the above cases are subject to resilience fees for climate change (€0.5 and €4 or €1.50 and €10 per day of stay), and all businesses also have to pay municipality taxes of 0.5% on turnover from short-term rentals.
How will you be informed about all the changes in short-term rentals?
Our accounting firm is always at your service to inform you about any questions you may have regarding short-term rentals.
We conduct audits of property status and advise you on whether there is an obligation to register for VAT and whether managing as an individual or through company formation is more beneficial.
We book individual meetings, via phone, zoom calls, or email correspondence, to answer all your questions and provide tailored solutions for your needs.