In an effort by the government to curb tax evasion, Law No. 5073/2023 came into force on 01/01/2024, under which a distinction is made between a private individual and a professional in short-term rentals.
This distinction is made based on the number of properties maintained by each owner or management company, which at first glance seems quite clear, but it is a measure with many branches that has caused a serious headache in the industry (see the relevant announcement here).
What exactly happens with the number of properties owned by an owner
Law 5073/2023 initially defines the category in which an owner falls, based on the number of properties they have available for short-term rental. Thus, if an owner maintains up to two properties, they are considered a private individual, while in the case where they maintain three or more properties, they are obliged to establish a company.
As expected, the obligations towards the state between a private individual and a company cannot be the same.
This differentiates the taxes and fees that each owner is required to pay, either as a private individual or as a company (legal entity).
More information on this specific distinction
Firstly, it should be noted that the length of stay defining a short-term rental has changed from one year which was in force until 31/12/2023 to just 60 days, i.e. 59 overnight stays, effective from 01/01/2024.
Following on from the above, if it is a private individual, i.e. an owner of up to two properties, they are required to pay an Environmental Fee.
If it is a company, thus referring to three or more properties, the tax obligation is as follows:
- Environmental Fee
- 13% Value Added Tax
- 0.5% Transient Occupancy Tax on the gross turnover
Environmental Fee
Also known as the Resilience Fee, this is the former Accommodation Tax that is passed on to the visitor and submitted by the last day of the following month.
According to Ministerial Decision A.1217/2023, the rates are set as follows:
- For the low season (between November and February), and provided that we are referring to a property available in winter, the guest must pay €0.50 per overnight stay.
- For the high season (from March to October), the guest will pay €1.50 per overnight stay.
- If we are referring to a house over 80 sqm., then for each overnight stay during the low season, the Environmental Fee is €4, while for the high season, it reaches €10.
Transient Occupancy Tax
Published in the Government Gazette with number B 7332/22-12-2023, this is a contribution imposed on tourism businesses to the municipality to which they belong.
The Transient Occupancy Tax is paid within the VAT payment deadline (see the relevant announcement here).
Business Tax
Amid all of the above, we should not overlook the Business Tax, which is paid if a business activity is carried out and also has some distinctions:
- If it is a sole trader, the Business Tax is set at €300 per year.
- If it is a Legal Entity, regardless of legal form (S.A., G.P., P.C. etc.), the Business Tax is set at €600 per year.
Additionally:
- In the case of short-term rental of more than one apartment within the same building, a single business tax is imposed, i.e. the company (Legal Entity) will be required to pay a total of €600 per year.
- If the company manages properties located in different buildings, these are considered its branches, and the Business Tax is set at €600 per year for each one of them.
What happens in cases of short-term rental of individual rooms within a property
Here things get a bit more complicated. We know that to register a property in the Property Registry, a Property Identification Number (ATAK) is required, which is recorded on the Real Estate Tax Statement and is necessary for any sale or lease of the property.
In the case of short-term rental of a property, we have the Property Registry Number (AMA) which is issued through the Property Identification Number (ATAK).
In the case where someone rents out separately two spaces of their property (e.g. two bedrooms), the Property Identification Number will be one, but two Property Registry Numbers will be issued, one for each bedroom rented out through short-term rental.
If in the above example, the owner decides to eventually rent out the entire house, despite the fact that they will have to issue a new Property Registry Number (so the property will have three AMAs), the owner continues to be exceptionally considered a private individual and not a company, with all the tax implications.
After all this, is it worthwhile for someone to make their property available for short-term rental?
As is evident, it is no longer so simple to make a property available for short-term rental, as one will have to constantly monitor developments and changes in taxation.
By choosing Sparrow for the management of your property, you can be assured of the immediate execution of any new instructions and compliance with all the rules set by the short-term rental accommodation platforms.
You can read more information about our services here.
