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2011 ColliERs REal EstatE REviEw » CoUNtRY

Greece

Dear Colleagues and Friends,

the liquidity shortage and conservative views of investors become more apparent during 2010, showing through in a lack of large transactions. there is a great deal of uncertainty in terms of what to expect in the Greek market in 2011. land owners are holding on to their assets until finance and market conditions improve, or until they are forced to sell by the banks.

the credit standards for lending to enterprises and households in anticipation of an increase in non-performing loans have tightened. Business and household confidence have declined. Discounts of fees may continue to be the case in order to attract and secure clients. this creates an opportunity for those willing to enter into property transactions before banks withdraw credit facilities.

Despite these structural improvements and opportunities, we believe that it could get worse before it gets better as volatility dominates the market before it can stabilize. We believe that stabilisation may take place sometime during the second half of 2011. those yet to invest and awaiting future opportunities, may very well benefit as values are expected to decrease once banks are forced to take measures against those not servicing loans.

Colliers must maintain its reputation and its quality of services in order to attract the most reliable clients in order to increase its market share.

Colliers team, which is focussed on gearing for growth in 2010, is well placed to take advantage of the opportunities that the Greek crisis will bring in 2011.

We look forward to working with you in 2011.

Best regards, Ana Vukovic

Ana Vukovic general manager colliers international greece

Address 70 Syngrou Ave. & 2 Drakou Str.117 42 Koukaki, Athens, Greece

Phone +30 210 683 2440

Email [email protected]

P. 54 | CollieRS inteRnAtionAl

CollieRS inteRnAtionAl | P. 55Research: [email protected]

2011 ColliERs REal EstatE REviEw » GREECE

SUMMARY � Currently Greece is under a

restructuring program with financial support from the EU and International Monetary Fund.

� By the end of 2009, the general public deficit had reached 15.4 percent of GDP and public debt had increased to 126.8 percent of GDP. Public debt as a share of GDP is forecast to peak at almost 150% of GDP in 2013 before declining thereafter.

� During the past few years, Greece has lost a lot of its competiveness. Public sector spending has increased beyond sustainable levels, while unemployment and CPI have also increased to unhealthy rates.

� To combat this, the Greek Government states within their update of the “Hellenic Stability and Growth Programme 2008 – 2011” dated January 2010 that it will take all the necessary steps for the reduction of general government deficit. Managing this will be difficult amidst a background of negative economic growth.

� According to the latest publication by the Hellenic Statistical Authority, GDP had decreased by 4.6% y-o-y by Q3 2010 (compared to Q3 2009). Despite significant declines in the external trade deficit – falling by 42.2% and thus contributing positively to GDP – declines in consumption, investment and government spending continue to place negative pressure on economic output.

� As a result, the unemployment rate rose again, reaching 12.4% by the end of Q3 2010 compared with 11.8% in the Q2 2010 and 9.3% in Q3 2009. This represents a 33% increase over a year.

� The annual rate of inflation (based on the Harmonized Index of Consumer Prices) reached 5.2% by year end, which is high for EU standards, but lower than the 6.6% average for surrounding south east European nations. The rate of growth, however, is a concern increasing by 4.8% in November 2010 compared to November 2009 (it had already risen by 2.1% between November 2008 – 2009).

PROGNOSIS � According to the Ministry of Finance,

the recession in Greece will be more shallow than in 2010 at -3% compared to -4.2%, but larger than initially expected at the beginning of the year (-2.6%).

� GDP growth is, however, forecast by the Ministry for 2012 and is then expected to continue to grow steadily following the restructuring of the economy and increasing competitiveness.

� The extent to which this scenario is realized will greatly depend upon the ability of the Greek government to retain and build the confidence of international investors and the money markets, as it reigns in government debt and deficits.

� This could prove to be positive for the real estate industry, with the government recently announcing ‘renewed’ plans to sell government owned and occupied real estate and land holdings to raise capital. How true this is remains to be seen.

ECONOMIC OVERVIEW

KEY ECONOMIC FIGURES

Metric % ChangeGDP Growth -4.6% Q3 2009 y-o-y

Unemployment 12.4% Q3 2009 y-o-y

Inflation 5.2% as of December 2010

Public Deficit 15.4% (end of 2009)

Source: Hellenic Statistical Authority

|

2008|

2009|

2010

15%

10%

5%

0%

-5%

-10%

GDP, UNEMPLOYMENT & HCPI

▬ GDP Growth ▬ Unemployment ▬ HCPI

Source: Hellenic Statistical Authority, Eurostat

|

2009|

2008|

2007|

2006

120%

100%

80%

60%

40%

20%

0%

GOVERNMENT BOND & PUBLIC DEFICIT

Source:Hellenic

StatisticalAuthority,Eurostat

▄ Government Debt ▄ Public De�cit

P. 56 | CollieRS inteRnAtionAl Research: [email protected]


OFFICE MARKET

GENERAL OVERVIEW � A fall in supply of new office premises

in Athens and a slow- down in leasing activity were key trends during 2010.

� Relocation to smaller sized offices in order to reduce operating expenses was also common and lease renegotiations have become more widespread, resulting in higher vacancy rates.

� The amount of office space under construction has fallen significantly due to the lack of funding; pre–lets have also dropped significantly.

� A large differentiation in rents has been noticed between Class A space and lower quality office space.

� Changes in the commercial law concerning the termination of lease agreements, reducing the compensation owed to the landlord by shortening the binding duration period from two years to one year resulted in strengthening the volumes of leasing market activity.

SUPPLY � During 2010 leasing activity in Athens

slowed down as development activity significantly decreased and supply edged upwards.

� The supply of Class A office space in Athens, however, remains limited. The total office inventory in Athens is estimated to be at around 6,500,000 Sqm, of which only 20% or 1,500,000 Sqm is of a high-quality. Approximately 1,500,000 Sqm of space is occupied by the public sector. Combined with the public sector downsizing, this will further increase vacancy.

� The volume of planned developments during 2010 was relatively low and pre-letting was the order of the day. Therefore, the majority of office buildings constructed were either pre-leased or built for a specific client, as many developers did not want to risk having their building sit vacant.

DEMAND � Demand deteriorated in 2010 as the

recession impacted on international companies entering the Athenian market.

� Demand was mainly driven by the relocations of multinational and local companies trying to consolidate their facilities and achieve smaller and better quality space at a lower cost. Renegotiations of existing lease agreements accounted for 40% of take–up in 2010

� Traditionally demanded areas in Athens, like Kifissias Avenue, Attiki Odos and Athens/CBD have monopolised the interest of tenants, but the requests were for lower rentals and more efficient use of space, i.e. less Sqm.

� A number of landlords proceeded with offering other incentives such as stepped rents and leasehold improvements in order to attract tenants.

� A significant number of lease transactions during 2010 in Athens surpassed 1,500 Sqm of office space.

KEY OFFICE FIGURES

Metric MeasureTotal Stock 6,500,000 Sqm

Take-Up 5,700,000 Sqm

Vacancy 12%

Prime Headline Rent €21/Sqm/month

Source: Colliers International Hellas Research

KEY LEASE TRANSACTIONS

Tenant Size Area DeveloperSiemens 5,500 Marousi Lamda Developments

New Democracy Party 5,500 Syngroy Av. BVIC

Proton Bank 6,000 Syngrou Av. Shipping Company

|

H2 2009|

H1 2010|

H2 2010

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

CHANGE IN STOCK OVER TIME & PIPELINE

Source: Colliers International Hellas

TAKE-UP STRUCTURE

37%Renewal &

renegociations

11%Relocation

from B class

10%Expansion

42%New leases

CollieRS inteRnAtionAl | P. 57Research: [email protected]


OFFICE MARKET

VACANCY / AVAILABILITY � Expansionary occupiers in all sectors

were few and far between and the number of leasing deals has fallen significantly. The problem that office markets have to deal with is not only the self-evident crunch, but also the exceeding availability of free office space in all major locations.

� The northern and southern submarkets of Athens comprise almost 70% of total office stock. Vacancy rates in these submarkets for grade A buildings stand at 15%.

� Vacancy rates for grade A office buildings are estimated at 7% for CBD and at 9 – 11% for Kifisias Avenue.

RENTS � As demand falls and the supply of

disposable office space increases, prime rental values in Attica have consequently been dropping.

� The decrease of rental levels in the last 12 months has reached up to 10% for new build office complexes in the main office avenues.

� On Kifissias Avenue - often renowned as the benchmark location for office prices – the prime rental levels are near an average of €20/Sqm/pcm for new built properties, whereas for older properties the prices vary around €15 – 17/Sqm/pcm.

� On Syngrou Avenue rental values for office space range from €15/Sqm/pcm to €18/Sqm/pcm. Along the Attiki Odos motorway, the construction of which radically changed the real estate map of the area, depicts office space rents that range from €12/Sqm/pcm to €16/Sqm/pcm.

� Athens/CBD prime office buildings competing for premier office users can even reach as high as €30/Sqm/pcm although this is rare and most buildings of good quality offer space at €24 – 27/Sqm/pcm.

� In the less attractive sub-markets, office rents currently stand at around €12 – 15/Sqm/pcm (Athinon Avenue, National road Athens-Lamia).

PROGNOSIS � We expect lease renegotiations to

dominate the market in 2011, while uncertainty will lead to a “hold” on any expansion projects.

� The driver of relocations will mainly focus on ‘downsizing’ of occupancy in newly leased premises in order to reduce the operation costs of occupiers.

� The upcoming year will also be dominated by strong sub-leasing activity. Kifisias Avenue is expected to be the focus of most sub-lease activity in the market.

� Vacancy rates should remain stable for prime office locations as demand is concentrated in these areas. This should also create stable prime rents.

� Vacancy and rents in secondary sub-markets, however, are expected to reflect a drop estimated to be around 10%.

� The limited construction of new office premises will continue in 2011, given the necessity of new developments to be pre-leased.

100%90%80%70%60%50%40%30%20%10%0%

DISTRIBUTION OF TRANSACTIONS, 2010

▬ Renewal ▬ New

|

Under 500 Sqm|

500-1,000|

1,000-2,000|

2,000-5,000|

Over 5,000 Sqm

|

H1 2009|

H2 2009|

H1 2010|

H2 2010

€25.0

€20.0

€15.0

€10.0

€5.0

RENTS

▬ Prime Office Headline Rent ▬ Average Office Headline Rent

P. 58 | CollieRS inteRnAtionAl


RETAIL MARKET

GENERAL OVERVIEW � The decrease in commercial sales

activity in various retail sectors, such as clothes and shoes, reached over 50% in 2010. Nevertheless, the request for stores of 1,000 Sqm and above in the central markets of large cities, e.g. Athens, Thessaloniki, Patras, Larissa, Heraklion remained stable.

� Furthermore, new requests from large space users such us Hennes & Maurittz, Zara and Koton for space in smaller cities (40,000 – 80,000 inhabitants) such as Trikala, Volos, Alexandroupolis, Ioannina and others was also noticeable in 2010.

� High demand for shopping malls remained, giving limited opportunities to retailers to lease space as only two new developments opened in Greece in 2010 (Metro Mall and Capitol).

� Rental prices in central high street areas witnessed a decrease of 20 – 30%.

SUPPLY � Only two new shopping centre

developments opened in Athens in 2010. These openings had limited negative impact on the market, as demand for these and existing shopping centres remained constant. The same cannot be said for the high-street.

� Despite the fact that Ermou Street is still one of the worlds most expensive high streets, retailers continue to express their desire to secure their presence in this prestigious retail market.

� This aside, Ermou had many empty stores by end 2010, which are not expected to be leased during 2011. Vacancy in high-streets stores was a growing trend in the centre of Athens in 2010.

� According to market data, up to 25% of middle and small store owners have their properties available to lease and as it is estimated that this percentage is going to grow up to 35% within the next few months of 2011.

DEMAND � Demand is now mainly for large

stores in central market locations. Shopping Centers have become the preferred format of foreign retailers as well as local retailers. Fashion and home wear stores, restaurants, bars and supermarkets are all looking for opportunities to expand in these attractive developments.

� Subsequently, demand for space on prime high street locations is less than in 2009.

RENTS � There was a decrease in High Street

rents by 20 – 30% in 2010, down to €80/Sqm. Prime SC rents are now €50/Sqm, and Prime Retail Outlet rents are €40/Sqm.

PROGNOSIS � The market is expecting the opening

of 2 – 3 retail developments in 2011. The large shopping mall — retail outlets to be delivered include: “River West Mall” by Viohalko in Athens, Mac Artur Glen outlet in Spata (Attica).

� These large scale commercial developments will increase the volume of available space by approximately 80,000 Sqm, although the timing of delivery is vague given the large delays in planning and construction.

� Whilst large retail chains will continue their expansion in both the Athens market and in other major Greek cities, this may not keep pace with new supply.

� Traditional high streets look set to suffer the most, where a large drop in rents is expected as vacancy rises over the course of 2011.

KEY RETAIL FIGURES

Metric MeasurePrime High Street Rents €180/Sqm/month

Prime SC Rents €50/Sqm/month

SC Stock 34,000 Sqm

SC Vacancy 30%


NEW MARKET ENTRANTS OR DEVELOPMENTS

Tenant Size Project DeveloperShopping center 12,000 Capitol Charagionis

Shopping center 22,000 Metro Mall Talima

Blanco 1,300 Ermou strore


250

200

150

100

50

0

CHANGE IN SC STOCK OVER TIME (SQM, 000)

|

Q42008

|

Q12009

|

Q22009

|

Q32009

|

Q42009

|

Q12010

|

Q22010

|

Q32010

|

Q42010


|

Prime SC|

Prime HighStreet

|

Prime RetailOutlets

€90.00€80.00€70.00€60.00€50.00€40.00€30.00€20.00€10.00€0.00

RENTS

Research: [email protected]

CollieRS inteRnAtionAl | P. 59


INVESTMENT MARKET

SUMMARY � The investment market in Athens

slowed down in 2010 compared to 2009.

� The Greek investment market was characterised by an imbalance between demand-side requirements and supply-side expectations. A combination of these factors resulted in a limited amount of deals being made.

� On the supply-side, the majority of vendors in Athens, who had their properties on the market before the crisis, withdrew their offers, continuing to wait for the investment market to pick up again in order to be able to achieve ‘yesterday’s prices’. For some, this may not happen, but they have been able to afford to wait as their properties continue to generate income.

� On the demand side, the buyer interest that existed primarily came from private local investors looking for bargain deals and distressed properties, to provide high returns on equity. Of those investors investors with equity, most were not ready to assume an all equity investment risk.

� These investors will continue to bide their time, anticipating forced sales. The decline in the volume of European bank debt and anticipated rise in debt costs may eventually begin to force some sales onto the market over the coming year.

� Due to a lack of comparable evidence and the limited amount of deals in 2010, there is an uncertainty regarding yields and pricing. Prime yields are estimated to be around 7.25% - 7.50% for office, 8.75 – 9% for industrial and 7.00% - 7.25% for retail properties.

� Secondary property yields have increased more as these properties are seen as more risky and less desirable transactions - it is more difficult to source the necessary funding to acquire such assets.

PROGNOSIS � 2011 is expected to be a challenging

year with limited equity being available in the market to finance large projects, resulting in smaller transaction sizes.

� The general belief is that yields will move out significantly during 2011, driven by the cost of money. This will provide cash rich/equity investors with opportunities. The bulk of investors will continue to be dependent on debt, which may take some time to materialise.

� Yields are anticipated to rise more significantly for secondary properties in submarkets, also evident from the decreasing of the rental figures.

� The most sought after assets will continue to be core office properties in prime locations in Athens with long leases and strong tenant covenants.

KEY INVESTMENT TRANSACTIONS

Deal Value Vendor PurchaserQ1 €46M Interamerican Ship owner

Q3 €38MSona Sierra & Acropole Charagionnis & Lamda Developments

Lamda Developments (the remaining shares)

KEY INVESTMENT FIGURES

Metric MeasureInvestment Turnover €121,000,000

Prime Office Yield 7.25%

Prime Retail Yield 7.00%

Prime Industrial Yield 8.75%

Source: Colliers International

|

2008|

2007|

2009|

2010

600

500

400

300

200

100

0

INVESTMENT VOLUMES (€ MLN)


|

H1 2009|

H2 2009|

H1 2010|

H2 2010

9%

8%

7%

6%

5%

PRIME YIELDS

▬ Prime Office Yield ▬ Prime Retail Yield ▬ Prime Industrial Yield

Source: Colliers International

Research: [email protected]

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GREECE TAX SUMMARY

VAT PROVISIONS FOR SERVICES CONNECTED TO IMMOVABLE PROPERTY

� According to Law 3763/2009 effective as of 1 January 2010, the place of supply of services to a taxable person shall be the place where the recipient has his business establishment, while the place of supply of services to a non-taxable person shall be the place where the supplier’s business is established.

� However, special provisions will apply regarding services connected with immovable property located in Greece (e.g. real estate brokers). In particular, VAT is due in Greece for the supply of services connected to immovable property located in Greece.

CORPORATE INCOME TAX � The taxable profits (or losses) of each year are

the profits (losses) shown in the financial statements, derived from the official books kept in accordance with the Code of Books and Records after adjusting for non-deductible expenses and non- taxable income. Capital gains (or losses) are generally regarded as ordinary business income.

� The tax rate applicable to the profits of an AE or EPE or a foreign branch is 24% for fiscal years starting from 1 January 2010. Such tax rate is reduced annually by 1% until it reaches 20% for the profits of accounting year 2014. The distributed dividends/profits are subject to 40% tax.

� On the basis of a new draft bill which has yet to be finalized and ratified by the Greek Parliament the tax rate applicable to profits of an AE or EPE is reduced to 20% for financial years starting from 1 January 2011 onwards. Distributed profits are subject to a 25% tax withholding. Profits derived on the basis of financial statements as of 31 December 2010 are taxed at the rate of 24%, whereas distributed profits are subject to a 21% tax withholding.

� When a company earns income from real estate, the gross income therefrom is subject to a 3% supplementary tax, but such tax cannot exceed the corporate tax corresponding thereto.

TAX DEPRECIATION � Annual depreciation of fixed assets is

compulsory for years ending on or after 30 December 1997 at rates or range of rates prescribed by law. Fixed assets of the same category can be depreciated on condition that the rate to be chosen will be used consistently. If a business in any accounting period does not take depreciation at the allowable rate, it waives its

right to deduct the corresponding amount in the future. Land is not depreciated for both tax and accounting purposes.

� Depreciation is taken on a straight-line basis on the acquisition cost of the asset plus any expenses incurred for improvement or extensions.

RELIEF OF LOSSES � Tax losses of companies and branches of

foreign companies that maintain double entry accounting books and of entities maintaining income and expense books may be carried forward and be offset against taxable income of the five years following the financial year in which they were incurred. Losses cannot be carried back. Greek companies having a business interest (branch) abroad, may offset losses incurred by their foreign interest only from profits arising from a similar business interest abroad and not from profits arising from their business activity in Greece.

THIN CAPITALIZATION � Based on the provisions of Law 3775/2009, as

amended recently with Law 3842/2010, accrued interest of loans or credits which are paid or credited to affiliated enterprises (i.e. enterprises related to each other in a relationship of direct or indirect substantial administrative or financial dependence or control) is deductible on condition that the relation of these loans or credits to the net assets of the enterprise does not exceed the ratio of 3:1 on an average per fiscal year. The thin capitalization rules also apply to bond loans, while intercompany loans include also loans provided by third companies, which are guaranteed by affiliated companies. Leasing companies, factoring companies, companies of Law 3156/2004 and Law 3601/2007 seated in Greece, credit companies and credit institutions which operate in Greece are exempted from the above provisions.

WITHOLDING TAXROYALTIES

� Royalties paid to companies or individuals with no permanent establishment in Greece are subject to a withholding tax of 25%. However, if a treaty for the avoidance of double taxation is in force, its provisions will apply.

� Also reduction may be achieved of the aforesaid rate to 5% for the period up to 30 June 2013 (unless the relevant treaty for the avoidance of double taxation provides for a more favorable rate) or to 0% from 1 July 2013 onwards, in cases where royalties are paid by Greek entities to affiliated entities subject to the conditions of the

EU Interest – Royalty Directive.

� There is no withholding tax on payments made to Greek residents.

INTEREST � Except for interest from bank deposits, which is

taxed by special provision, and interest from state bonds or bonds issued by Greek corporations, interest remitted to non-resident entities is subject to withholding tax at a rate of 40%, or at the rate applicable in a tax treaty for the avoidance of double taxation.

� Also reduction may be achieved of the aforesaid rate to 5% for the period up to 30 June 2013 (unless the relevant treaty for the avoidance of double taxation provides for a more favorable rate) or to 0% from 1 July 2013 onwards, in cases where interest is paid by Greek entities to affiliated entities subject to the conditions of the EU Interest – Royalty Directive.

� Interest earned on deposits with banks operating in Greece is subject to withholding tax at the rate of 10% (except for deposits made in foreign currency by a non resident which is tax-free). Interest earned on Greek State bonds, treasury bills and bonds issued by Greek corporations (including banks, insurance companies and foreign companies in which Greek banks have the majority in the share capital) is subject to withholding tax at the rate of 10%. Exemptions from tax may apply provided that certain conditions are satisfied and interest from Greek State and corporate bonds is exempt from tax if earned by a non resident.

SERVICE FEES � In general, fees paid to foreign undertakings or

individuals who have no permanent establishment in Greece for services rendered in Greece are subject to a 25% withholding tax unless a tax treaty provides otherwise. Fees incurred specifically for studies, designs, research and scientific advice, as well as for supervision and consulting services in Greece on construction projects are also subject to a 25% withholding tax. There is no such tax in the case of a Greek resident. Where a treaty for the avoidance of double taxation is in force, its provisions apply.

DIVIDENDS � According to a new draft tax bill, which has yet

to be finalized or ratified by the Greek Parliament, dividends deriving from financial years starting from 1 January 2011 onwards are subject to 23% withholding tax. Especially for dividends deriving from financial statements as of 31 December 2010

CollieRS inteRnAtionAl | P. 61Contact: [email protected]


GREECE TAX SUMMARY

the corresponding withholding tax is set to 21%.

� Reduction or elimination of the said withholding tax may be achieved on the basis of either the applicable treaty for the avoidance of double taxation or the EU Parent – Subsidiary Directive.

REAL ESTATE TAX TAXES ON ACqUISITION

� Law 3427/2005 introduced, as of 1 January 2006, VAT on the transfer of new buildings (construction licenses that were issued or revised after 1 January 2006) at the rate of 23% (as of 1 July 2010), on condition that they are to be used for the first time by the purchaser as his secondary residence or commercial property.

� Following this first transfer, every subsequent transfer will be subject to real estate transfer tax. Concerning the transfer of old buildings (whose construction license was issued up to 31 December 2005) as well as land and new buildings to be used as the purchaser’s primary residence, these are not subject to VAT but to real estate transfer tax.

� Real estate transfer tax is levied on the acquisition value of real estate. The tax is computed on the contract price or the objective value, whichever is higher. The objective value system covers real estate situated in almost every part of Greece and is a method adopted for mitigating disputes between the tax authorities and the taxpayer as to the taxable value of real estate. Where no objective values exist, the value is determined by the tax authorities. Real estate transfer tax rates are 8% for the first €20,000 and 10% for the remainder. A local authority surcharge, equal to 3% of the transfer tax, is also levied.

TAXES ON OWNERSHIP � Tax on ownership is imposed in the form of

real estate tax. Real estate tax is imposed annually and applies to the total value of real estate situated in Greece and owned by individuals or legal entities on the 1st January of each fiscal year starting from 2010. For real estate owned by individuals, this tax is levied with progressive rates ranging from 0.1% to 1% whereas the tax free threshold amounts to taxable value of €400,000 per owner. Especially for financial years 2010, 2011 and 2012 the tax rate on any taxable value over €5 Bln amounts to 2%.

� For real estate owned by legal entities, the taxable value is based on “objective” criteria and taxed at 6‰ for businesses or at 3‰ for not-for-profit organizations which serve educational, religious or charitable purposes. A reduced rate of

1‰ applies on some other categories of buildings including those used by entities on carrying out their own activities. Any tax due on the total value of buildings cannot be less than €1/Sqm. with the exception of semi-finished buildings. Especially for financial years 2010, 2011 and 2012 the taxable value of real estate self-used by hotel enterprises is taxed at 0.33‰ without the limitation of €1/Sqm.

� Finally, certain categories of real estate and certain taxpayers (the state, public legal entities, churches, monasteries, sports clubs) are exempt from real estate tax.

� Real estate tax is not deductible for income tax purposes.

� Real estate tax replaced real estate duty which was introduced in 2008.

TAXES ON OCCUPATION/RENTAL INCOME � Income from real estate is subject to income

tax at the rates described in the previous chapters. There are special rules applicable to determine net taxable income where the income is earned by individuals and foreign entities which do not have a permanent establishment in Greece, and not all expenses (including depreciation) are necessarily taken into account.

� The occupation of self-owned real estate gives rise to imputed taxable income. The annual imputed income for using a self-owned (rented or granted for free) primary residence is calculated according to a specific scale based on its surface and on the zone prices applicable for the respective location. For secondary residences the annual imputed income is reduced by half. Businesses receive a deduction equal to their imputed income, thus there is no income tax effect.

� Apart from income tax payable on rental income, individuals are subject to a 1.5% supplementary tax on gross real estate income, which is increased to 3% if the real estate is used for residential purposes and exceeds 300 Sqm. This supplementary tax cannot exceed the tax payable on this income. Corporations are subject to the same supplementary tax, however only the 3% rate applies.

� Stamp duty is payable on rental income at a rate of 3.6% for commercial leases.

� Rental income is generally not subject to VAT, however the rental of shopping malls under certain conditions, furnished units with certain added services, and equipped industrial premises are subject to VAT (at the rate of 23% as per 1 July 2010).

SPECIAL TAX ON REAL ESTATE � A special annual tax is imposed at the rate of

15% calculated on the value of the real estate on offshore legal entities, companies or legal forms of any type (including trusts) that own the freehold or usufruct of real estate located in Greece effective from 1 January 2010. In order to be exempt from this tax, individuals who are the ultimate shareholders of Greek or EU companies must be identified and obtain a Greek Tax Registration Number.

� However, further exemptions from this tax may be also provided if certain conditions are met.

� The tax is calculated on the objective value of the real estate on 1 January each year and is paid at the time of filing the return, which should be filed by 20 May of the following year.

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