How to obtain tax relief for renovating your home or business premises

By GRAMMATIS BAKLATSIS, surveyor – urban planner, baklatsi@yahoo.gr
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It is a fact that the majority of buildings in Greece are old, built before 1990, worn down by time and in urgent need of renovation. However, the majority of owners do not have the financial means to repair them and are trying to find ways to obtain subsidies for the necessary work. This is also reflected in the increased interest of citizens in the “I save at home” program.

On the other hand, there are many prospective buyers looking for profitable investments in real estate, whose value is expected to increase once they are upgraded. As a result, many are buying old or abandoned buildings, apartments, and warehouses with the aim of renovating them and then exploiting them through short-term rentals (Airbnb).

Within this framework, the state offers property owners various subsidies for appropriate energy efficiency upgrades to their homes and is also considering introducing tax breaks for the renovation of old homes.

In order to achieve the energy upgrade of the country’s building stock and at the same time ” crack down” on undeclared work and widespread tax evasion, which are common in professions related to all types of home upgrades, the state has provided tax incentives to property owners who carry out energy, functional, and aesthetic upgrades to their properties.

What is the decision on tax exemptions?
According to the ministerial decision, which falls under tax law 4646/2019, for every natural person who carries out energy, functional, and aesthetic upgrades to a property, will now be able to deduct 40% of the money paid each year during the period 2020-2022 from their income tax liabilities for the four years following the year in which the expenses were paid. The maximum limit for the amount of expenses is €16,000, so the maximum tax deduction that an owner will be entitled to over the four-year period will be €6,400 (€1,600 per year).

What are the conditions for receiving the discount?
The necessary conditions for the 40% discount on the cost of energy, functional, and aesthetic upgrades to buildings to be applied to the owner’s income tax are:

They must not have joined the “Exonomo” program and must not join any upgrade program in the future.
Expenses must be proven with legal documents, i.e., retail receipts or service invoices from technicians.
Expenses must have been paid by electronic means of payment, i.e. credit or debit cards, prepaid cards, e-banking, electronic wallets, etc. Expenses paid in cash are not taken into account.
Please note that: owners, for as long as the 40% discount on renovation expenses remains in effect, will not lose the 5% discount on taxable income from rents, which applies to repair and maintenance expenses, it applies every year and is calculated automatically, without the obligation to submit supporting documents to the tax authorities.

What expenses are eligible?
The expenses for services that are recognized for the application of this provision are as follows:

Α. Energy

Installation of thermal insulation.
Replacement of frames, glass panes, and external protective sheets.
Installation or upgrade of heating/cooling system and the necessary infrastructure and components to make it fully operational.
Installation of automatic control devices for the operation of the heating/cooling system.
Installation of self-generation electricity systems (with energy offsetting), as well as electrical accumulator systems (batteries) when combined with photovoltaic systems.
Installation of a hot water production system using Renewable Energy Sources (RES).
Installation of a mechanical ventilation system with heat recovery.
Upgrading of lighting in the common areas of apartment buildings.
Β. Functional-aesthetic

Installation/replacement of plumbing. Installation/replacement of electrical wiring. Maintenance/repair of roofs. Repair of masonry/painting inside and outside buildings.
Installation of fixed or mobile shading systems.
Upgrade or installation of an elevator.
Installation of home charging points for electric vehicles.
Replacement or repair of floors.
Does the discount only apply to residential properties?
Eligible expenses apply to all buildings regardless of their use (e.g., apartments, offices, shops, etc., provided they have not already been included in subsidy programs or actions.

Are those who have full ownership or those who only have usufruct entitled to the tax reduction?
The amount corresponding to 40% of the eligible expenses each year reduces the tax of the natural person who has full ownership or usufruct of the building in which the “eligible expenses” related to the energy, functional, and aesthetic upgrades for the relevant tax year.
Natural persons who have bare ownership rights over real estate are also eligible for the tax reduction, provided that they use the property in question either as their primary or secondary residence or as their headquarters or branch office for the conduct of their business activities.
In the above cases, only the person in whose name the relevant document is issued is entitled to the reduction.
What applies when work is carried out in common areas of an apartment building?
In the event that expenses are incurred in the common areas of an apartment building, the expenses may be allocated per apartment/shop/office, etc. In this case, the expenses are paid by the apartment building/property complex manager using electronic means of payment or through a payment service provider, and are then taken into account for the beneficiaries in proportion to their co-ownership shares, based on a relevant certificate issued by the manager, which will include the ATAC (property identification number) of the property located within the building for which the relevant expense is incurred.

What are the “fine print” details we need to pay attention to? The following are cumulative prerequisites for tax reduction:

a) proof of payment of these expenses with legal documents, i.e., an invoice or retail sales receipt for the provision of services, which must clearly state the type and value of the service provided, as this is used to calculate the tax reduction, the details (name, tax identification number) of the person and the details of the property (ATAK), unless it is a common area, in which case only the address of the property is sufficient,

b) the payment of expenses, regardless of their amount, has been made by electronic means of payment or through a payment service provider.
“Electronic means of payment” means any means of payment that requires the use of a telecommunications or electronic network, such as the transfer of money via special internet applications (“e-banking”), cards, “electronic wallets,” etc.

Therefore, payment service providers include, among others, credit institutions, postal check offices, and payment institutions, regardless of whether they are based in Greece or abroad (EU, third countries).

c) The portion of expenses for services received that is not paid in the above ways is not recognized as a deduction.

d) The amounts of “eligible expenses” are declared in a special code on form E1 of the income tax return.

When does the tax relief provision for building renovations apply?
Eligible expenses are recognized for tax reduction if they are incurred by the end of 2022 and have not been deducted as an expense from gross business income.

How do I begin to upgrade the energy efficiency of my home?
First, we consult an engineer who does the following:

Recording of the building to be upgraded energetically.
Energy study of the building.
Presentation of the required interventions according to the energy study.
Costing of energy interventions.
Implementation of energy upgrade.
Issuance of energy certificate for the building.
What permit will be required for the renovation of the house?
According to the law, the issuance of a permit by the town planning department is required for the remodeling or renovation of a building. However, recent provisions exempt certain works from this requirement.

In any case, you should consult an engineer to examine what work needs to be done on the property and what permits are required to carry it out.

Permits are divided into two categories. The first category includes small-scale permits and the second category includes building permits. The second category concerns heavy work with a budget of €25,000 or more.

On the other hand, a small-scale permit is for minor repairs.

More specifically, it concerns:

Work carried out using scaffolding, such as painting exterior walls. Demolishing walls if you want to join rooms together, or constructing an outdoor pergola exceeding 50 m². a2>Roof reconstruction or changes to the appearance of the building, such as installing a new balcony door in a different location than specified.
Installation of an elevator, fireplace with chimney, or autonomous heating system.