The sale of the shares of a company, whose property includes immovable property, is taxable for capital gains taxation in the same way as with the sale of immovable property. The capital gains taxation resulting from the sale of immovable property cannot be avoided through the sale of shares instead of immovable property. The taxation is imposed so that tax payers who are shareholders and tax payers who are owners of immovable property to be equally treated. In the case of selling shares of a company owning immovable property only, the declaration of sale is accepted; however, if a company owns some other property besides the immovable one, then only the value of the immovable property is considered for capital gains tax purposes. Capital gains taxation is imposed only if there is profit from the sale of immovable property or from the sale of the shares of companies whose property includes immovable property situated in the Republic. No such tax is imposed when the sale is made for movable or other property. The tax rate for the profit made is 20% and the time of the sale of the property is the time during which the profit or loss from the sale was made.
The Supreme Court has dealt with the issue of the time of selling the property as well as with the issue of capital gains tax discount for the company instead of the shareholders. In the case 134/2004 dated 14/2/2006, Judge A. Kramvis states that in the event that a share purchase agreement is made and the shares are those of a company which owns immovable property, the date of the signing of the agreement is considered the time of the sale, regardless of any clauses for future acts for the materialisation of the sale and the transfer of the shares. According to Article 12 of the relevant legislation the time of the sale and the time of the transfer are separated in such a way, that it is impossible to consider the time of transfer as time of sale for capital gains taxation purposes. The fact that the agreement also concerned shares not issued, but which would be issued in the name of the purchasers at a later time and with the date of payment given, does not in any way affect the date of sale, since it is considered that these shares were sold even if they were not yet issued. It is also considered that the applicants gained profit from this sale, which was taxable according to the relevant law. The fact that the specific shares did not exist during the signing of the agreement but they were to be issued for the purchasers at a later time with a remuneration towards the applicants, is only relevant with the way of sale and (according to Article 10, this was described as abandoning the use of the applicants rights in the added capital) it is still a taxable property according to the Law.
As regards the write offs, of corporate assets given to companies that own immovable property according to Article 12 of the Income Taxation Law, i.e. hotels for annual attrition, these write offs which consider buildings (4%) and installation (10%) are deducted during the calculation of the value of the immovable property. As a result, the profit from the sale of shares increases and there is therefore more capital gains tax imposed. The company benefit from this discounts/write offs, but the shareholder does not. The Court rejected the applicants complaint that the Director of the Tax Office decreased the value of the buildings through the capital gains taxation discount given to the company. The Directors position that the value of the shares is connected with the immovable property is correct since, according to Article 9(1) of the Law, in case of sale of shares the product of the sale is calculated exclusively based to the immovable property. The write off is a basic element of the value of the immovable property and it is thus normally given upon corporate property and not personally to the shareholders. The value of the sold shares increases and decreases according to the increases and decreases of the prices of immovable property and thats why the write offs, as well as the inflation according to article 6 of the Law, are basic elements of the shares value and it was correctly deducted.
By George Coucounis, coucounislaw.com
