Investing in real estate overseas has become a sought-after avenue for many Israelis seeking attractive returns and favorable tax options. However, success in this field requires a deep understanding of each country's unique advantages and disadvantages, as well as an awareness of broader factors such as the social and political environment.
Greece: Prominent advantages in taxation and "Golden Visa"
Greece offers significant advantages, particularly in taxation. According to Article 13 of the tax treaty between Israel and Greece, capital gains from the sale of a property by an Israeli resident are taxed only in Greece, exempting the investor from paying additional tax in Israel. The property purchase tax in Greece is a fixed 3.09%, with a small additional fee on transactions above €250,000.
Furthermore, Greece offers an attractive "Golden Visa" program, which allows for obtaining a European residency and work visa. This can be acquired by purchasing a property valued at €800,000 in major cities or €400,000 elsewhere in the country. It is important to note that in strategic and border areas, such as islands near Turkey, a purchase permit is required from the Greek Ministry of Defense.
Cyprus: Low purchase tax and exemption from capital gains
Cyprus stands out for its low tax rates on property purchase and sale. The purchase tax generally ranges from 0.2% to 0.4% and varies according to the property's value. One of the greatest advantages is that there is no capital gains tax on the sale of private real estate. VAT on the purchase of a new property is 19%, though it can be reduced to 5% if it is a first residence. Second-hand properties are generally not subject to VAT. A "Golden Visa" can also be obtained in Cyprus with a minimum investment of €300,000. For non-EU residents, a purchase permit from the Council of Ministers is required, a process that typically takes several weeks.
Bulgaria and Romania: Potential for value appreciation with Euro adoption
Bulgaria and Romania offer opportunities with an emphasis on growth potential. Both countries are expected to adopt the Euro currency in the next two years. Historically, in every EU country that adopted the Euro, the value of real estate assets appreciated, and it is likely that this will also happen here. In Bulgaria, the purchase tax is 2%-3% depending on the city and property type. Tax on rental income is a flat 10% net, with no deduction for expenses. A sales tax of 5% is applied if the property is sold within three years of its registration in the Land Registry, after which it is exempt.
In Romania, the purchase tax is up to 3%, and the sales tax ranges from 3%-5% based on the property's value and capital gain, with an exemption after three years. It is crucial to note that a foreign resident can be registered as the owner of the house, but not the land on which it is built.
Additional factors to consider
Beyond the financial data, the Israeli investor must be aware of the social and political environment, especially in light of rising global antisemitism. Despite excellent relations at the governmental level, the sentiments of the local public towards Israelis, influenced by geopolitical events, can affect one's personal sense of security. Additionally, in areas far from cultural centers, there is an exposure to a different mentality and social structures, which should be taken into account. Therefore, an investment should be based on a thorough and deep understanding of local laws, while considering not only the financial profile but also the investor's personal and security profile.
In conclusion
Real estate investments in Europe offer many advantages for the Israeli investor, primarily attractive returns and favorable tax options. However, the decision to invest should be based on in-depth research and a comprehensive understanding of local laws. It is also important to consider broader trends, such as rising global antisemitism, which can affect one's personal sense of security and integration into the community. A wise investment aligns not only with the financial profile but also with the investor's personal and security profile.
The author is an attorney, an International real estate investment expert, and a former member of Knesset.