Vasilis Argyrakis (Strama, Greece): Tax absurdity threatens the sustainability of the sector

The short-term rental sector is facing serious tax challenges that threaten the viability and growth of many businesses.

In a revealing interview, Vasilis Argyrakis, treasurer of Stama Greece, and CEO of See Greece, highlights the catalytic effect of the 2024 AADE circular, which, with a seemingly insignificant change, imposed on each apartment the tax liability of a full branch. This decision had the effect of burdening managers with the business tax of 600 euros per property, a disproportionate and controversial imposition that has already been taken to the Council of State.

As Mr Argyrakis explains, the consequences are immediate: a reduction in liquidity, loss of investment capital and tensions in relations with owners. Combined with the unstable tax policy, the increase in TAK and the uncertainty about the reimbursement of undue payments, this creates a high-risk environment for the industry.

Through the interview, the need for stability and transparency is evident so that businesses can grow with a plan and perspective.

The challenges of short-term rentals in Greece

What are the key tax issues faced by property managers in short-term reantls and how do they affect business viability?

Undoubtedly the April 2024 AADE circular, deleting only one word (compared to the 2018 circular), considered each apartment to be a branch! So an apartment has the same tax liability to pay the 600€ business tax as a bank branch or a hotel.

For this absurd and unconstitutional decision, Stama Greece and several management companies have appealed to the Council of State and have already been vindicated in the first instance, but unfortunately we will have to wait for the decision of the plenary.

However, this has already brought huge disruptions to the liquidity and viability of businesses as the obligation to open branches and pay the corresponding business tax is not lifted until the final decision is issued. Even after our eventual vindication, there is anxiety as to whether and how the unpaid amounts will be refunded by the administration.

Already the side effects are evident, depriving companies of valuable resources for growth and have created, in some cases, friction with some owners over who will bear this fee. There has also been a shift to the model of providing services to owners in order to avoid paying this fee.

In addition, the excessive increase in the TAK, has created problems for low-priced housing as the proportion of fees, taxes and commissions is as high as 40% of the final price.

However, I believe that the main problem that the state and the tax administration has cultivated with the constant changes and increases is uncertainty. It is a chronic problem of Greek business, but our industry has been targeted in the last two years. No management company can make predictions about its future and grow in an environment of uncertainty and tax and administrative surprises every year.

Have visitors’ needs or habits changed since the pandemic and how does this affect your pricing strategy?

I believe that we have now returned to a “normality”. The driving force of tourism at the global level is now the rapid growth of the population and especially the quantitative rise of the “middle” class of developing countries who are hungry for travel abroad.

Visitor habits are changing rapidly and social media and artificial intelligence are mainly responsible. In particular, “individual” travellers, who are primarily targeted by short-term rentals, are now more spontaneous, make last-minute decisions and are primarily influenced by the availability and price of airline tickets. Nowadays, close to 50% (especially Europeans) do not choose a specific destination when they search.

It therefore becomes almost necessary to use dynamic pricing so that the operator can adjust prices in real time to changes in demand and competition. However, I do not believe that “automation” of pricing policy works well in all areas of Greece, especially in areas with high and low seasonal demand.

What are the main financial challenges facing property managers in the industry today?

The difficulty of finding reliable partners, especially in the cleaning sector, is consistently a key challenge. Cleaning costs have now (especially on the islands) skyrocketed.

The necessary investments in new technologies are steadily eroding profitability. But all this can be overcome with a proper pricing policy.

The unstable fiscal and administrative environment will always remain the number one, and by far the number one, economic challenge we face. Right now there are companies that will be required to pay a total amount for business tax 2 and 3 times their annual profitability!

How do you see this year’s short-term rental tourist season shaping up and what is forecast in terms of demand and revenue?

The market is now maturing. Those entering now will face difficulties, especially if the property does not have any special features or is not located in a good area. There will soon be an exodus of residential properties, especially in the two major urban centres, where saturation has set in and now in many cases, long-term rentals are yielding a better average monthly income. Although a new record number of arrivals is also forecast for the country as a whole, average occupancy will fall as competition has increased excessively.

I also believe that the average nightly rate will go up, but not the average net revenue as the increase will come mainly from higher taxes and fees.

Management Companies need to invest in keeping up to date with developments and in reliable partners in accounting, housekeeping and digital optimization and marketing tools.

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