Property Tax headache for six million homeowners in Greece

Property Tax headache for six million homeowners in Greece

Athens, January 19, 2015/ Independent Balkan News Agency

By Spiros Sideris

The result of the January 25 election are waiting six million homeowners, totaling EUR 680 billion, to learn if and how much they will pay in 2015.

The diametrically different views of ND and SYRIZA have frozen all activities in the real estate market, according to the daily “Kathimerini”, since basic questions a prospective buyer wants answered remain in the air, such as:

– Will the property tax be imposed to all as is the current situation with the single real estate property tax (ENFIA) or only to those who have a large real estate property?

– Will the ownership tax will be calculated per property like today or by calculating the sum of the value of the property?

– Will there be an Asset Means Declaration Tax in the real estate market in general or will the main residence be excluded?

– The basis of the taxes will be the objective values or actual values?

– He who acquires a property in these circumstances will be faced in 2016 with a betterment tax – which has been suspended, but not repealed, or not?

– What will be the policy on “red” mortgages and how it will affect the funding from the banks from now on?

Notaries and heads of large brokerage firms argue that potential buyers postpone the signing of even finished contracts, since, especially in real estate, there are no “constants”. The open fronts are:

As regards with the taxation of property, if there is a ND-led coalition government, the ENFIA will be calculated with the same “model” as today. That is, the tax will be levied per property, in addition to the additional tax for those whose personal fortune exceeds EUR 300,000. Most likely, the tax will be ratified in April or May and will begin to be collected from May or June in 7 or 8 monthly installments. In such a case it remains to be seen whether there will be a reduction of the calculation rates for 2015, as was announced by the prime minister.

SYRIZA, on its part, speaks of the immediate abolition of ENFIA, which means that the tax for 2015 will not be ratified. There will be a large property tax which will be levied not on each property separately, but on the sum of the property. In such a case, there are two unanswered issues for the property market: Where will the tax free limit be set – Some executives place it at EUR 300,000 and others at EUR 450.000 – and how will the scale factors be formed. The issue is purely fiscal. The higher the tax-free limit goes, the fewer homeowners will pay. Moreover, it will revive the practice of the “division” of property (with parental benefits, donations, transfers in ‘close’ companies, etc.) to avoid the imposition of FMAP. Officially, SYRIZA speaks of financial losses of around two billion euro.

In real estate transactions, there is an open issue with Asset Means Declaration, which is currently applied to the primary residence as well, but on the face value on the contract and not based on the objective value. Samaras has announced the abolition of the Asset Means Declaration for buying a primary residence. On the other hand, SYRIZA has incorporated a provision in its program for the abolition of any exception from the Asset Means Declaration, so that the slightest change in the assets of taxpayers must be justified by accounting documents, but also in the tax declaration. By taxing the transfer of property is created an issue with the capital gains tax, the imposition of which has been suspended for two years, but has not been abolished.

The third open issue has to do with the values on which the occupation and transfer taxes will be imposed. SYRIZA’s program speaks of an immediate reduction of objective values by 30% -35%. The ND has planned the equation of the objective and trade values from 1/1/2017, although after a ruling by the State Council, the process must be accelerated.

What have the Greek taxpayers paid for ENFIA

The ENFIA requires about 1.2 million Greeks to pay amounts up to 100 euros. One in four, about 1.5 million owners, pay from 100-250 euros, while one in three was charged in 2014 with amounts ranging from 250 to 500 euros.

With ENFIA, tax amounts exceeding 500 euros were forced to pay 1.66 million owners. Of these, 78,000 (approximately) exceeded the limit of 3,000 euros. (There are the large landowners whose ENFIA obligations ranged of from 200,000 to 600,000 euros per person. However, these champions of ENFIA were not more than 30 persons across the country.)

With a “Large Property Holding Tax”- type of tax there is clearly a smaller number of deptors (if imposed, the number of those who have to pay can be reduced even by 90%), but the average amount of tax per owner will skyrocket. In order to receive 1.3 billion from 350,000, the average tax by owner will have to skyrocket to at least 3,500 euros. That is, the average tax rate should be at least 0.7% -0.8%.