Greek Property Taxes – PASOK Implements Immediate Changes

Anybody who reads a newspaper, or surfs on the net, will be aware that the Greek economy is at crisis point and that the incoming government has to slash the country’s spending, immediately. Amidst a raft of measures designed to cut spending, increase taxation, and tackle the endemic corruption that has fuelled the black economy and reduced tax receipts, PASOK has announced that it is to shift the burden of Greek annual property taxes.

Greek Property Taxes and Inheritance Tax

The main thrust of the changes to property taxes is a change to the passing on of property from parents to children. Currently, the level of taxation is 1% after a €95 000 threshold, but the new administration intends to adjust this in an attempt to raise more tax for the beleaguered economy. The tax bill is expected to be tabled in March but, in an interesting development, perhaps a sign of the dire state of the Greek economy, the government has announced the possibility of a retrospective tax. Faced by a rush of families attempting to pass on property before March, the PASOK administration announced that it would temporarily tax people at the current level, but reserved the right to apply any new rate of tax at a later date.

(From: Kathimerini)

Greek Property Taxes - Changes for High-End Buyers

Greek Property Taxes – Annual Taxation Rates

The other major change is in shifting the annual tax burden from small and medium property owners and businesses towards the higher end. In a move supported by 70% of Greeks, this tax restructuring is intended to target individuals owning many large properties and offshore companies holding property portfolios. For these target groups, the new laws propose a tax hike of up to five times the present level.

These particular changes will affect over 350 000 properties in Greece and the tax restructuring should not affect the vast majority of foreign property owners in Greece, most of whom will fall well below the taxation threshold. However, there is one potential stumbling block on the horizon, and that involves the finalization of the real estate tax registry in Greece.

Greek Property Taxes – Rateable vs Market Value

Currently, most Greek property has two values, the market value and the government value, which is usually considerably lower than the market value. For example, I know of one house that is for sale at 150 000 Euros but is officially valued at 55 000 Euros. This is the value that is used for taxation purposes.

Thus, some people may have a house with a market value above the threshold but has a rateable value way below the threshold. If the government steps up its drive to reform the land registry, which will involve raising the rateable value of houses to better represent market values, then some properties will become taxable, at an annual rate on a sliding scale of between 0.3 and 0.9%.

However, despite the noises for quick reform, there is one immutable law in Greece, namely that bureaucratic inertia will act as a brake. Currently, there is little need to panic if your property portfolio is on the threshold of the new taxation limit – it will be a couple of years, at least, before anything changes, as the next valuation review is not due until 2012. However, there is a strong possibility that the administration will prioritise high-end properties, so a potential rise in Greek property taxes is an extra cost that you will have to bear in mind over the lifespan of this government.