Hoped-for tax-free ceiling dropping

The new property tax that will replace the existing Single Property Tax (ENFIA) will likely have a very low tax-free threshold of between 20,000 and 30,000 euros, according to the Finance Ministry’s latest plans. However, that will only come into force after the adjustment of objective values (property rates used for tax purposes).

In that way, the exemption of small property owners can be ensured, and possibly some medium-sized property holders too. On the other hand, owners of large properties look set to pay more tax as the ministry is planning for an increase in the rates to compensate for the introduction of a tax-free threshold.

This means that the original plans for a tax-free level of 100,000 euros, and more recently of 50,000 euros, will be abandoned. Were the threshold to be set at 50,000 euros, even with the existing objective values, about four in 10 property owners would pay no tax at all. That would mean the other owners would face huge payments so that the state could avoid a revenue loss, which would burden the country’s finances further.

The latest plans provide for a single set of property tax rates. Every owner will be taxed on his/her total property. Therefore, if a taxpayer owns a house valued at 200,000 euros and a 50,000-euro store, they will be taxed for a total of 250,000 euros, with the first 20-30,000 euros exempt.

The 2014 ENFIA was planned to fetch 2.65 billion euros, and indeed it met that target. However, Alternate Finance Minister Nadia Valavani says that this target will be very difficult to attain this year too. If the target is lowered, Athens will have to cover the loss with other revenue measures.

In any case, the determination of the new property tax will not be made before the second half of the year, after the revision of objective values, which in many cases will be downward. Valavani said a committee has been formed to study the revision, after the Council of the State, the country’s highest administrative court, demanded that the process be completed by June. The question is whether there is enough time for that, as objective values use market rates as a yardstick, and there are precious few transactions at the moment.