Each residential property has two different objective values

In what is yet another Greek tax travesty, the state continues to use different “objective values” (property prices used for tax purposes) for the taxation of residential properties, with one used for the calculation of the Single Property Tax (ENFIA) and another when the property is sold.

This is due to property assets being used by the Greek state as an instrument to plug fiscal holes, and effectively having one value if they are sold and another if they are just owned. The result of this policy is that the construction sector contributes less than 1 percent toward gross domestic product, with investment in housing having dropped to 0.6 percent from 11 percent in 2007.

A revealing example of this travesty is the age coefficient for the objective values, which is the exact opposite of the factors that apply in ENFIA calculation. For ENFIA there is in effect the application of a “freshness” coefficient, as there is a 25 percent tax hike on newly built properties, even though the zone rates have just been determined according to the values of new homes.

For example, a 100 square-meter apartment that is three years old with a zone rate of 2,500 euros/sq.m. will not be taxed for a value of 250,000 euros but as if it had a 312,500-euro value due to the additional application of the 1.25 multiplier imposed on buildings less than four years old. Yet if that same property were to be transferred, the transaction tax would be calculated on a value of just 225,000 euros thanks to the 0.90 age coefficient!

This is a case of overtaxation through a “reversed” age coefficient for ENFIA, which taxes old properties as if they were new and new ones even higher. As Babis Charalampopoulos, former president of the Hellenic Valuation Institute, notes, “while the taxation of properties, whether for transfers or ENFIA, should be based on on the same taxable value for tax justice purposes, we see a distortion, with taxes based on fake values.”

Similar problems arise with the coefficients on commerciality and floor level, as there are major differences between the values used for ENFIA calculation and for property transactions.

Therefore property market professionals are calling for a radical overhaul of the property taxation system, with values updated annually to reflect the going rates.