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There are a lot of different taxes on real estate. The limit of 400,000 euros (which is about to be lowered) applies to one of them, the "tax on large real estate". This tax starts from 1/1000 and goes up to 1/100 of the estimated value of the real estate (estimated value used to be much lower than commercial value during the bubble years but now they are much closer). If you property is valued at one million euros you pay 3.900 euros per year.  It's on top of any other taxes on real estate one already pays. So the meaning of the tax exemption is that if you live on your own home which is valued at 400.000 euros, you won't pay an additional tax. Because most Greek are home-owners of some kind but rather low to middle income earners, a "large real estate tax" on the scale of 400-1000 euros per year ON TOP of other income and property taxes is significant (if you earn, let's say 1,500 euros per

You pay taxes on income earned by real estate (such as rent) where the above limit does not apply. This income is added to your total income (after deducting 10% for amortization) and has an additional charge of 3%. For example, if you gain a rent of 10,000 euros per year, 9,000 of them are added to your total taxable income and are taxed with your marginal rate (which might be from 0% up to 40%). Then you pay another 270 euros (3%) irrespectively of your marginal tax rate. So for a rent of 10,000 euros you might pay a tax of 3,870 euros (9,000X40% plus 3%).

You also pay two kinds of local government taxes. That depends on the municipality you leave but you should expect around 300-400 euros per year for a flat that can accommodate a middle-class pair and one or two children. Usually the one who lives in the flat pays this tax (be it home-owner or renter).

Then you pay a transactions tax when you buy real estate, which is quite a lot at 13% of the estimated value of the property.

The problem with real estate in Greece is not that it is not taxed, because there are quite a lot of taxes. It is that it is used to launder money by tax evaders. A provision of the freshly announced measured re-inforce that because for the next two years you won't asked where you did find the money to buy new housing property.

To conclude, you pay 13% of the estimated value of your property when you buy it, then you pay 1/1000-1/100 on its value per year afterwards, and of course you pay income taxes on rent earned (up to 40% but for middle incomes it is between 26% and 36%) plus local government taxes.

I hope that explains why real estate worth (estimated worth for tax purposes, to be precise, which might differ from commercial value) under 400,000 euros was not exempt from "large real estate tax".

"Eurozone leaders have turned a €50bn Greek solvency problem into a €1,000bn existential crisis for the European Union." David Miliband

by Kostis Papadimitriou on Tue Jun 14th, 2011 at 04:32:36 AM EST
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