Greek Finance Ministry considers phasing in property tax rise in two stages

Greek Finance Ministry is examining new strategies regarding the new “objective values” (property rates used for tax purposes), as the plan for two separate sets of values for each property appears to be a nonstarter, while the country’s creditors are pushing for an automatic mechanism to revise the rates.

The revised bailout agreement describes the alignment of objective values with market prices along with the creation of a permanent unit within the ministry to constantly update the zone rates as prior actions.

Nevertheless, Athens will propose to the creditors that the property-related taxes and levies be adjusted gradually to the new objective values, with a lower increase rate for all 21 taxes just for this year, and a further revision of the tax rates next year to match the rise in objective values where applicable.

Sources note that the plan that foresaw the use of two sets of objective values – with one set for the calculation of the Single Property Tax (ENFIA) and another for property transfers – has been abandoned due to the legal problems it would create.

Increased property values in Greece

The ministry is leaning toward the phasing in of the increased taxable values: For example, in an area with a current zone rate of 1,600 euros per square meter and a revised objective value of 2,000 euros/sq.m.this year’s property taxes would be based on a moderate rise to 1,800 euros/sq.m. before being brought into line with the full increase next year.

The ministerial decision is likely to state in detail the extent of the increase of the objective values to apply this year and next, although all this still requires the approval of the creditors, who are yet to receive the data showing whether the ENFIA target of 3.2 billion euros will be attained this year.

The test calculation with the sum of the new zone rates across Greece has not yet taken place. Tax administration officials argue this will have to come after the full examination of the new objective values by the ministry’s competent agencies and after the political leadership has issued specific guidelines on what it wants the tax administration to do.

Officials add that if the 2019 test calculation – with the higher zone rates – leads to an ENFIA result of 3.6 billion euros or more, the political leadership would raise the tax-free threshold of the supplementary tax (imposed on large property owners) from 200,000 to 250,000 euros.