What is changing in tax scale for rents in Greece;
Radical changes to the taxation of rents are being considered by the government in order to correct a major injustice suffered by property landlords for years.
Total annual income from rent up to 12,000 euros is taxed at 15%. But anyone who collects even 100 euros more is taxed… sharply at 35%!
That is, while all other scales in taxation have intermediate rates, here there is a large gap that leads to overtaxation.
This very issue was raised in a meeting of property owners with the political leadership of the Ministry of Finance, where two scenarios were considered: that of the owners, who are asking for a 10 percentage point reduction in the current rent scale, and that of the government, which is considering introducing a intermediate rate between 15% and 35%. There is also the thought of abolishing the current scale and taxing rents with the general income tax scale, but for the time being this remains an alternative solution.
Rental income is taxed from the first euro.
And for income up to 12,000 euros the rate is 15%, for income from 12,001 to 35,000 euros the tax rate is 35% and for income over 35,001 euros the rate is 45%.
That is, for a taxpayer who will acquire during 2023 a total net income of 22,000 euros from rents, the tax will be calculated as follows:
■ 12,000 euros x 15%=1,800 euros
■ 10,000 euros x 35%=3,500 euros
Well, 1,800 euros + 3,500 euros = 5,300 euros.
Also, for another taxpayer with a total net income of 37,000 euros from rents, the income tax will be calculated as follows:
■ 12,000 euros x 15% = 1,800 euros
■ 23,000 euros x 35% = 8,050 euros
■ 2,000 euros x 45% = 900 euros
Well, 1,800+8,050+900 euros = 10,750 euros.
Today Greece is above average in relation to the rest of Europe in terms of taxation of rental income. It applies similar rates to Norway. However, the above scale is higher than Italy, Spain, Great Britain, the Netherlands and all the Balkan countries, where taxation ranges between 10% and 15%
So, for 2024, the following proposals for changes in the tax scale are being considered:
■ The first proposal foresees a structural change by incorporating an additional rate in the current scale, between incomes from 12,001 to 35,000 euros, with the aim of sharing the burden.
So, according to competent sources, there should be at least an intermediate bracket with a rate of 20% or 22% (s.s.: as it is today in the income tax scale), which will operate as a fire brigade and will proportionally direct the tax burdens.
■ The second suggestion comes from the property owners themselves. It provides for the reduction of income tax on principal residence rentals by 10 points in all three current tax brackets, in order to make taxation fairer and to provide a substantial incentive for landlords to make permanent, rather than short-term, rentals available.
Based on this proposal, the lowest bracket of 15% (for an annual income of up to 12,000 euros) will be set at 5%, the bracket of 35% at 25% and the highest bracket of 45% at 35%.
As mentioned above, there is also a proposal to abolish the current scale and tax rents with the general income tax scale. In this case those with small incomes or those with only rental income will be favoured, while those with higher incomes will not benefit at all.
In any case, the new rent scale will be the next tax file that the government will open after first introducing, next week, the bill on taxing the self-employed.