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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
[ Parent ]
Is it the case, as I understand it was (and maybe still is) in Spain that there is an 'official' price at which property sales take place, and then an unofficial 'premium' paid in cash ie large bundles of 'Bin Laden' (...everyone knows they are there and what they look like but they have never seen them) €500 notes.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Tue Jun 14th, 2011 at 07:50:08 AM EST
[ Parent ]
Something like that. Although you generally do not need these 500 notes because of bank secrecy.

"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 08:25:43 AM EST
[ Parent ]
Thank you for your excellent explanation!

For comparison, the annual property tax on real estate in Colorado for a private house valued at about $230,000 is around $1200. This is on the low end of the tax scale in the U.S. There is no transaction tax involved in purchasing a house (other than some small fees), but if it increases in value during your ownership of it then you have to account for capital gains tax after selling.

Real estate scams here involve getting your property listed as agricultural or unimproved land, which have very low tax rates. This generally involves a shady deal with the local tax office, and is quite common.

by asdf on Tue Jun 14th, 2011 at 05:20:24 PM EST
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A couple caveats to that. I'm in NY and I bought a huge mansion in my upstate city. It cost me $250k for 8,000 square feet, turn of the 20th century woodwork, arts and crafts movement. My property taxes are $9k a year. And now you know why housing stock here is relatively cheap.

Our transaction taxes in NY are relatively high. it takes about $8k to close, but most of those are fees for title searches, surveys, appraisals and the like. Only $2k of that goes to the state as tax.

Lastly, I believe federal law has changed now and homes that sell for under half a million are no longer subject to capital gains.

by Upstate NY on Wed Jun 15th, 2011 at 12:35:49 AM EST
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I had a house like that--not 8000 square feet, but same general concept. After fighting with plumbing, electricity, HVAC, roof, landscaping for a few years it got old and I moved to a brand new house. Where I can get the rarely needed plumbing part at Home Depot instead of from the guy who custom makes them on his basement lathe for $250 a pop.
by asdf on Sun Jun 19th, 2011 at 12:15:18 PM EST
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Tell me about it!! Upkeep is insane. But, we do replace copper pipe with PVC. The problem is the asbestos.
by Upstate NY on Sun Jun 19th, 2011 at 12:30:06 PM EST
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