News
Why is the Unified Real Estate Tax (‘ENFIA’) unconstitutional?
A Unified Property Tax has been imposed on all private property in Greece belonging to natural and legal persons (with the exception of these mentioned on Article 3, which refers to public property) by means of L. 4224/2013 (FEK A’ 287/31-12-2013). The law applies from 2014, is known as ‘ENFIA’ and covers the overwhelming majority of property rights, including full ownership, usufruct and tenancies. The same tax is imposed on contractual parking rights, storage areas and swimming pools, which are in common ownership with assets and fixtures on the land. The tax is also imposed, based on Article 2 paragraph 2 of this Law, but on a case by case basis without specific justification in law, on rights of tenure or ‘quasi-possession’ and rights in relation to private property held by Local Authorities.[1]
The first suggestion of a unified tax on private property appeared with L. 4051/2011 and specifically by Article 53. This imposed a special charge on all areas constructed for habitation or commercial use and supplied with electricity that were required to pay the real estate property charge on 17 September each year by virtue of L.2130/1993 paragraph 1 Article 24 (A’ 62). This was done for reasons of national interest because of the immediate need to reduce the national debt. However, two years later, when the crisis was deemed under control, after Greek taxpayers had already taken on unprecedented burdens, this new sweeping hyper-law was brought in to replace the old law (known as ‘EETHDE’), establishing regular taxation on every form of property, including property with no electrical supply, along with property in poor areas and empty and unfinished buildings.
Yet taxation, although necessary to support fiscal policy, is not immune from the need to be fair and must be guided by the fundamental principles of the rule of law. In this instance, we are of the view that a proper consultation and review based on the principle of proportionality enshrined in Article 25 of the Greek Constitution is required. Without this, our fundamental rights, including tax justice, the right to property and also the right to human dignity are infringed.
Specifically, the legal defects of the new law can be summarised as follows:
- Failure to link the tax to the person’s ability to pay. For this it is necessary to assess, not only the value of the property, but the person’s income, especially since this tax is imposed alongside other taxes (e.g. income tax and VAT etc.).
- Tax is levied on notional taxable income, but this fails to take account of decreases in values at the current market price.
- Tax is levied without any criteria, on all property, even property without electricity and empty property, for example.
From the above it seems clear that the new tax is unconstitutional, considering that the initial tax measure (the EETHDE), already replaced by the new tax, was imposed on a temporary basis, owing to the unexpectedly severe financial crisis We will await the view of the courts, as we expect they will elucidate the law on this issue.
Many taxpayers have already raised administrative objections to the tax in order to challenge the tax statements issued on 31 July 2014.
[1] It should be explained that in Greece, there is a distinction between the Central Administration and the Local Authorities. Both are public bodies, but only the Central Administration owns public property. The property that belongs to Local Authorities (called ‘OTA’) is autonomous and independent and resembles private ownership.
Mariangela Vlagopoulou
Partner, Lawyer LL.M.
This email address is being protected from spambots. You need JavaScript enabled to view it.