Tax returns: what needs to be done to “erase” imputed income from previous years

Every year, as a result of imputed income audits carried out by the Greek Tax Authority, more than 1.5 million taxpayers find themselves in a situation where they have to find ways to somehow “erase” their income.

“Capital Consumption”

Imputed income is imposed on those who owns real estate, cars and yachtsand the minimum amounts of reasonable living income are 3,000 euros for divorced people and 5,000 euros for married or cohabiting couples.

Taxpayers have the right to switch to the so-called “capital consumption”, that is, to “erase” their data from previous years' income by filling out codes 787-788 on their tax returns. They are used to fill the capital amounts they have accumulated through savings from previous (consecutive) years.

Amounts entered into codes 781-782 and 787-788, if derived from assets acquired after 1/1/1988, must be reduced by any amount paid for their acquisition (acquisition expenses), unless they are not included when determining the capital for the year in which they were paid and the consumption of which the taxpayer declares in his current return. The same applies to amounts that were taxed separately or were exempt from tax.

In practice, the taxpayer will have to add up for each year in which he filed a tax return, all income from wages or pensions, benefits, rent, business activities, interest on deposits, dividends, etc., amounts from the sale of assets (real estate, cars) or other income such as Social Security lump sums, lottery winnings, donations, and add up the housing and asset purchases recorded for each year. Then he will have a complete idea of ​​the exact amount of capital consumption that he can use.

If the taxpayer did not spend a total income of, for example, 30,000 euros in previous years, but this year used 5,000 euros to cover expenses, then next year the balance of funds for capital consumption will be reduced to 25,000 euros.

Real estate income

If a taxpayer declares income from real estate on his tax return, he must report the net amount in the capital consumption table. That is, the amount received and declared in Table 4 of Form E1, minus 5%, which the income tax law recognizes as expenses for the maintenance of real estate. This net amount can also be seen on each income tax return.

Proceeds from the sale of an asset

If the taxpayer received income from the sale of a car, house, movable property worth more than 10,000 euros, bonds, bills, shares in mutual funds, etc., special attention should be paid to the amount that must be declared in the capital consumption table.

If the taxpayer does not rely on the year of acquisition of an asset that is presumed to have been acquired in that year, the taxpayer must report only the positive difference between the sale and purchase as the amount of the asset disposed of.

If the taxpayer also relies on the year of acquisition of the proposed asset in the year of consumption, then in the consumption table he enters not the difference between the sale and purchase, but the full amounts of the acquisition and sale of the asset.

Finally, there are a number of amounts that are not considered income, but which the taxpayer may nevertheless use to cover his imputed income. Illustrative examples are:

• Gambling winnings
• Severance pay
• Compensation from the insurance company
• Social dividends
• Alimony received by one spouse from the other after divorce
• Donation or provision of money by parents
• What applies to separate declarations of spouses.

In declarations of spouses submitted separately, the income of one of them cannot cover the imputed income of the other, since the imputed income for living and purchasing is borne by each spouse separately. The minimum amount of objective expenses for each spouse in the case of separate declaration is 3,000 euros.

As for the possibility of covering the imputed income through capital consumption, the income from the separate declaration of the other spouse cannot be used.

It should be noted that in joint returns for previous years, each spouse can only rely on capital consumption from their own income.

If married taxpayers have given notice of their decision to file a separate return, and one spouse does not have a joint ownership interest in the principal residence, whether owned or leased, and is not a tenant in the leased principal residence, they must fill out code 801 with the spouse’s VAT number and code 092 related to hosting, selecting “cohabitation with a spouse” when filing a declaration using the online service.

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