Before we mention all the ways to bypass presumptions, we should clarify the following about the 3 categories of presumptions:
1) Presumptions of living are specific amounts of living expenses that, according to the Tax Administration, determine in an objective way a minimum amount of taxable income for each natural person. The system of presumptive determination of taxable income based on presumptions of living provides, in principle, a minimum amount of annual living expenses of 3,000 euros for each single taxpayer and 5,000 euros for married or cohabiting couples of taxpayers – 2,500 euros for each spouse or cohabiting partner. It also provides for specific amounts of objective (implied) living expenses that correspond to the annual expenses for the use and maintenance of houses, I.X. cars, yachts, swimming tanks and aircraft, while also taking into account the actual costs of paying private tuition fees and service staff fees.
2) In addition, the Tax Administration also uses the presumptions of acquisition of assets to determine the taxable income of natural persons. These presumptions are the actual expenses of the taxpayers for the acquisition of movable or immovable assets, for the purchase of shares, bonds and other savings and investment products, for participation in the equity capital of companies, for the granting of loans, for donations or parental benefits and for the repayment of housing, consumer, personal loans and credit cards.
In order to determine the total presumptive taxable income of each natural person, of whatever category of income he declares, the amounts of the presumptive assets are added to the amounts of the presumptive living. This results in a total amount of presumptive taxable income, which is compared to the total actual declared income of the natural person. If the assumed amount of income is greater than the total actual income then the taxpayer is required to pay the tax corresponding to his actual income plus the tax corresponding to the additional difference between actual and assumed income.
3) This year approximately 735,000 taxpayers who during 2023 carried out individual business activities, either as tradesmen or as service enterprises or as freelancers, will also be faced with the new system of presumptions or objective criteria for determining the minimum taxable net income (profit). The criteria for determining will be the annual amount of the gross minimum wage of the private sector, which for 2023 amounted to 10,920 euros, the years of operation of the business, any additional expenditure on staff payroll and any excess of the annual turnover of the business from the average of the turnover of the respective branch. This system will determine for each of these taxpayers a presumptive amount of net taxable income, which will already be calculated and pre-filled in forms E1 and E3 of their tax returns.
In any case in which this presumptive amount will be greater than the one that will have arisen in accounting, based on the income and expenses recorded in the taxpayer’s books, his income tax will be calculated on the basis of this presumptive amount.
THE 8 WAYS TO AVOID THE “TRAPS” OF OVERTAXATION
The overtaxation traps hidden by the application of the presumptions of living and acquisition of assets, taxpayers have the possibility to avoid them in 8 different ways. Under the current legislation, each taxpayer can cover any added income difference that arises due to the subsistence presumptions, by indicating, in the tax return to be submitted in 2024, for 2023, up to 8 different categories of amounts, which are as follows:
1) Actual incomes acquired in 2023 by the taxpayer himself, his spouse and dependent family members and which are exempt from tax or taxed in a special way. Such incomes include unemployment benefits, profits from shares and mutual funds, interest from REPOS, interest-bearing notes and bonds of the Greek State, interest from bank deposits, risk allowances, etc.. This category also includes received amounts that are exempt from both income tax and the special solidarity levy, such as, for example, child benefits collected by OPECA, salaries, pensions and fixed remuneration of the totally blind and the physically disabled 80% or more, the compensation due to termination of employment, etc.
2) Amounts of money that are not considered income and were acquired within 2023 by the taxpayer or his spouse. Such amounts are e.g. the lump sum received by the taxpayer as a pensioner, a compensation received from his insurance company or a compensation received for moral damage, scholarships, extraordinary one-off financial aids paid to those affected by natural disasters, OPECA welfare benefits (benefits disabled etc.) the extra-institutional allowance and any related amount paid to special categories of disabled persons, the birth allowance etc.
And in this case, the taxpayer should have collected and preserved the supporting documents proving the collection of these amounts.
3) Any income or price received by the taxpayer within 2023 from the sale of its assets. As income from the sale of assets, the amounts received by the taxpayer from the sale of real estate, cars, movable things with a total value of more than 10,000 euros, shares, bonds, mutual fund shares and other movable assets are taken into account. From the sale price received within 2023 is deducted the cost of acquisition, i.e. the price paid in some previous year to purchase the asset.
In order to prove the collection of an amount from the sale of an asset, the taxpayer must provide, if requested, a certified copy of the contract or pre-agreement or a notary’s certificate from which the sums of money collected are derived. For the purchase and sale of cars between individuals, a responsible declaration of Law 1599/1986 by both parties is sufficient.
4) Incomes and revenues acquired in the years before 2023, not spent until 12-31-2022 and spent within 2023. This is the method of covering evidence through “consumption of capital of past years”.
With “capital depletion”, the taxpayer can look back at the tax returns of previous consecutive years (as many years as they want) and take the following actions:
– To add up the amounts of all types of income (from wages, pensions, rents, businesses, interest on deposits, dividends, capital gains from the sale of shares, etc.) and the amounts of income from asset sales, which he has entered in the declarations of past years.
– From the sum of income and income of previous years, which will result, he should then deduct the amounts that were taken into account in the same tax returns as proof of living (for residences, cars, swimming pools, boats, service personnel, etc. .) as well as the amounts he declared in the same declarations that he spent to acquire assets (real estate, cars, boats, movable objects of great value, etc.).
The net amount that will result from the above mathematical operations is the “capital” of the previous years that the taxpayer can “form” and show to the Tax Office as a savings product, in order to cover the additional difference in income that will be determined by the presumptions.
The detailed recording of all the above amounts (income, expenses, net capital) can be done by hand on a simple sheet of paper or electronically in an EXCELL program.
6) Loans received by the taxpayer within 2023 from banks, relatives or third parties. The conclusion of a loan with a banking institution is evidenced by the text of the relevant contract signed by the taxpayer, while the conclusion of a loan with a private individual is evidenced by a notarized or private document that has been stamped.
7) Amounts received in 2023 by the taxpayer from either donations or parental benefits. In order for the taxpayer to prove that he collected such amounts within 2023, the relevant tax return must have been submitted within six months of their collection.
8) Winnings from lotteries, PPOPO, LOTTO, TZOKEP, Fixed Bet, etc. lucky games. Amounts of winnings from games of chance are taken into account only after deducting the taxpayer’s expenditure on the purchase of the ticket or ticket or lottery ticket won. To prove the receipt of a profit from a game of chance or lottery, the taxpayer must have the relevant certificate available.
The ways of questioning from the self-employed
According to the current legislation, the new presumptions for determining taxable income for taxpayers with sole proprietorships are contestable, that is, they will be able to be challenged. For this purpose, there will be a special “box” on the tax return form that the taxpayer can “click” to declare to the Tax Office that he disputes the presumptive amount of taxable income determined by this system of presumptions and that it should be judged- in the second year – by the Tax Office, in order to be taxed based on a lower than assumed amount of income.
The grounds of dispute between which he will be able to choose are the following:
a) military service,
b) imprisonment,
c) hospitalization in a hospital or clinic,
d) inability to exercise an activity due to pregnancy or during the 12 months after giving birth or adopting or fostering a child,
e) extensive natural disasters that made it impossible, in whole or in part, to exercise their professional or business activity,
f) revocation of the license to operate their individual business or their license to practice their profession,
g) prohibition of the operation of the shop or other place of exercising their professional or business activity in implementation of a decision of a public authority for reasons of protection of public health or another reason dictated by the public interest,
h) other reasons of force majeure that prevent the exercise of business activity for a certain period of time.
In addition to the above eight reasons for questioning the new evidence, the pretentious will have the possibility of one more choice. In a special – most likely – “box” of E1, they will be able to dispute the amount resulting from the application of the presumptive income, requesting a tax audit, to prove the accuracy of his declaration of income less than the presumptive.
In any case, however, in which claimants dispute these new presumptions, they will first be required to pay the tax resulting from the settlement of their declarations based on the presumed income and then await the results of the audits to either receive tax refund or to offset the extra tax they have paid unnecessarily with their other debts to the Tax Office.
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