A tax on all their houses - what other countries charge

As the Government toys with bringing back property tax, we check out what homeowners in other countries have to pay, writes FRANCES O'ROURKE

IRELAND IS one of the few countries that does not currently put some kind of annual tax on domestic property (apart from the new second home tax).

Internationally, most countries tax homeowners, most frequently to pay for local services – as Ireland did before it abolished domestic rates in 1978. The residential property tax which was introduced in 1983 was abolished in 1997.

As the map shows, the amounts charged abroad vary considerably. It is extremely hard of course to compare like-with-like. Countries take very different approaches to the business of taxing property, with a mix of national, regional and especially local governments deciding annual rates.

Equally, the method of deciding how to value a property before applying the annual rate varies hugely too: in France, part of the tax is based on what the local authority decides is the rental value of your home; in England and Scotland, it’s based on how much your home was valued at in an assessment done in 1991. It seems rarely to be the market value of the property.

The only real common denominator is that in most major cities and countries around the world homeowners do pay some kind of annual tax on their property.

LONDON: in the UK, homeowners pay an annual council tax to help fund local authority activities. Every year, each council decides what it will charge homeowners, with the amount being based on eight different tax bands. Which band your property falls into depends on the assessment of the value of your property in 1991 in England and Scotland and in 2003 in Wales. (In Northern Ireland, a system of rates applies.) The bands range from A (homes worth up to £40,000) to H (£320,001-plus).

Londoners pay tax to their own borough and to the Greater London Authority. If your house falls into band B and you live in Wandsworth, your council tax would be €608.61; if you live in Kingston upon Thames, it would be €1,436.71.

PARIS: there are two property taxes in France, the real estate tax – taxe foncière – paid by the owner of the property and a taxe d’habitation paid by the person living in it. The taxes are based on the rental value of the property, and that is determined each year by local authorities. The assessed value of a property is usually significantly lower than its market value. If you are an owner-occupier, you pay both taxes and if you rent out the property on short-term lets, you are deemed to be living in it and also pay both. The amount of tax anyone pays depends on the value of the property, its size and location, and can vary a great deal from one municipality and region to another.

Annual property tax for an apartment in Paris is calculated, approximately, at €10 per sq m for taxe foncière and €12 per sq m for the taxe d’habitation. The taxe foncière works out at about €500 a year; if you live in your property, the taxe d’habitation works out at about the same amount as the property tax, so your total bill would be €1,000.

NEW YORK: every year, the state of New York sends property owners a “Notice of Property Value (NOPV)”, its assessment of the market value of their home. This is based on a formula established by New York city and state laws.

How much tax an owner pays is based on the taxable value of their home, which of four classes of property it falls into and on the tax rate in their area, set each year by New York City Council.

A “Class 1” property (many condos, one to three-bedroom houses) worth €300,000 would currently have an assessed value of €18,000 and a tax rate of 0.16787: the tax bill to be paid would be €3,021.66. Provision is made for reductions in property tax for various groups, like senior citizens, veterans and disabled homeowners.

TORONTO: tax rates are determined every year by Toronto City Council and the value of all properties in the province of Ontario is determined by a Municipal Property Assessment Corporation. A recent law introduced a four-year property reassessment cycle. A residential property in Toronto valued at €300,000 would currently have a tax rate of 0.8547807 per cent, and a property tax bill of €2,564.

MUNICH: real estate tax (Grundsteuer) is an annual tax levied by German municipalities on the assessed value of the property using the basic federal tax rate of up to 0.35 per cent. On the resulting base amount, the municipalities apply their respective multipliers to arrive at the final tax due. The multipliers vary by municipality.

Thus, an apartment in Munich with a standard value of €300,000 has a base value of €780 (0.26 per cent of €300,000). Tax is calculated at the municipal rate of 490 per cent which works out as an annual property tax of €3,822.

MADRID: as in the UK, local authorities levy an annual tax – the Impuesto de Bienes Inmuebles (IBI) – which varies widely from one municipality to another. It is based on a property’s rateable value (valor cadastral), decided by the local authority. Average taxes are between 0.5 per cent and 1.1 per cent of the value of a property. A property in Madrid city centre with a value of €300,000 currently has an annual IBI tax rate of 0.512 per cent and therefore a property tax bill of €1,536.

LISBON: an annual property tax (Imposto Municipal Sobre Imóveis, IMI) is charged by each local authority and is similar to the UK’s council tax. The tax is paid on a percentage of market value (maximum 0.72 per cent). Tax rates vary from around 0.2 per cent to 0.5 per cent on a new urban property up to 0.8 per cent on a country house or cottage. The IMI tax on a new property in Lisbon city centre valued at €300,000 is 0.5 per cent, so the owner would pay €1,500.

WARSAW: there is an annual property tax in Poland, with central government deciding the maximum rate. But each local authority is empowered to establish the annual rate of tax in its area. The real estate tax payable is based on the size rather than the value of a property. Currently, rates in Warsaw range from €0.09 to €0.17 per square metre. On top of that, most properties in Warsaw attract a “perpetual usufruct fee”, calculated under real estate law. (An owner of a dwelling in a building on a plot of land used under perpetual usufruct has to pay this fee.) In all, an owner of a 70sq m (753sq ft) apartment with a garage space would have an annual property tax bill of €80.

The taxes in our property map are approximately based on a property worth €300,000 – but as the article explains, the basis on which tax is charged and methods of valuation vary considerably from country to country. Taxes are rarely based on current market value.

The information was supplied by Eoin Whelan of BDO Simpson Xavier, tax and business advisors