Any amount that was paid to obtain these revenues reduces them in order that they may be taken into account in the covering or limiting the total annual expenditure unless these amounts have been taken into account in the determination of the income of the year they were paid and, the taxpayer invokes the Capital Consumption for this year.
Determination of capital consumption for uses from 1/1/2005 until 31/12/2007
For the determination of each year’s capital, the following are taken into account:
- the actual incomes that have been taxed or legally exempted from taxation, which result from offsetting the positive and negative elements of these
- the amounts of money that are not considered income:
-
- Amounts of money that are derived from the disposal of assets.
- Import of foreign currencies that are not compulsorily assignable to the Bank of Greece.
- Loans, donations, or parental provision of amounts of money for which the relevant tax return has been submitted by the end of the year in which the relevant expenditure was incurred and any other amount that has been collected.
Expenses are deducted from the above incomes whose determination is defined by Articles 16 (objective expenses) and 17 (asset acquisition expenses), regardless of whether they are exempt from the application of the presumption.
Example: If a natural person owned a car in 2008 and 2009 that was exempt from the presumption (e.g., factory value of fewer than 50.000 euros), and during 2012 the capital consumption of the two previous years is invoked, then the presumed expenses of the car in question will not be deducted. Given that the person is exempt from the presumption that there are no living expenses under Article 16 of the ITC or that the amount is smaller than 2.900 euros, an amount of at least 2.900 euros will be deducted.
Attention: From 1/1/2005 until 31/12/2007, when determining the capital of each year, and more specifically, during the deduction of the presumptive living expenses and the acquisition of assets, these expenses will be deducted, regardless of whether they are exempt from the application of the presumption.
Determination of capital consumption for uses from 1/1/1992 until 31/12/2004
For the determination of each year’s capital, the following are taken into account:
- the actual incomes that have been taxed or legally exempted from taxation, which result from offsetting the positive and negative elements of these
- the amounts of money that are not considered income:
-
- amounts of money derived from the disposal of assets.
- import of foreign currencies that are not compulsorily assignable to the Bank of Greece.
- loans, donations, or parental provision of amounts of money for which the relevant tax return has been submitted by the end of the year in which the relevant expenditure was incurred.
- any other amount that has demonstrably been collected.
Expenses are deducted from the above incomes whose determination is defined by Articles 16 (objective expenses) and 17 (asset acquisition expenses), as they were, regardless of whether they are exempt from the application of the presumption. In the event that there are no expenses on the basis of Article 16 or if their amount is smaller than two thousand nine hundred (2.900) euros, the amount that must be deducted can in no possible way be lower than two thousand nine hundred (2.900) euros. What happens instead is that it is determined based on the social, financial, and family situation of the taxpayers and their proven living expenses. Any amount that was paid to obtain this income reduces the expenses in order for them to be taken into account for the covering or the limitation of the total annual expenditure, unless these amounts have been taken into account in the determination of the income of the year they were paid and, the taxpayer invokes the capital consumption for this year.
Determination of capital consumption for the financial years 1992 and earlier
For the determination of the funds of the financial years 1992, and earlier, the decrees that were in force during the relevant financial years are applied (POL. 1042/92). In summary:
a. Appropriation of funds through the financial year 1978
The ones taken into account are the taxed and tax-free incomes, the amounts of money from the disposal of assets, etc. The ones deducted are the living expenses and the amounts allocated for the purchase of assets, life insurance premiums, the payment of taxes, etc. (reg. 7/22-1-1979) The remaining balance constitutes the capital for consumption,
b. Appropriation of funds from the financial year 1979 through the fiscal year 1988
The declared total net income resulting from the offsetting of positive and negative taxable or exempt items is determined first. The capital to be consumed is obtained by subtracting the expenses referred to in Articles 11 and 12 of Law No. 820/78 from the declared total net income.
c. Appropriation of funds from the financial year 1989 through the fiscal year 1992
From the declared incomes, we subtract the tax-free amounts under paragraphs 3 and 4 of Article 8 of Law No. 3323/55, the expenses of paragraphs 6, 7, and 11, and the corresponding tax or the total of the presumed expenses of paragraphs 2-4 of Article 5 of Law No. 3323 as amended by Article 5 of Law No. 1828/89, depending on which is more significant (if the total of the assumed costs is much higher, we subtract it).
Abolition of savings that were formed by the declaration (form E6 of the financial year 1992)
It is also pointed out that the provisions of Article 10 of Law No.2019/1992, with which the obligation to submit the form E6, was established (declaration of movable assets that you had owned on 1/1/1991). Those provisions, which had been attached to the declaration for the financial year 1992, do not apply to the amounts of actual and imputed expenses that were incurred from 1/1/1994 and onwards. However, the amounts of money that were claimed from the consumption or sale of these items, according to the amounts that were taken into account to reduce the added presumptive difference of the financial years 1992 to 1994, reduce the amounts of the funds of the corresponding years, which you can invoke to reduce your presumption.
Attention: The amounts of money written in the codes 781-782 and 787-788, as long as they come from assets acquired after 1/1/1988, must be reduced by any amount that was paid for their acquisition unless they are amounts that have been taken into account when determining the capital of the year they were paid, the consumption of which the taxpayer claims with the return of the financial year 2010.
Capital from previous years from the income of a minor that had been taxed in the name of the father
The taxpayer can claim consumption of their income that was earned when they were minors and were taxed in their parents’ name to cover an expense incurred after reaching the age of majority unless that income was previously claimed by the parent in order to cover this presumption (POL.1259/2-11-2000).
Coverage of presumptive purchase, spouses with funds from previous years, before the start of their married life
In the years in which the spousal cohabitation had not begun, and each spouse submitted a separate declaration for their own income, the incomes of each spouse can cover or reduce only his or her own, as the case may have included a presumptive difference (POL.1094/23-3-89).
Coverage of the added difference of presumptions with capital consumption of previous years between spouses who are separated
The spouses who submit the income tax returns separately because of separation can, according to Article 19 of the ITC, invoke funds from previous years to cover their presumption, which will come only from their own incomes and not from the family income that arose during the married life (Relevant document 1020051/389/Α0012/12-3-2002 and 1048601/935/Α0012/8-6-2005).
Coverage of the surviving spouse’s presumption of income declared on joint tax returns
In the event that the wife who submits a separate tax return for her own income because of the death of her husband wishes to cover in the future a presumption of purchase of immovable property with the capital consumption from previous years, she can invoke her own income and from the income of her husband only those included in their joint declarations (Rel. doc. 100180711/8-1-2003).
Coverage of presumption by capital consumption of previous years and non-recognition of damage in case of determination of income based on the annual expenditure
As the income is calculated based on the annual expenditure of Article 19 of the ITC, the damage of the same financial year or the previous ones is not deducted, and neither is it transferred for offsetting in the following financial years. In the event that, in any year, the determination of income is based on the presumptions, any resulting damage in that year is not offset against the remaining income nor carried over to subsequent years.
Therefore, when using capital from previous years, the damage of this year will not be taken into account. If in any of the past years in which the taxpayer invokes capital consumption, there is damage from a commercial enterprise this damage is, in principle, offset against the remaining income of the taxpayer. In the event that the final result after the offsetting remains negative, during the determination of capital of previous years, the final damage of this year is not taken into account as a deduction but, for this year, it is considered that there is no capital left for consumption (Relevant document 1045929/856/Α0012/19-5-2005).
Tax audit difference
In the event of a tax audit of previous financial years, for which the taxpayer invokes capital consumption, the final incomes of the compromise are taken into account.
No penalty for submitting a supplementary declaration for incomes that are exempt from taxation or taxed in a special way or are not considered income
When the taxpayer submits a supplementary declaration and declares income that is taxed in a special way or is exempt from tax or amounts of money that are not considered income, no fine is imposed on them (POL. 1317/2-12-1997).
Supporting documents for the capital consumption of previous years
In order to cover the assumed cost of living and the acquisition of assets by capital consumption from previous years, a detailed table is submitted with the data of the income (income, donations, etc.) and the annual expenditure of assumptions or an amount of 2.900 euros, or 3.000 euros or 5.000 euros, as the minimum amount of living expenses if there are no living expenses (presumptions), of Article 16 depending on the year that it invokes declared incomes for consumption with the amount of the capital formed every year that is intended to cover presumptions.
Addition of the difference between total annual expenditure and total declared income to the final reported income
In the event that the real incomes that are declared by the husband, the wife, and the members of his family who live together, and burden the husband, are smaller than the presumed income, then the difference increases the incomes reported by the taxpayer or his wife. More specifically, when these incomes come from commercial enterprises (income from source D), or liberal professions (income from source G). If they do not declare income from these sources then the whole difference is considered income, under paragraph 3 of Article 48 of Law No. 2238/94 (incomes that cannot be attributed to another source), and it is taxed in the name of the taxpayer or his spouse, depending on to whose detriment the difference is.
Steps that we follow for the calculation of the difference between the total income and presumptions
- We find the total net family income. As shown in Table 4, we aggregate the individual net incomes, which are taxed following the general provisions about tax income with the offsetting of the positive and negative elements. The incomes declared in Table 6 shall not be included in this calculation, which is exempt from taxation or is taxed independently by the exhaustion of the taxation liability.
- We find the estimated total family income.
- We calculate the individual presumptions of living and the acquisition of assets, as they were declared in Table 5.
- We find the difference between the actual and the imputed income. We find the incomes that cover or limit the difference. We add up the incomes declared in Table 6 of the declaration as exempt, taxed in a special way, etc., net amounts derived from the sale of assets, loans, donations, parental allowances of foreign exchange, etc., and capital consumption. If these incomes are greater than the difference of the presumption, then they cover the difference, and therefore, no amount is charged to the actual income.
Although if they are less than the difference of the presumption, then the final difference that remained uncovered is added to the taxable income.
Example: A taxpayer running an individual commercial business in the fiscal year 2010 declares net profits of 40.000 euros, net income from property rental of 10.000 euros (after depreciation and expense deductions), i.e., total net income of 50.000 euros (40.000 + 10.000).
Also, in the same year, there is an objective expenditure from T.I.R. of 20.000 and from buying a store of 100.000€, i.e., a total expenditure of 120.000 euros (20.000€ + 100.000€).
Comparison between actual income and objective expenses.
Total declared real income = 50.000€
Total objective expenditure = 120.000€
Difference: 70.000€
If the taxpayer cannot justify the amounts of money for the total objective expenditure (living and acquisition of assets), then the difference of the 70.000 euros will be added to the income from commercial enterprises, and the taxpayer will be taxed on income from commercial enterprises of 110.000 euros (40.000€ + 70.000€) plus real estate income of 10.000 euros, i.e., the total taxable income of 120.000 euros (110.000€ + 10.000€).
The difference that entails between the total annual objective expenditure, and the total income that was declared by one spouse, can be covered by the income of the other spouse
In the case that the objective expenditure that was declared by the one spouse, is bigger than the income that was declared by the same spouse and the persons they are responsible for then the difference can be covered by the incomes of the other spouse. This can happen if the resulting difference is not covered by other incomes declared by the person in table 6 of the declaration
