The tax audit on the increase of property


We are coming back to the question of increase of property that we have dealt with in a previous article, as a result of many questions from taxpayers concerned about recent publications regarding audits of individuals listed in the Tax Audit Service for High Net Worth Individuals (KEFOMEP).

In this respect, taxpayers must be aware that, in accordance with the applicable tax provisions (paragraph 4 of article 21 of Law 4172/2013) and the previous Law 2238/1994 (paragraph 3 article 48), any property increase deriving from an unlawful or unjustifiable or unknown source or cause, is considered as profit from a business activity and is taxed accordingly.

Taxable property gains arise from tax audits accompanied by the opening of bank accounts or the application of indirect audit techniques by the tax authority, which is obliged to take into account the following:

  • The taxable amount to be incurred by the taxpayer must be real and documented.
  • Amounts for which their origin is not proven and are in principle considered to be an increase of property do not constitute concealment of taxable items, to the extent that they are outweighed by the taxpayer's unspent funds.
  • A deposit in a bank account, if it has been withdrawn from the same or another bank account of the same beneficiary, irrespective of the length of time that has since elapsed and of the absolute numerical identification of the two, is "sufficiently presumed and for the benefit of the taxpayer" that it came from a previous withdrawal from its already taxed capital.
  • There is no unjustified increase in assets or credit in a money account whose source is obvious. This is true even if this amount has not been included in the relevant income tax returns. In these cases, tax is charged according to the type of income (e.g. property, capital, etc.).
  • The failure to present national accounts due to an objective impossibility to produce the relevant supporting documents (e.g. because the time has passed for keeping the relevant records from the bank) implies acceptance of the taxpayer's claims unless the tax authority has other data for rejecting his/her allegations.
  • If the acquisition of an investment took place in a period other than the tax years under review, or the incoming foreign transfer is derived from deposits / income from previous years, the relevant credits are considered justified for the audited period and do not justify an extension of the tax audit in these previous years.
  • The amount of a bank account that fed a remittance and was considered an increase of property is taxed as income from business activity for the accounting period in which it first entered the property of the account holder. Transferring it by wire transfer from a beneficiary's bank account to another bank account (domestic or foreign) does not constitute an increase in its assets.
  • Credit that is proven to derive from individual business is taxed as profit from a business activity and is subject to other taxes (e.g. VAT) if it has not already been taxed.
  • Prior to the implementation of indirect audit techniques, the audit authority invites the audited person via mail to provide a table of assets and a questionnaire regarding living conditions, in order to get the necessary data to apply the new audit techniques. These data are taken on a family basis not only of the taxpayer, but also of the spouse and the protected members.

Taxpayers with indications that they are going to be audited may need to ask their accountant or tax consultant to apply the three indirect audit techniques, initially for some of the years 2014-2016, to see if there is an 'unreasonable property increase'.

G. Samothrakis, J. Panou
Posted on Sunday newspaper KATHIMERINI on 18/02/2018

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