Bill on “plastic money” to usher in new system for tax-free allowance
The draft bill tabled in Parliament last week will usher in a new way for tax-payers to “build up” their tax-free allowance as of January 1, 2017, exclusively through the use of debit and credit cards.
Only transactions and purchases using “plastic money” will be taken into account in order to accumulate the necessary limits, while the final amount needed will vary according to declared income.
The amounts that must be spent in order to get a tax free allowance rise going up the income brackets, from 10 pct of total income for those earning up to 10,000 euros a year, to 15 pct for those earning between 10,001 and 30,000, and then 20 pct (up to a maximum of 30,000 euros) for higher income brackets.
This means that an employee earning 10,000 euros a year must spend 1,000 euros using credit and debit cards in order to get the full tax-free allowance and an employee earning 15,000 must spend 1,750 euros. For annual salaries of 20,000 euros, the amount rises to 2,500 euros, for 30,000 euros to 4,000 euros, while for 50,000 euros annual income, transactions of 8,000 euros are needed to get a full tax-free allowance.
If a tax-payer fails to meet the required spending limits using ‘plastic money,’ the difference will be taxed at a rate of 22 pct. For example, if a tax-payer with an annual declared income of 30,000 euros carries out transactions with credit and debit cards amounting to 3,000 euros in a year – instead of the required 4,000 euros – that tax-payer will be liable to pay 22 pct of the 1,000-euro difference, or an extra 220 euros in tax.
The finance ministry is expected to further specify the categories of spending that will not count toward the tax-free allowance, categories of tax-payers to be exempted for mandatory use of electronic means of payment, as well as additional incentives for tax-payers that exceed the minimum spending limits.
Initially, foreign ministry employees, members of the military serving abroad, those serving at the Permanent Greek Representation in the EU and those residing in homes for the elderly, psychiatric wards and in prison are exempted.
The bill also stipulates that medical costs will only be tax-deductible if payment is made electronically.
In addition, the bill is expected to increase electronic payments by introducing mandatory use of cards or other electronic payment methods for transactions exceeding 500 euros, instead of the present 1,500 euros, as well as lotteries with significant cash prizes using receipt numbers.
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