Membership in the EU and the obligation to comply with its requirements is one of the stimuli for tax reforms in each of the member states. The European countries use the EU-member status and the eurozone as reasons to transform their tax systems. The average paid by the EU citizens in property tax is 100 to 400 euros per year.
Almost in all EU countries almost every property owner pays property tax, which is calculated according to three main approaches:
- Progressive tax rates – pro rata to the property value.
- Tax rates depends on the total floor area of the real estate.
- Tax rate is fixed and is set by the municipality.
Property tax in transition countries of Central and Eastern Europe represents only 1% of their GDP.
The lowest property tax of all European countries is collected in Luxembourg as a percent of its private capital stock and is set at 0.05%. The other countries with low property tax rates are Switzerland with 0.11% and Austria with 0.13%. The UK, France and Poland on the other hand are countries with the highest property tax rates, namely 2.53%, 1.7% and 1.61% respectively. At that, Ireland and Malta do not collect property tax at all. Cyprus and Hungary do not collect property tax under certain circumstances. For example, in Cyprus the owner of property with a value of less then EUR 120,000.00 will not be subject to property tax, and in Hungary one might be exempt from property tax under a special decision of the municipality.
The only country in Europe that taxes only the value of land, excluding the value of buildings and structures on that land, is Estonia, which makes it the country with the most efficient property tax.