Property tax

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A property tax (or millage tax) is a levy on property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state, a county or geographical region, or a municipality. Multiple jurisdictions may tax the same property. This is in contrast to a rent and mortgage tax, which is based on a percentage of the rent or mortgage value.

There are four broad types of property: land, improvements to land (immovable man-made objects, such as buildings), personal property (movable man-made objects), and intangible property. Real property (also called real estate or realty) means the combination of land and improvements. Under a property tax system, the government requires and/or performs an appraisal of the monetary value of each property, and tax is assessed in proportion to that value. Forms of property tax used vary among countries and jurisdictions. Real property is often taxed based on its classification. Classification is the grouping of properties based on similar use. Properties in different classes are taxed at different rates. Examples of different classes of property are residential, commercial, industrial and vacant real property.^[1] In Israel, for example, property tax rates are double for vacant apartments versus occupied apartments.^[2]

A special assessment tax is sometimes confused with property tax. These are two distinct forms of taxation: one (ad valorem tax) relies upon the fair market value of the property being taxed for justification, and the other (special assessment) relies upon a special enhancement called a "benefit" for its justification.

The property tax rate is often given as a percentage. It may also be expressed as a per mil (amount of tax per thousand currency units of property value), which is also known as a millage rate or mill (which is also one-thousandth of a currency unit). To calculate the property tax, the authority will multiply the assessed value of the property by the mill rate and then divide by 1,000. For example, a property with an assessed value of $50,000 located in a municipality with a mill rate of 20 mills would have a property tax bill of $1,000 per year.^[3]

Property taxes by jurisdiction

Property tax rates, assessment rules, and valuations vary widely by jurisdiction.

Australia

Australia has property taxes known as property or land rates. Land rates and frequency of payment are determined by local councils. Each council has land valuers who value the land's worth. The land's worth is the value of the land only; it does not include existing dwellings on the property. The assessed value of the land determines the total charges of rates. Rates can range from $100 per quarter to $, but frequency varies by locality. Australian property owners also pay water rates. Some councils include this in the total of the rates notice and provide a breakdown of water and land charges. Other councils may charge this separately. Depending on the municipality, water rates can be either a flat fee, user pay or a combination of both. Prospective buyers can get details about land and water rates from the local council before purchase.

Australia also has stamp duty, applied at the time a property is sold, by the purchaser to the Office of State Revenue. In addition to stamp duty there is also a Land Transfer Charge under the NSW State Revenue Legislation Amendment Bill 2010 (1 July 2010). The Charge will be levied as an ad valorem tax to be paid by the purchaser, for property above $500,000 in value, and is payable at the time a transfer document is lodged for registration with Land & Property Information (LPI).

Stamp duty rates are applied on a sliding scale of 1% to 6.75% based on the value of property and the state of Australia.

Canada

Many provinces in Canada levy property tax on real estate based upon the current use and value of the land. This is the major source of revenue for most municipal governments in Canada. While property tax levels vary among municipalities in a province there is usually common property assessment or valuation criteria laid out in provincial legislation. There is a trend to use a market value standard for valuation purposes in most provinces with varying revaluation cycles. A number of provinces have established an annual reassessment cycle where market activity warrants while others have longer periods between valuation periods.

Calculating Individual Property Taxes

In Ontario, for most properties (e.g., residential, farms), the property taxes can be calculated by multiplying the phased-in assessment indicated on the Property Assessment Notice by the tax rate.

Municipal tax rate x phased-in assessment for the particular taxation year = municipal portion of tax

county/regional tax rate x phased-in assessment for the particular taxation year = county/regional portion of tax

education tax rate x phased-in assessment for the particular taxation year = education portion of tax

municipal portion of tax + county/regional portion of tax + education portion of tax = Total Property Tax

In some cases (e.g., commercial, industrial, multi-residential properties), the Province or municipality may implement measures that affect the actual taxes paid on a property.

Chile

Land property taxes, called "territorial tax" or "contributions", is an annual amount paid quarterly by the property's owner. It is determined as a percentage of the property's "fiscal value," which is calculated by the Internal Revenue Service, based on the property's land and built area, the value of the construction materials, its age and its use. The fiscal value, which is usually much lower than the market value, may be disputed by the owner. The annual levy varies between 1 to 2% of this value, depending on the property's use (residential, agricultural or commercial). Residential properties valued below US$40K (as of 2013) are not taxed; those above that threshold are taxed only on the amount exceeding it.^[4] The collected taxes go to the municipality administering the property's commune.^[5] All municipalities contribute a share of the revenue to a "common municipal fund," which is then redistributed back to municipalities according to their needs (commune's poverty rate, etc.).^[6][7] Additionally, municipalities charge a quarterly trash collection tax, which is often paid together with the territorial tax (if applicable).

Denmark

The property tax in Denmark is 1% for property valued at less than DKK 3 million and 3% for property valued above DKK 3 million.

Greece

Greece has a Municipal and a Government property tax. The municipal property tax (ΤΑΠ/ΔΤ/ΔΦ) is included in electricity bills and incorporates, among others, charges for street cleaning and lighting. The Government property tax (ENFIA) is a combination of the individual asset's tax based upon floor-area and a progressive real-estate wealth tax per individual which is based on the estimated net-worth of all properties and can reach 2%.

Hong Kong

In Hong Kong, there is a kind of tax named a property tax, but it is not an ad valorem tax; it is actually classified as an income tax.

According to HK Inland Revenue Ordinance IRO s5B, all property owners shall not be subject to this tax; unless the HK property owner has received a consideration, the example is rental income for the year of assessment. The property tax shall be computed on the net assessable value at the standard rate.

Year of Assessment

The period of assessment is from 1 April to 31 March of the following year.

Net assessable value

The formula is:

Net assessable value = 80% of Assessable value.

HK property tax payable = Net assessment value X Property tax standard rate

Assessable value = Rental income + Premium + (Rental bad debt recovered — Irrecoverable rent) – Rates paid by owner.

Jamaica

This tax is paid annually and is based on a percentage of the unimproved value of a property.

India

Property tax or 'house tax' is a local tax on buildings, along with appurtenant land, and imposed on owners. It resembles the US-type wealth tax and differs from the excise-type UK rate. The tax power is vested in the states and it is delegated by law to the local bodies, specifying the valuation method, rate band, and collection procedures. The tax base is the annual rental value (ARV) or area-based rating. Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually six percent. Vacant land is generally exempt. Central government properties are exempt. Instead a 'service charge' is permissible under executive order. Properties of foreign missions also enjoy tax exemption without an insistence for reciprocity. The tax is usually accompanied by a number of service taxes, e.g., water tax, drainage tax, conservancy (sanitation) tax, lighting tax, all using the same tax base. The rate structure is flat on rural (panchayat) properties, but in the urban (municipal) areas it is mildly progressive with about 80% of assessments falling in the first two slabs.^[8]

Ireland

A Local Property Tax will come into effect in Republic of Ireland on 1 July 2013, and will be collected by the Revenue Commissioners. The tax will be on residential properties, with the owner a property being liable (though in the case of leases over twenty years, the tenant will become liable). The revenue raised will be used to fund the provision of services by local authorities. Such services currently include public parks; libraries; open spaces and leisure amenities; planning and development; fire and emergency services; maintenance and cleaning of streets; and street lighting.

The tax will be based upon the market value of the property, taxed via a system of market bands. The initial national central rate of the tax will be 0.18% of a property's value up to €1 million, and in the case of properties valued over €1 million, 0.25% on the balance. From 1 January 2015, local authorities will be able to vary LPT rates -/+ 15% of the national central rate.

In the case of properties valued over €1 million, no banding will apply – 0.18% will be charged on the first €1 million (€1,800) and 0.25% on the balance. The government estimates that 85% to 90% of all properties will fall within the first five taxation bands.^[9][10]

Netherlands

Property tax (Dutch: Onroerendezaakbelasting (OZB)) is levied on homes on a municipal basis in two parts: for the one who lives in the house, and for the owner of the house. There are some exemptions for widows and widowers. Those with a rental home are liable only for the living part of the tax.

United Kingdom

There is currently no ad valorem tax on residential property. Two former systems were dropped because of their unpopularity and (in the case of rates) the gradual separation of the voter base from the revenue base:

• Schedule A income tax, a central government tax that was levied on the imputed rent, that is the rent that owner-occupiers of land would have been receiving from a tenant had they not been living in the houses they owned. However, actual (as opposed to imputed) rent is still subject to income tax under Schedule A.
• Rates, a local government tax that was levied in proportion to the assessed value of property; this proportion itself was fixed or set by a schedule or formula that determined rateable value by reference to actual or imputed rental value, but the amount levied floated according to the budget decided on by councillors (originally only elected by ratepayers), giving rise to a charge distributed proportionally over all the relevant properties. This was replaced under the Thatcher government by the Community Charge (popularly known as "poll tax"), which proved even more unpopular than the rates, and was replaced by a mixed Council Tax which combines elements of property tax and a poll tax. Rates are still (2010) levied on business property, though some classes of business are exempt.

A Mansion Tax is proposed by Labour for residential property valued over £2m, subject to winning the 2015 general election.^[11]

United States

In the United States, property tax on real estate is usually levied by local government, at the municipal or county level. Rates vary across the states, between about 0% and 4% of the home value.^[12] The assessment is made up of two components—the improvement or building value, and the land or site value. The property tax is the main tax supporting local education, police/fire protection, local governments, some free medical services, and most of other local infrastructure. Also, many U.S. state and local jurisdictions impose personal property taxes.

Egypt

Property tax was approved in the parliamentary session of 2008, and was applied legally beginning in 2010 in accordance with Article 14 of Law 196 of 2008. The law imposes a tax on each property built. Public buildings are excluded (such as government buildings), as are religious buildings (mosques and churches).

Places without property tax

Africa

•  Kenya^[13]
•  Mauritania^[14]
•  Namibia^[15]

Europe

•  Faroe Islands^[16]
•  Malta^[17]

Oceania

•  Palau ^[18]
•  New Zealand^[19]
•  Norfolk Island^[20]
•  Cook Islands^[21]

See also

• Allodial title
• Land value tax

References

Property Types Common property Common land Community Croft Intangible Intellectual indigenous Personal Private Public State Crown property Crown land Tangible immovable real Commons Common-pool resource Digital Global Information Knowledge Communal land Theory Bundle of rights Comedy of the commons Common good economics term Excludability First possession appropriation homestead principle Free rider problem Game theory Georgism Gift economy Labor theory of property Law of rent rent-seeking Legal plunder Natural rights Ownership common customary self state Property rights primogeniture usufruct women's Right to property Rivalry Tragedy of the commons anticommons Applications Acequia (watercourse) Ejido (agrarian land) Forest types Inheritance Land tenure Open access Property law alienation easement restraint on alienation real estate title Rights Air Fishing Forest-dwelling (India) freedom to roam Grazing pannage Hunting Land aboriginal indigenous squatting Littoral Mineral Bergregal Right of way Water prior-appropriation riparian Disposession Redistribution Bioprospecting Collectivization Eminent domain Enclosure Eviction Expropriation Farhud Forced migration population transfer Illegal fishing Illegal logging Land reform Legal plunder Piracy Poaching Primitive accumulation Privatization Regulatory taking Slavery bride-buying human trafficking wage wife selling Tax inheritance poll progressive property Theft Scholars (key work) Frédéric Bastiat Ronald Coase Henry George Garrett Hardin Tragedy of the Commons David Harvey John Locke Two Treatises of Government Karl Marx Marcel Mauss The Gift John Stuart Mill Elinor Ostrom Karl Polanyi The Great Transformation Pierre-Joseph Proudhon What Is Property? David Ricardo Jean-Jacques Rousseau The Social Contract Adam Smith The Wealth of Nations Categories Property Property law by country