Those who own their own home must pay income tax on the so-called owner-occupied home lump sum. This lump sum is 0.35% of the WOZ value of the home, insofar as it lies between €75,000 and the so-called villa limit (€1,350,000 in 2026). If the WOZ value is higher than the villa limit, a flat rate of 2.35% applies to the excess. The increase in the lump sum (2.35% instead of 0.35%) results in higher tax, referred to as ‘villa tax’. The question for the court to answer is whether this tax constitutes an unauthorised infringement of property rights.
Two tax partners own a house with a value under the Valuation of Immovable Property Act of almost €1.7 million. They argue that this increased flat rate violates the right to property and the prohibition of discrimination under the ECHR. After all, the scheme levies on income that is not actually enjoyed. Moreover, it ignores the diminishing border utility in more expensive properties. They refer to the Christmas judgment and the judgments on box 3 and argue that the reasonable relationship between purpose and means is lost. Does the court follow this argument?
The court's opinion
The court ruled that the increased owner-occupied property tax did not violate the ECHR. While levying tax is an interference with the right to property, it is justified if it serves a legitimate purpose and respects a fair balance. The legislator deliberately chose a higher rate for more expensive homes. The idea is that for homes above a certain value, the investment aspect plays a proportionally greater role than the spending aspect. The legislator thus made a difference between owners with homes below or above the limit amount. This choice falls within the legislator's wide discretion. In this regard, the court considers it important that the rate of 2.35% only applies to the part of the value above the villa limit. The fact that the legislator also took into account budgetary considerations does not alter this. Also, the circumstance that the tax is levied on unrealised income does not lead to conflict with the ECHR.