GREEK TAX LAW
1. Constitutional Provisions | top
All Greek citizens contribute to public expenditures without distinction according to their financial ability.
Article 78
- A tax may be imposed only by law passed in Parliament.
- The Parliament may not delegate its legislative power to the Government
or other authority concerning the object and the rate of taxation as well
as the tax exemptions.
- A tax may not be imposed by retroactive legislation extending beyond the previous economic year.
Ratified International treaties constitute an integral part of the Greek legal system and prevail over any contrary statutory provision.
2. Bilateral treaties for the avoidance of double taxation | top
COUNTRIES
 |
LAW / LEGISLATIVE DECREE / EMERGENCY LAW
|
GOVERNMENT GAZETTE ISSUE |
SIGNED
|
DATE OF ENFORCEMENT |
| U.S.A | L.D.2548/53 |
231 & 333/1953 |
20/02/1950 |
30/12/1953 |
| United Kingdom | L.D.2732/53 | 329/1953 | 25/06/1953 | 15/01/1954 |
| Germany | E.L.52/67 | 134/1967 | 18/04/1966 | 01/01/1964 |
| India | L.D.4580/66 | 235/1966 | 11/02/1965 | 01/01/1964 |
| Sweden | L.D.4300/63 | 73/1963 | 06/10/1961 | 01/01/1964 |
| France | L.D.4386/64 & 73/1965 | 192/1964 | 21/08/1963 | 31/01/1965 |
| Cyprus | E.L.573/68 | 223/1968 | 30/03/1968 | 01/01/1967 |
| Austria | L.D.994/71 | 210/1971 | 22/09/1970 | 05/01/1972 |
| Holland | L.1455/84 | 89/1984 | 16/07/1981 | 01/01/1981 |
| Finland | L.1191/81 | 206/1981 | 20/01/1980 | 01/01/1982 |
| Switzerland | L.1502/84 | 192/1984 | 16/06/1983 | 01/01/1983 |
| Italy (as reviewed) |
E.L.23/67 L.1927/91 | 109/1967 17/1991 | 03/09/1987 | 01/01/1984 |
| Hungary | L.1496/84 | 178/1984 | 25/05/1983 | 01/01/1985 |
| Czech Republic | L.1838/89 | 86/1989 | 23/10/1986 | 01/01/1990 |
| Slovakia | L.1838/89 | 86/1989 | 23/10/1986 | 01/01/1990 |
| Poland | L.1939/91 | 37/1991 | 20/11/1987 | 01/01/1991 |
| Denmark | L.1986/91 | 189/1991 | 18/05/1989 | 01/01/1992 |
| Norway | L.1924/91 | 16/1991 | 27/04/1988 | 01/01/1992 |
| Romania | L.2279/95 | 9/1995 | 17/09/1991 | 01/01/1996 |
| Israel | L.2572/98 | 12/1998 | 24/10/1995 | 01/01/1999 |
| Korea | L.2571/98 | 11/1998 | 20/03/1995 | 01/01/1999 |
| Croatia | L.2653/98 | 250/1998 | 18/10/1996 | 01/01/1999 |
| Luxemburg | L.2319/95 | 127/1995 | 22/11/1991 | 01/01/1999 |
| Uzbekistan | L.2659/98 | 268/1998 | 01/04/1997 | 01/01/1999 |
| Albania | L.2755/99 | 252/1999 | 14/07/1995 | 01/01/2001 |
| Bulgaria | L.2255/94 L.2927/01 | 195/1994 140/2001 | 15/02/1991 | 01/01/2002 |
| Armenia | L.3014/2002 | 103/2002 | 12/05/1999 | 01/01/2003 |
| Georgia | L.3045/02 | 198/2002 | 10/05/1999 | 01/01/2003 |
| Spain | L.3015/02 | 104/2002 | 04/12/2000 | 01/01/2003 |
| Portugal | L.3009/02 | 90/2002 | 02/12/1999 | 01/01/2003 |
| S. Africa | L.3085/02 | 319/2002 | 19/11/1998 | 01/01/2004 |
| Ukraine | L.3046/02 | 199/2002 | 06/11/2000 | 01/01/2004 |
| Slovenia | L.3084/02 | 318/2002 | 05/06/2001 | 01/01/2004 |
| Ireland | L.3300/04 | 262/2004 | 24/11/2003 | 01/01/2005 |
| Turkey | L.3228/04 | 32/2004 | 02/12/2003 | 01/01/2005 |
| Belgium (as reviewed) | L.D.117/69 L.3407/05 | 41/1969 266/2005 | 25/05/2004 | 01/01/2006 |
| China | L.3331/05 | 83/2005 | 03/06/2002 | 01/01/2006 |
| Kuwait | L.3330/05 | 82/2005 | 02/03/2003 | 01/01/2006 |
| Latvia | L.3318/05 | 46/2005 | 27/03/2002 | 01/01/2006 |
| Lithuania | L.3356/05 | 152/2005 | 15/05/2002 | 01/01/2006 |
| Mexico | L.3406/05 | 265/2005 | 13/04/2004 | 01/01/2006 |
| Moldavia | L.3357/05 | 153/2005 | 29/03/2004 | 01/01/2006 |
3. Income taxation on natural persons | top
Article 1
Tax is imposed on the total net income generated in Greece or abroad that is derived by any natural person that fulfils the requirements of article 2.
Article 2
Every natural person that derives income generated in Greece is subject to tax regardless of his nationality and his place of domicile. Every natural person that domiciles in Greece, regardless of nationality, is subject to tax for income derived outside Greece.
Article 3
Tax is imposed in every financial year on income derived during the previous economic year. The duration of each financial year is from the 1st of January until the 31st of December of the same calendar year.
Article 4
Income on which tax is imposed is the gross income derived from any source after deduction of the expenses incurred to produce it. Tax imposed according to the provisions of this law, penalties or additional taxes are not deducted from this income.
Income is distinguished according to its source into the following categories:
A-B Income from real property
C Income from financial instruments
D Income from commercial activities
E Income from agricultural activities
F Income from remunerated services
G Income from the exercise of a liberal profession and from any other source.
Income tax is computed on the aggregate income from all sources. Loss from any source is in principle offset against profit from another. Losses incurred in the exercise of commercial, agricultural, mining, industrial and hotel activities can be carried forward up to 5 tax years in order to be set off against profits.
Losses incurred from sources outside Greece can only be set off against profits of the taxpayer made outside Greece.
Income from the lease of real property or interest on loans that is deemed to have been derived but has not been collected by the taxpayer can be excluded from the computation of the total income provided that a) the taxpayer proves the non-collection of this deemed income and b) the debt is assigned (gifted) by the taxpayer to the State which latter acquires all the legal rights against the taxpayer's debtor.
Article 5
Married couples are obliged to fill in a common tax return but each spouse is taxed on his/her own income separately. Losses of one spouse cannot be set off against gains of the other.
If the income of one spouse (A) comes from the exercise of a business / profession which is depended financially on the other spouse (B), this income is added up on the income of that other spouse (B) and is taxed on his/her (B's) name.
Article 8
Provides for certain deductions that are allowed from the net income of the taxpayer:
- the annual rent paid for the principal residence of the taxpayer and his/her family
- life insurance premiums and nursery fees
- medical and hospital expenses
- tuition fees for private lessons of foreign languages etc for the taxpayer's children or for himself - money paid for the purchase of a personal computer, peripherals that constitute an integral part with the p.c. and money paid for gaining access to the Internet.
Article 9
The net income remaining after deduction of the expenses (according to article 8) is taxed according to the following tables:
Income received between 1.1.2001 - 31.12.2001 (In Greek drachmas)
| Income scale
|
Tax rate |
Tax
|
Total income
|
Total tax
|
| 2.100.000 |
0% |
0 |
2.100.000 |
0 |
| 746.000 |
5% |
37.300 |
2.846.000 |
37.300 |
| 1.706.000 |
15% |
255.900 |
4.552.000 |
293.200 |
| 3.407.000 |
30% |
1.022.100 |
7.959.000 |
1.315.300 |
| 9.088.000 |
40% |
3.635.200 |
17.047.000 |
4.950.000 |
| over |
42,5% |
n/a |
n/a |
n/a |
Income received after 1.1.2002 (in Euros)
| Income scale
|
Tax rate |
Tax
|
Total income
|
Total tax
|
| 6.163 |
0% |
0 |
6.163 |
0 |
| 2.190 |
5% |
110 |
8.352 |
110 |
| 5.006 |
15% |
751 |
13.358 |
860 |
| 10.000 |
30% |
3.000 |
23.357 |
3.860 |
| 26.670 |
40% |
10.668 |
50.027 |
14.528 |
| over |
40% |
n/a |
n/a |
n/a |
4. Corporate income tax | top
An E.P.E. pays corporation tax on the profits which actually arise during its accounting period. The rate of the tax for the financial year (1 January to 31 of December) during which the profits arise is currently 29% and as of the 1st of January 2007 it will drop to 25%. With this taxation at 25% of the net profits of the E.P.E., the tax obligation is fulfilled both for the company and its members. This applies for all members of the E.P.E., whether Greek or foreign natural or legal persons regardless of whether there is a treaty for the avoidance of double taxation between Greece and the country of their permanent residence.
Profits are considered to be acquired on the same day the meeting of the shareholders resolves on the balance sheets and profits distributed; otherwise they are presumed to be acquired on the last day of a three month period after the expiry of the fiscal year.
Until the introduction of law 3190/2002 a so called "business or entrepreneur fee" was deducted from the profits of the EPE. After deduction, the remainder was taxable in the name of the legal entity. That business fee was considered as income of the managing members from commercial activities for which a withholding tax of 15% was imposed plus stamp duty @ 1,20%.
By virtue of law 3190/2002 article 8 the business fee system was abolished so that the total income of the EPE is now taxed in its name at 29% (25% as of 1.1.2007).
Taxation of the "A.E." (Company limited by shares or "S.A.")
According to §1e of Law 2238/1994 (Greek income tax code) Greek S.A. companies, other than banks and insurance companies, are taxed based on their total net income or profit derived from their business activity in Greece or abroad. By the same article it is provided that the profits distributed are taken from the remainder of their profits left after the deduction of the corporate income tax payable. Consequently, corporate income tax on S.A. companies is calculated on their total taxable income before the deduction of any profits to be distributed. Of course, dividends distributed are free from any further taxation because they correspond to profits already taxed.
An A.E. pays corporation tax @ 29% on the profits which actually arise during the fiscal year. The applicable rate for profits that will arise after 1.1.2007 is 25%.
5. Import duties | top
6. Buying property in Greece | top
The requirement for a notarial act Article 369 of the Greek Civil Code provides: Contracts that have as object the creation, alteration, transfer or annulment of rights in real property must be made in the presence of a notary public.
The requirement for the presence of a lawyer before the notary public Article 42 of the Code of Advocates (Legislative Decree 3026/1954). The obligation for the presence of a lawyer before the notary applies where the contractual value of the property is above €29.347,0286 for the jurisdiction of Athens & Piraeus. For all other jurisdictions the relevant threshold is €11.738,8114.
The system of “objective value” (or tax value) of the property. By virtue of law 1249/1982, a system of objective value of real property has been established. This system provides for a minimum value of real property according to objective criteria such as position, size, public facilities in the area, age of the building etc. This system has been imposed so that the tax authorities have a reference minimum value in imposing taxes in relation to land. In cases of transfer of land, the transfer tax is calculated on either that “objective value” or the value agreed in the contract, whichever is the highest. The objective values are in 99% of the cases much lower than the market values.
2. The main tax considerations of real property ownership.
a. Obligation for filing a tax return. By virtue of article 61 § 1 óô’ of Law 2238/1994 (Income Tax Code), residents abroad who buy or erect building(s) in Greece are obliged to file a tax return in Greece. By virtue of article 61 § 1 æ’ of the same law, residents abroad who possess one or more primary or secondary residence in Greece with a total surface of 150m2 or more, are obliged to file a tax return in Greece.
b. Tax on the transfer of real property – Burdens the buyer. The tax rates applicable are the following Real property in areas subject to urban planning where fire brigade squad is based: 9% for value between 0 - €15.000 & 11% for value exceeding €15.000 Real property in areas not subject to urban planning: 7% for value between 0 - €15.000 & 9% for value exceeding €15.000.
c. Tax on the income from real property. Income from real property is declared together with other income of the taxpayer in his annual tax return and it is added to his other income which is then subject to the relevant tax rates. The main points that need to be considered for income produced from real property are the following: i. There are strict limits regarding the deductible expenses relating to income from land. ii. The ownership of residential property exceeding 200m2 regardless of whether it is used by the owner or rented constitutes “deemed income” of the owner. This essentially means that if one is owner of his main residential property that has surface of 300 m2 , he is deemed to pay rent for the 100 m2 exceeding the 200. If the property is rented and not inhabited by the owner, this deemed income is indifferent from a tax point of view because the taxpayer shall declare it anyway as income produced. For each recreational (summerhouse) property exceeding 150 m2 the deemed income applies only to 3 months per year.
d. Tax on Large Immovable Property. This tax has been established by virtue of Law 2459/1997. It taxes great immovable property. Subject to tax is the total value of the property owed by an individual or a corporation if it exceeds the amount of €243.580. The tax rate on corporations owning large immovable property is uniform (0, 7%) for all the value exceeding the above amount. The tax rates on individuals are escalating from 0, 3 up to 0,8%. The first rate (0, 3%) applies to the firs €150.000 above the tax free value. The second rate (0, 4%) applies accordingly to the next €150.000 and so on. The rate of 0, 7% applies to value up to €1.027.000 above the tax free value. Any value above €243.580 (tax free) + €1.027.000 (rates 0, 3% to 0, 7%) is taxed @ 0, 8%. Married couples enjoy a more beneficial tax-free zone of €487.160. The tax is due yearly and a special Large Immovable Property Tax Return is filled.
3. Ownership by a natural person VS ownership by a company.
The intervention of a legal entity for tax reasons aims mainly to the following:
a) Less tax on the subsequent transfer. The tax on the transfer of property applies equally to individuals and corporations. The difference lies in the subsequent transfers. If a company owns land, transferring its shares instead of the property itself leads to the same result with less tax. The tax on the transfer of shares of companies not listed in the stock exchange is 5%. This method is usually adopted for inheritance tax planning.
b) Application of corporate income tax rates. Tax rates on individuals range from 0 to 40%. Corporations currently enjoy a uniform corporate income tax rate of 35%. For this uniformity to be beneficial, the annual income subject to tax must be at least €112.000. If it is less, the individuals’ rates lead to less tax.
c) Tax base – the possibility of deducting expenses. Where the property is owned by an individual, the expenses relating to that property that may be deducted from the gross income in order to come up with the net taxable income produced by that property, are very limited (up to 15%). This means that if you incur expenses for renovation, painting, insurance etc. not all of them may be deducted if they exceed 15% of the gross income produced by the property. On the other hand, where the property is owned by a corporation, the income is calculated following the application of the accounting method, by full deduction of all justifiable expenses. This, in combination with the corporate income tax rates leads to a beneficial situation because it offers the possibility for reducing the tax base.
7. Taxation of dividends | top
Before presenting the tax treatment in Greece of dividend distribution it is useful to understand two notions taken from the tax theory.
1) The notion of "economic double taxation":
This is the situation whereby the same income is tax twice in the hands of two different tax-payers. In the case of dividends, economic double taxation occurs where the profits of a corporation are taxed before distribution, e.g. by 35% and then, when the corporation distributes dividends to its shareholder (natural person) the latter is taxed again for the dividends received according to the applicable income tax provisions on natural persons.
2) The notion of "international double taxation":
This is the situation where the same income is taxed by two different countries. In the case of dividends, this may occur when country A imposes a witholding tax on dividends and at a second stage, country B taxes the dividend again, without crediting the tax already paid in country A.
It may be that the combination of legal provisions in two different countries leads to both economic and international double taxation. This is why it is useful to look into the matter from many different prespectives.
The notion of "economic double taxation" is an internal matter of a state, whereas the notion of international double taxation is a matter that is governed by international treaties on the avoidance of double taxation. According to the relevant model treaty provisions of OECD, the model of which most countries usually adopt (including Greece), if tax is payable by natural persons in their country of residence for dividends received by companies established in the other country, the tax authority of the country of residence must credit the taxpayer with the tax already paid in the other country.
The tax treatment of dividend distribution in Greece
In the case of Greece the matters are significantly simple, however. Since law 2065/1992 Greece totally exempts dividends from income taxation on natural persons. An S.A. company is subject to corporate tax (currently @32%) regardless of whether it chooses to distribute dividends or not. If it chooses to distribute dividends, and it does so to a natural person, the natural person is not going to be taxed for that income because essentially this has already been taxed in the name of the S.A. company.
So if the distribution is made to a Greek natural person resident and taxable in Greece, the dividends received are tax-free. However, in the case of a natural person residing (and subject to tax) abroad, the Greek state again does not impose any tax (witholding or other) BUT whether this income from the Greek company's distributed dividend is subject to tax in the country of residence is a matter of internal taxation of the country of residence. Before coming to final conclusions it is always advisable to look whether a treaty for the avoidance of double taxation is signed between Greece and the specific country in question, and if so, what that treaty provides in relation to dividends.
8. Inheritance tax Q A | top
1) Who is liable to submit an inheritance tax declaration?
The successor or his lawful representative (article 61 of the Code of Taxation Relating to Inheritances – Donatio inter Vivos and Parental Grants, as ratified by Law 2961/01).
2) Which is the term within which the inheritance tax declaration must be submitted?
The inheritance tax declaration must be submitted within 6 months if the deceased has died in Greece or within a year, if the deceased or his successors or his legatees were residing abroad at the time of death.
The above mentioned term commences from:
- the death of the deceased
- the publication of the will or
- the publication of the final decision which declares the presumption of death or
- the death of the person who although was liable to submit a declaration he did not do so or
- the appointment of the guardians of the estate in abeyance, of the executors of the will, of the trustees in bankruptcy or
- their acknowledgement, in case of guardians of the estate in abeyance or
- the time as defined in articles 7 and 8 of the Code.
The above mentioned six-month or annual deadline may be extended by a decision of the head of the competent tax authority, for another 3 months at the maximum, provided that there exist substantial reasons (articles 62, 63 and 64).
3) Which supporting documents are necessary at the time of the submission of the inheritance tax declaration?
a) A certificate of death
b) A copy of the will
c) A certificate of inheritance or a certificate by the competent municipal or communal authority regarding the type and the degree of kinship to the deceased
d) A certificate issued by the Secretary of the Court of First Instance which declares that no other will has been published recently or that no will at all has been published (in cases of intestates deaths)
e) A certificate which indicates the age of the beneficial owner, when in order to ascertain the value his age is taken into account
f) A document of legalization, if the successors are represented by a proxy
g) The documents which prove the metathesis of the time at which the tax obligation has emerged.
h) Documents which indicate the burdens imposed on the inheritance in question (article 67).
4) Which is the competent Tax Authority before which the inheritance tax declaration must be submitted?
If the deceased was resident in Greece, the inheritance tax declaration must be submitted at the tax authority which is situated in the area in which the deceased used to reside. If the deceased was residing abroad, the inheritance tax declaration must be submitted before the Aliens Tax Authority. However, if the deceased resided abroad, but died in Greece, the inheritance tax declaration must be submitted before the Tax Authority which is situated in the area where the death took place (article 66).
9. The deductible expenses from the gross income of a business with B' category accounting books | top
As gross income of the company is considered the income recorded in the B' Category Books. The following expenses may be deducted from the gross income, under the condition that the company accounting books are found by the tax control to be "true and accurate" (i.e.: if there are no violations/breaches).
The general administration expenses, the detailed citation of which would be rather scholastic. Thus we must have in mind that in general every expense related to the company may be deducted. Indicatively, we mention the following:
- Expenses arising from the wages/ salaries paid to the company's personnel,as well as the insurance fees paid by the employer (company).
- The rent fees of the company
- Any insurance fees paid related to possible group personnel and company's
insurance
- The interests of any loans undertaken by the company
- Taxes - fees- stamp tax (except from the tax paid on profits and on income)
- The depreciations of the company's standing charges (facilities - machinery -
furniture - company wares)
- The expenses which have emerged from the company's incorporation and
establishment
- The advertisement and promotion expenses for the company
- The expenses undertaken for the support of the company relating to facilities that
are supplied to it from an affiliate company (either national or overseas)
- Fees paid to third parties, such as accountants and lawyers etc, which are not
employees of the company
- Transportation expenses
- Electricity, Water, Postal and Telephone expenses (utility expenses)
- Manufacturing and Packing Materials etc
- Software Programmes
The lawful documents must exist in order to deduct the above mentioned expenses. The above mentioned are mere indications of expenses that can be deducted and do not constitute an exhaustive list of deduction cases. For this reason, it is advisable that in cases of doubt the expenses have to be approved on a case by case basis.
However, if you require an up-to-date exhaustive list of expenses approved by ministerial decisions, laws and case-law, we will have to prepare a more detailed study.
Finally, care has to be taken whenever an invoice is submitted for payment and filed in your books as a deductible expense. There exist scum companies of which the only activity is the production of fraudulent invoices that are effectively sold to businesses to minimize their tax burden. This practice is dangerous and incurs criminal and administrative sanctions for both the issuer and the receiver of such invoices.
10. Tax return submission by tax payers who live abroad but gain income in Greece | top
The person who is authorized to accept service should submit any income tax declaration on behalf of the taxpayer who lives abroad but gain income in Greece, as he/she has been authorized to do so.
- For the persons who are authorized to accept service and are resident in the Prefecture of Attica, the competent Tax Authority is the Aliens Tax Authority whose registered office is situated in Athens in 4, Metsovou Street, Tel:+30210 5228057 - Fax: +30210 5228208
- For the persons who are authorized to accept service and are resident in the Prefecture of Thessalonica, the competent Tax Authority is the 8th (È') Tax Authority of Thessalonica.
- For the persons who are authorized to accept service and are resident in the rest of Greece, the competent Tax Authority is the First (A') Tax Authority of the capital of the Prefecture in which they reside. (e.g.: For the Prefecture of Achaia, the competent Tax Authority is the First (A') Tax Authority of Patra).
- For the islands that fall under the Prefectures of Attica-Dodecanese-Lesvos-Magnesia-Kavala-Corfu-Cephalonia-Cyclades and Samos, the competent Tax Authority in each island is that in which the person authorized to accept service submits his/her tax declarations. However, when the capital of the Prefecture is located in the above mentioned islands, the competent Tax Authority is the First (A') Tax Authority of the Athens.
11. Permanent establishment of foreign legal entities in Greece | top
1) For the purposes of Greek income tax law (L. 2238.1994), permanent establishment of a foreign business or corporation in Greece is deemed to exist provided that the latter:
- Has one or more shop(s), establishment(s), agency (ies), branch (es), office(s), warehouse(s), factory (ies), workshop(s), and/or facilities designed to extract natural resources or
- Proceeds to the industrialisation of raw materials or processes agricultural products with its own facilities or through the use of the facilities of others in Greece which others act under its order and on its behalf or
- Conducts business in Greece or provides services through a representative, who is authorised to and can negotiate and conclude contracts on behalf of the foreign legal entity, and also when the business or services are offered without a representative, provided that they are related to the drawing up of studies or projects or the conduct of research in general or provided that these works and services are technical or scientific in general or
- Keeps a stock of merchandise from which it executes commercial orders on its own name or/ in its own name/ on its behalf
- Participates in a "personal company" or a limited liability company, which is resident in Greece.
2) For the purposes of determining the net profit produced in Greece by the permanent establishment of a foreign business, the charging of the permanent establishment in Greece with general management expenses and other organisational and operational expenses occurred and undertaken by the head offices of the business abroad cannot exceed 5% of the managerial and operational expenses occurred in Greece by the permanent establishment of the foreign business, as these expenses appear to be in the annual financial statements of each given tax year. The necessary certificates and paperwork for the recognition of theses expenses as well as details regarding the application of the provisions of the present article are determined by decrees issued by the Minister of Finance.