Tax Treatment in Greece of Directors’ Fees Received from a Lithuanian Company
Directors’ fees received by a Greek tax resident from participation on the board of directors of a Lithuanian company raise important cross-border tax considerations, both under the Double Tax Treaty (“DTT”) between Greece and Lithuania and under Greek domestic tax law.
The analysis below assumes that the remuneration constitutes directors’ fees paid in consideration for duties performed in the capacity of a board member of the Lithuanian company, and that such remuneration does not relate to employment services or dividend distributions.
Double Tax Treaty Between Greece and Lithuania
The taxation of directors’ fees is governed by Article 16 of the DTT between Greece and Lithuania, which provides that:
“Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or any other similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.”
Under this provision, taxing rights are allocated to both states:
- the state where the company paying the remuneration is established (Lithuania), and
- the state of tax residence of the recipient (Greece).
The wording “may be taxed” means that Lithuania retains the right to tax the directors’ fees at source, without excluding Greece’s right to tax the same income on the basis of the recipient’s worldwide income taxation.
Greek Income Tax Treatment
Under Article 12 paragraph 2(d) of the Greek Income Tax Code (“ITC”), directors’ fees are classified as employment income for Greek tax purposes.
This position has also been confirmed through administrative guidance issued by the Greek tax authorities (indicatively Circulars DEAFA 1064780 EX 2015/11.5.2015 and D12A 1058454 EX 8.4.2014), according to which remuneration paid to directors or board members, whether provided under the company’s articles of association or approved by the general meeting of shareholders, constitutes employment income.
Accordingly, such income is subject to taxation in Greece based on the progressive tax scale applicable to employment income.
Applicable Greek Income Tax Rates
| Annual Income (€) | Tax Rate |
| 0 – 10,000 | 9% |
| 10,000.01 – 20,000 | 20% |
| 20,000.01 – 30,000 | 26% |
| 30,000.01 – 40,000 | 34% |
| 40,000.01 – 60,000 | 39% |
| Over 60,000 | 44% |
Relief from Double Taxation
Where directors’ fees are taxed both in Lithuania and in Greece, relief from double taxation may generally be obtained through a foreign tax credit mechanism provided under both the DTT and Greek domestic legislation.
Treaty Relief
Pursuant to Article 24 of the Greece–Lithuania DTT, Greece shall grant a tax credit equal to the tax paid in Lithuania on income that may be taxed there under the Treaty.
However, the foreign tax credit cannot exceed the amount of Greek tax attributable to the same income.
Greek Domestic Rules
Similarly, Article 9 of the Greek ITC provides that Greek income tax corresponding to foreign-source income is reduced by the amount of foreign tax already paid abroad on that income, up to the amount of the Greek tax due.
Supporting Documentation for Foreign Tax Credit Claims
In order for a foreign tax credit to be recognised in Greece, specific supporting documentation must be submitted together with the annual Greek income tax return, in accordance with Circular POL.1026/2014.
In cases involving countries with which Greece has concluded a DTT, the taxpayer is generally required to provide:
- a certificate issued by the competent foreign tax authority confirming the tax paid abroad, duly Apostilled; or
- where tax has been withheld by a company or individual, a withholding certificate certified by the competent foreign tax authority, or alternatively a certificate issued by a Certified Auditor.
Proper documentation is essential to support the recognition of the foreign tax credit by the Greek tax authorities.
Lithuanian Tax Considerations
The Lithuanian domestic tax treatment of directors’ fees, including potential withholding tax obligations and applicable compliance requirements, should be assessed separately under Lithuanian tax law and in consultation with local tax advisors in Lithuania.
* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.