Tax treatment of dividend distributed by a foreign company to a Greek tax resident
(Independent Authority for Public Revenue (IARP) circular No 2018 of 28.1.2019)
It follows from the combination of the provisions of the DTTs regarding the tax treatment of dividends, that the State of tax residency of the shareholder may tax the dividends arising in the other State, but must credit its own tax on such dividends, to the tax paid in the State in which the dividends arise, at the rate specified in the relevant provisions of the relevant DTT.
However, some Double Tax Treaties include the article on elimination of double taxation provisions on the credit and on the corporate tax attributable to the distributed dividend (underlying tax credit). These DTTs are listed below, together with the respective provisions:
Albania (Law 2755/1999) – Article 23
In the Hellenic Republic:
If a resident of the Hellenic Republic acquires income or owns capital which, in accordance with the provisions of this Treaty, may be taxed in Albania, the Hellenic Republic shall recognize it:
– as a deduction from the income tax of this resident, an amount equal to the income tax paid in Albania,
– as a deduction from the capital tax of that resident, an amount equal to the capital tax paid in Albania.
Such deduction shall in no case exceed the part of the income or capital tax, as calculated before the deduction is granted, corresponding to the income or capital which is taxable in Albania.
If dividends are paid by a company, resident in Albania, to a resident of the Hellenic Republic, the tax credit will consider (in addition to the tax credited as above) the tax payable by the company in respect of the profits, from which the dividends are paid.
Armenia (Law 3014/2002) – Article 24
If a resident of a Contracting State acquires income or holds capital which, in accordance with the provisions of this Treaty, may be taxed in the other Contracting State, the first State shall recognize it:
(a) as a deduction from the income tax of that resident, an amount equal to the income tax paid in that other State,
(b) as a deduction from the capital tax of that resident, an amount equal to the capital tax paid in that other State.
But such a deduction, in either case, shall not exceed that part of the income or capital tax, as computed before the deduction is given, which corresponds to the income or capital which may be taxed in that other State.
If dividends are paid by a company, resident in one Contracting State, to a resident of the other Contracting State, the tax credit shall consider (in addition to the tax credited above) the tax paid by the company in respect of profits from which the dividends are paid.
Georgia (Law 3045/2002) – Article 24
In the Hellenic Republic:
If a resident of the Hellenic Republic acquires income or holds capital which, in accordance with the provisions of this Treaty, may be taxed in Georgia, the Hellenic Republic shall recognize it:
(i) as a deduction from that resident’s income tax, an amount equal to the income tax paid in Georgia,
(ii) as a deduction from that resident’s capital tax, an amount equal to the capital tax paid in Georgia.
However, such a deduction in both cases shall not exceed that part of the income or capital tax, as calculated before the deduction is given, which corresponds to the income or capital which may be taxed in Georgia.
In the case of a dividend paid by a company resident in Georgia to a resident of the Hellenic Republic, the tax credit will consider (in addition to the tax credited as above) the tax payable by the company making the distribution in respect of the profits from which the dividends are paid.
Estonia (Law 3682/2008) – Article 23
In the case of a resident of the Hellenic Republic, double taxation will be avoided as follows:
When a resident of the Hellenic Republic acquires income or holds capital which, in accordance with the provisions of this Treaty, may be taxed in Estonia, the Hellenic Republic shall recognize:
– as a deduction from that resident’s income tax, an amount equal to the income tax paid in Estonia,
– as a deduction from the capital tax of that resident, an amount equal to the capital tax paid in Estonia.
Such a deduction, however, in both cases does not exceed that part of the income tax or capital tax, as calculated before the deduction is given, which corresponds to the income or capital that can be taxed in Estonia.
Where dividends are paid by a company resident in Estonia to a resident of the Hellenic Republic, the tax credit will consider (in addition to the tax credited as above) the tax payable by the company in respect of the profits from which such dividends are paid.
United Kingdom (Decree-Law 2732/1953) – Article XIV
The laws of the Contracting Parties shall continue to govern the taxation of income arising in either of the territories, except where express provision to the contrary is made in the present Treaty. Where income is subject to tax in both territories, relief from double taxation shall be given in accordance with the following paragraphs of this Article. (2) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom, Greek tax payable, whether directly or by deduction, in respect of income from sources within Greece shall be allowed as a credit against the United Kingdom tax payable in respect of that income. (3) Subject to the provisions of the law of Greece regarding the allowance as a credit against Greek tax of tax payable in a territory outside Greece, United Kingdom tax payable, whether directly or by deduction, in respect of income from sources in the United Kingdom shall be allowed as a credit against any Greek tax payable in respect of that income. Where such income is an ordinary dividend paid by a company resident in the United Kingdom, the credit shall take into account, in addition to the United Kingdom tax appropriate to the dividend, the United Kingdom tax payable by the company on the corresponding part of its profits; and, where it is a dividend paid on participating preference shares and representing both a dividend at the fixed rate to which the shares are entitled and an additional participation in profits, the United Kingdom tax so payable shall likewise be taken into account in so far as the dividend exceeds that fixed rate; provided that the amount of the credit shall not exceed the amount of the Greek tax charged in respect of that income.
China (Law 3331/2005) – Article 23
In the Hellenic Republic, double taxation is eliminated as follows:
Where a resident of the Hellenic Republic earns income which, in accordance with the provisions of this Agreement, may be taxed in China, the Hellenic Republic shall allow as a deduction from the income tax of such resident an amount equal to the income tax paid in China.
However, this deduction will not exceed that part of the income tax, as calculated before the deduction is granted, which corresponds to the income that may be taxed in China.
When dividends are paid by a company resident in China to a resident of the Hellenic Republic, the tax credit will consider (in addition to the tax credited as above) the corporate tax on the profits from which the dividends are paid.
Cyprus (Law 573/1968) -Article 21
Methods for the Elimination of Double Taxation
The laws of the Contracting States shall continue to govern the taxation of income derived from either Contracting State except where express provision to the contrary is made in this Treaty. Where income is taxed in both Contracting States, double taxation shall be avoided in accordance with the provisions of the following paragraphs of this article.
Subject to the provisions of Greek tax legislation concerning the deduction, granted in the form of a credit against the Greek tax, of tax payable outside Greek territory, the Cypriot tax payable in accordance with the tax legislation of Cyprus, whether indirectly or directly by withholding, in connection with income derived from sources in Cyprus, shall be allowed as a credit against the Greek tax payable in respect of that income.
If that income is an ordinary divined paid by a company resident in Cyprus, the credit shall take into account (in addition to the Cypriot tax in respect of that dividend) the Cypriot tax payable by the company in respect of its profits and, if the dividend is paid on privileged shares and represents both a dividend at a fixed rate, to which the shares are entitled, and an additional participation in profits, the Cypriot tax payable by the company in this connection shall also be taken into account to the extent that the dividend exceeds the fixed rate.
For the purposes of paragraph 2, the term ‘’Cypriot tax’’ payable shall be deemed to include:
- The Cypriot tax which would be payable in respect of any profits or interest for which relief or exemption from Cypriot tax is allowed as a tax incentive.
- The Cypriot tax which would be withheld from any dividends paid out of profits for which relief or exemption from Cypriot tax is allowed as a tax incentive.
Subject to the provisions of Cypriot tax legislation concerning the deduction, granted in the form of a credit against the Cypriot tax, of tax payable outside Cypriot territory, the Greek tax payable in accordance with the tax legislation of Greece, whether indirectly or directly by withholding, in connection with income derived from sources in Greece, shall be allowed as a credit against the Cypriot tax payable in respect of that income.
If that income is an ordinary dividend paid by a company resident in Greece, the credit shall take into account (in addition to the Greek tax in respect of that dividend) the Greek tax payable by the company in respect of its profits and, if the dividend is paid on privileged shares and represents both a dividend at a fixed rate, to which the shares are entitled, and an additional participation in profits, the Greek tax payable by the company in this connection shall also be taken into account to the extent that the dividend exceeds the fixed rate.
For the purposes of paragraph 4, the term ‘’Greek tax’’ payable shall be deemed to include:
- The Greek tax which would be payable in respect of any profits or interest for which relief or exemption from Greek tax is allowed as a tax incentive.
- The Greek tax which would be withheld from any dividends paid out of profits for which relief or exemption from Greek tax is allowed as a tax incentive.
If an individual who is a resident of Greece for the purposes of Greek tax and also a resident of Cyprus, that income may be taxed by either of the Contracting States (in accordance with the tax legislation in force in that Contracting State and with any agreement for the avoidance of double taxation of income between that Contracting State and the territory from which the income is derived, but a credit shall be granted against the tax imposed by either Contracting State — on that portion of the income which is subject to tax in both Contracting States – which credit shall bear the same proportion to the amount of the tax (as reduced by the application of any deduction allowed in connection with the tax payable in the country in which the income arises) or to the amount of the tax imposed by the other Contracting State (reduced as above), whichever is less, as the first-mentioned amount (before any reduction) bears to the aggregate of the two amounts (before any reduction).
For the purposes of this article, profits or renumeration for professional services or for services as an employee performed in one of the Contracting States shall be regarded as income derived from sources in that Contracting States, and the services of any individual performed wholly or mainly aboard a ship registered in one of the Contracting State or an aircraft operated by a resident of one of the Contracting States shall be deemed to be performed in that Contracting State.
Latvia (Law No 3318/2005, Government Gazette A’ 46) – Article 24 (1)
In the case of a resident of the Hellenic Republic, double taxation will be avoided as follows:
When a resident of the Hellenic Republic acquires income or holds capital which, in accordance with the provisions of this Treaty, may be taxed in Latvia, the Hellenic Republic shall recognize:
(i) as a deduction from the income tax of that resident, an amount equal to the income tax paid in Latvia,
(ii) as a deduction from the capital tax of such resident, an amount equal to the capital tax paid in Latvia.
Such a deduction, however, in both cases does not exceed that part of the income tax or capital tax, as calculated before the deduction is given, which corresponds to the income or capital that can be taxed in Latvia.
Where dividends are paid by a company resident in Latvia to a resident of the Hellenic Republic, the tax credit will consider (in addition to the tax credited as above) the tax payable by the company in respect of the profits from which such dividends are paid.
Lithuania (Law 3356/2005) – Article 24(1)
In the case of a resident of the Hellenic Republic, double taxation will be avoided as follows:
When a resident of the Hellenic Republic acquires income or holds capital which, in accordance with the provisions of this Treaty, may be taxed in Lithuania, the Hellenic Republic shall recognize:
(i) as a deduction from that resident’s income tax, an amount equal to the income tax paid in Lithuania,
(ii) as a deduction from the capital tax of such resident, an amount equal to the capital tax paid in Lithuania.
Such a deduction, however, in both cases shall not exceed that part of the income tax or capital tax, as calculated before the deduction is given, which corresponds to the income or capital which may be taxed in Lithuania.
Where dividends are paid by a company resident in Lithuania to a resident of the Hellenic Republic, the tax credit will consider (in addition to the tax credited as above) the tax payable by the company in respect of the profits from which such dividends are paid.
Uzbekistan (Law 2659/1998) – Article 23
If a resident of a Contracting State acquires income or owns property which, in accordance with the provisions of this Treaty, may be taxed in the other Contracting State, the first State shall recognize:
(a) as a deduction from the income tax of that resident, an amount equal to the income tax paid in that other State,
(b) as a deduction from that resident’s property tax, an amount equal to the capital tax paid in that other State.
Such a deduction in either case shall not, however, exceed that part of the income or property tax, as computed before the deduction is given, which corresponds to the income or property which may be taxed in that other State.
Where dividends are paid by a company resident in one Contracting State to a resident of the other Contracting State, the credit shall consider (in addition to the tax credited as aforesaid) the tax payable by the company in respect of the profits out of which such dividends are paid.
Slovenia (Law 3084/2002) – Article 23
If a resident of a Contracting State acquires income or holds capital which, in accordance with the provisions of this Treaty, may be taxed in the other Contracting State, the first-mentioned State shall recognize:
a) as a deduction from the income tax of that resident, an amount equal to the income tax paid in the other State,
(b) as a deduction from the capital tax of that resident, an amount equal to the capital tax paid in the other State.
Such a deduction, however, in both cases shall not exceed that part of the income or capital tax, as calculated before the deduction is given, which corresponds to the income or capital which may be taxed in the other State.
In the Hellenic Republic:
If a dividend is paid by a company resident in Slovenia to a resident of the Hellenic Republic, the tax credit referred to in paragraph 1 shall consider (in addition to the tax credited as above) the tax payable by the company on the profits from which the dividends are paid.
According to Article 28 of the Constitution, the provisions of a DTT ratified by law take precedence over the provisions of any domestic legislation that may regulate the same matter and therefore the relevant provisions of our domestic legislation apply to those matters not expressly regulated by the provisions of the DTT.
Following the above, for the application of the provisions of the above-mentioned DTTs, the tax due on dividends acquired by a natural person – tax resident in Greece from a foreign company is credited to the foreign corporate tax, while for those issues not explicitly regulated by the provisions of the Treaty, the provisions of our domestic legislation and specifically the Income Tax Code and the Code of Tax Procedure apply.
To ensure the correct application of the terms of the DTTs, and in order to indicate in the personal income tax return (E1) the amount of the foreign corporate tax due to the shareholder and in order for it to be credited against the amount due in Greece, a certificate from the tax authority of the counterparty states is required, which will include the following information:
– The full details of the legal entity that made the profit distribution
– Certification that the legal entity is resident in the Contracting State for the purposes of the application of the relevant Double Tax Convention
– The amount of income tax paid in total by the legal entity
– The percentage of participation of the shareholder (or partner) in question individual person in the share (or partnership) capital of the legal person making the distribution
– The amount of the dividend received by the individual person and the corporate tax payable.
Alternatively, certificates from other public authorities are also acceptable, provided that they prove the above, even in combination. Certificates issued by the legal person itself or by other private persons (auditors, accountants, or lawyers) are not acceptable.
* 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.