Taxation of benefits in kind under Greek law
Applicable legal provisions
A. New Greek Income Tax Code (Law 4172/2013, hereinafter the “ITC”)
Article 12 defines the meaning of the gross income received from salaried work and pensions and clarifies the income cases included.
Article 13 defines the meaning of the benefits in kind and their special types and states how their tax value determined.
Article 14 par.1 defines what is excluded when calculating income received from salaried work and pensions.
Article 60 par.1 defines the withholding tax rate which is applicable for the gross income received from salaried work and pensions.
B. Circulars
No. 1219/06.10.2014 provides further details about the benefits in kind categories, and indicates their tax treatment and the entry into force of the withholding tax provision.
No. 1072/31.03.2015 states that benefits in kind are no longer subject to withholding tax, because of the fact that their evaluation seems particularly difficult.
No. 1091/09.04.2015 defines the 31st of December 2015 as the deadline for the submission of any amending file regarding the pay certificates provided by the employers.
MEMO
A. Under Article 12(1) of the new Hellenic Income Tax Code (Law 4172/2013, hereinafter the ITC) gross income from salaried work and pension includes all types of income in cash or kind acquired in the context of any current, past or future employment relationship.
Gross income from salaried work and pensions includes:
a) wages, salaries, allowances for leave, sickness allowances, holiday bonuses, compensation for leave not taken, pay, commission, retainer fees and tips.
b) income including cost of living allowance, daily pay, rental income, remuneration for travel or accommodation costs.
c) reimbursement of expenses incurred by an employee or relative of the employee.
d) a benefit of any type received by the employee before starting work.
e) compensation payable upon termination or rescission of the employment relationship.
f) pensions granted by a main and supplementary mandatory social security provider, and by occupational funds established pursuant to law.
g) the proceeds paid as a lump-sum or in the form of periodic benefits in the context of group pension plans.
h) any other benefit collected in lieu of any existing, past or future employment relationship.
However, under Article 14(1) of that Code, the following are excluded when calculating income from salaried work and pensions:
a) reimbursement of expenses for accommodation and meals and daily remuneration paid to the employee solely for the purpose of the employer’s business activities.
b) reimbursement of travel expenses paid by the employer for work-related purposes, provided they relate to travel expenses incurred by the employee during work, which can be backed up by lawful invoices/receipts.
c) withholdings paid to social security funds which are imposed by law.
d) social security contributions paid by the employee, including employer and employee contributions to occupational funds established pursuant to law.
e) benefits paid lump sum by welfare funds and state social security providers and by occupational funds established pursuant to law to insured parties and dependents of insured parties.
f) benefits of negligible value, of up to € 27 per year.
g) premiums paid by the employee or employer on behalf of the employee as part of group pension plans and
h) premiums paid by the employer for Medicare and hospital coverage for employees or to cover risk to their lives or disability cover in the context of an insurance policy, up to € 1,500 per year per employee.
Moreover, Article 13 of the ITC states that every benefit in kind received by an employee or dependent/relative (i.e. spouse, ascendants or descendants in the direct line) will be taken into account in taxable income at its market value, provided the total value of those benefits exceeds € 300 per tax year.
Circular No. ΠΟΛ.1219/2015 defines ‘market value’ as the cost of the benefit for the employer, demonstrated by the requisite lawful supporting documents entered in its accounting books.
Benefits in kind include:
a) the value of goods represented by gift cheques which were provided, and the cost of purchasing goods or services represented by vouchers which were provided.
b) the value of vouchers given free of charge to purchase goods or services at associated stores. In the case of food vouchers, the benefit in kind is assumed to be any amount exceeding € 6 per working day.
c) use of a company credit card to cover expenses not incurred on behalf of the company, but to cover personal, family or other expenses unrelated to the business interests of the employer or not used in normal commercial transactions, where the cost is assumed by the employer.
d) the benefit accruing to employees, managers, administrators, board members and pensions or companies providing energy, telephony, water supplies, gas, subscriber services (like television) from providing them with a certain quantity of electricity, phone calls, water, natural gas, and subscriber channels, at either a reduced rate or free of charge.
e) various payments made directly by employers to third parties such as:
payments to extra tuition centres, schools, kindergartens, campsites, etc. to cover tuition costs, kindergarten fees, etc. for the aforementioned persons,
direct payments to cover the cost of such persons participating in workshops, programmes or training, education or vocational training courses, or to cover subscriptions to journals or chambers, unrelated to their business activities or the post they hold.
This case also covers the benefit accruing to employees, managers, administrators and board members of private schools due to free studies or studies with reduced tuition fees for their children, excluding scholarships granted by those schools.
direct payments to cover subscriptions for those persons at gyms, clubs, etc. or relating to medical expenses such as check-ups.
providing company mobile phone connections to employees, managers, administrators and board members to the extent that it goes beyond the cost of their tariff plan, provided that the excess above the tariff plan is used for personal reasons and not for reasons associated with the employer’s business activities, given that many businesses cover the specific benefit to support their operating needs, increase productivity and provide a higher level of service (such as communication with customers or associates, etc.) even outside the normal daily working hours. This benefit also includes taxes and levies corresponding to it (VAT and other levies).
It is feasible to segregate the benefit arising from the employer’s business activities from that arising from personal usage by such persons using the itemised bill provided by mobile phone companies, or it may in all events be based on a certificate from the employer confirming the amount each year relating to business or other usage of the company mobile phone.
Where it is not possible to segregate usage in the ways mentioned, the amount exceeding the cost of the tariff plan will be deemed to be a benefit in kind.
B. Special types of benefits in kind:
Article 13(2), (3) and (4) of the ITC states that there are special types of benefits in kind which can be given by natural or legal persons or legal entities to employees or partners or shareholders for which there are no restrictions as to value. These specific benefits are:
a) The market value of use of a company car for any time period in a tax year.
The value is calculated at 30% of the cost of the vehicle entered in the employer’s books as an expense in the form of depreciation, including road tax, repairs, maintenance, and the relevant financial cost corresponding to purchase or leasing of the vehicle, and if the cost is zero, the market value of use of the vehicle is 30% of the average expenditure or depreciation over the last 3 years. Note that if a company car is used for less than one year (e.g. a new recruitment, cases of employees leaving due to retirement or dismissal, etc.) the value of the benefit is calculated pro rata with the actual length of time (in months) it was used for, and any period of time over 15 calendar days is treated as a full month.Other expenditure relating to such vehicles (such as fuel, tolls, etc.) are not taken into account in calculating the market value of company cars.
The following vehicles are excluded:
• Cars provided by companies to specific sales reps, technicians and other employees whose work requires frequent travel away from the employer’s facilities (tool cars), which are used in the employer’s business activities, irrespective of whether those cars may also be used by the beneficiary outside of working hours.
On the contrary, the following are covered by the market value of cars provided to employees due to their position in the company (such as managers or sales inspectors, technical mangers and other executives) and are benefits in kind:
• test-drive cars which car dealers make available to them.
• staff transport vehicles such as mini-buses.
• cars used by companies (such as hotels) to transport guests or customers.
• cars which car repair and service companies provided as temporary replacements for cars being repaired.
• private cars used by airlines and airport management companies to facilitate aircraft and their passengers (runway cars) and cars used to transport VIPs or staff.
b) Benefits in the form of a loan which takes the form of a written agreement.
The benefit is valued based on the difference between the interest the employee would have paid in the calendar month he received the benefit if the interest rate used to calculate the interest was the average market rate (whose calculation method is determined by decision of the Minister of Finance) in the same month, and the interest the employee did in fact pay during that calendar month. Where there is no written loan agreement, the total initial capital shall be deemed to be a benefit in kind. Advances on salaries of over 3 months shall also be treated as loans.
c) Market value of benefits in the form of stock options
Their value is computed at the time the option is exercised or transferred, irrespective of whether the employment relationship continues or not. The market value of exercising the option is the closing price of the share on the stock market less the sale price of the option.Note that this provision covers options exercised from 1.1.2014 onwards, irrespective of when the option was granted, and also covers stock options traded on foreign exchanges.
d) The market value of use of a home for a period of one tax year.
The value of this benefit is computed as the rent paid by the company or, in the case of a residence owned by the employer, 3% of the objective value of the property.The following cases are excluded:
• accommodation provided by the state and public sector bodies to persons serving with it (e.g. uniformed staff) where the law mandates that they travel.
• the provision of accommodation (a home) due to temporary travel by such persons to branches or worksites or other business facilities of the employer in the context of their work.
C. Cases excluded from the benefits in kind category
Benefits which are not considered to be ‘benefits in kind’ and consequently are not ‘income from salaried work’ include:
a) benefits intended solely to cover costs or make goods losses suffered by a natural person in the context of his employment relationship when carrying out work, which by their nature are payable by the employer in which case the benefit cannot be categorised as ‘income’.
b) benefits in kind which are given to individual beneficiaries in person, in their original form and not in cash, to meet operational or productive needs of the business, to help increase productivity and the quality of working conditions or which are occupational H&S measures, such as special work uniforms, the supply of milk, the supply of food in the workplace, or the provision of a parking space at work, etc.
c) the value of work tools provided to such persons (such as tablets or laptops) and the cost of access to the internet for such tools (such as mobile internet) even outside of the normal working day, provided that the provision of such tools supports the company’s operating needs, the increase in productivity and the provision of top quality services. These rules apply to one work tool of each kind.
d) benefits in kind given to the staff of an enterprise pursuant to an enterprise-specific collective labour agreement (CLA) (Article 3(1)(c) of Law 1876/1990) given that they are provided to met the working needs of the enterprise’s employees.
D. Withholding tax
Article 60(1) of the ITC states that benefits in kind, and monthly income from salaried work and pensions, wages and lump-sum benefits, are subject to a withholding tax based on the sliding scale in Article 15(1) of the Code, after having first been calculated on an annualised basis.
Under Circular No. ΠΟΛ 1104/9.4.2014 the withholding tax for income from salaried work and pensions takes effect from 1.1.2014.
Moreover, Circular No. ΠΟΛ 1219/2014 states that the provisions of Article 13 relating to benefits in kind apply to income acquired from 1.1.2014 onwards, which will be subject to withholding tax from 1.1.2015.
However, subsequent circular No. ΠΟΛ.1072/2015 makes it clear that due to the fact that it is difficult -if not impossible- to calculate the value of benefits in kind at the time they are granted, withholding tax on those benefits will not be made but the tax owed will be calculated when the tax return is being finalised given that their value (if taxable) increases the income of beneficiaries from salaried work. In cases where withholding tax has already been withheld for these benefits, that tax will be offset when the tax return is finalised.
E. Pay certificates
The employers’ payroll departments must value these benefits which increase the taxable income of employees and include those amounts in the pay certificates covering income from salaried work and pensions which they issue.
Circular No. ΠΟΛ.1091/2015 states that for the 2014 tax year, the last date for submission the initial pay / pension / fees from business activities certificates file in good time online using the internet is 10.5.2015. If any amending files for pay / pension / fees from business activities certificates are submitted, the last date for submitting them in good time is 31.12.2015.Note that the amended file must necessarily be submitted by the same user who submitted the original pay certificate and must contain all entries, not just corrected entries