Taxation of dividends received by a Greek tax resident from the United Kingdom

Taxation of dividends received by a Greek tax resident from the United Kingdom

According to the general rules of Greek law, based on Articles 9, 36 and 40 of the Income Tax Code:

If, during the tax year, a taxpayer – natural person who is a tax resident in Greece – earns income abroad, the income tax payable by that taxpayer in respect of that income is reduced by the amount of tax paid abroad on that income. The payment of the tax abroad is proven by the relevant supporting documents. The reduction in income tax provided for may not exceed the amount of tax corresponding to this income in Greece. The term “dividends” means income arising from shares, founding titles, or other rights to participate in profits that do not constitute claims on debts, as well as income from other corporate rights, including shares, shares including interim dividends and mathematical reserves, participations in the profits of personal enterprises, distributions of profits by any kind of legal person or legal entity, and any other related distributed amount. Dividends are taxed at a rate of five per cent (5%). Furthermore, it should be specifically examined whether the relevant Double Taxation Agreement provides for a foreign tax credit in this case, and under what terms and conditions. Specifically, according to Article XIV of the Double Taxation Convention between Greece – United Kingdom and with regard to the tax treatment of dividends, it appears that the State of residence of the shareholder, in this case Greece, is allowed to tax dividends arising in the other State, but must credit against its own tax on those dividends the tax paid in the State in which the dividends arise, based on the rate specified in the relevant provisions of the relevant Convention regarding the taxation of dividends. In addition, however, the United Kingdom is one of the countries where the Double Taxation Convention also provides for the crediting of the corporate tax corresponding to the distributed dividend (underlying tax credit). In other words, if the income is a regular dividend paid by a company based in the United Kingdom, the deduction will be calculated not only on the tax corresponding to the dividend in the United Kingdom, but also on the tax paid by the company in the United Kingdom on the corresponding part of its profits. In the case of a dividend paid on preference shares and comprising both the ordinary dividend and an additional profit share, the tax paid by the company in the United Kingdom will also be taken into account, provided that the dividend exceeds a specified percentage.

It should be noted that, under the Double Taxation Agreement, this deduction applies provided that the amount of the deduction does not exceed the amount of tax levied in Greece on the specific income.

According to Article 28 of the Constitution, the provisions of DTAs ratified by law prevail over the provisions of domestic legislation that may regulate the same matter, and therefore the relevant provisions of our domestic legislation apply to matters not expressly regulated by the provisions of DTAs.

In order to ensure the proper application of the above terms of the Double Taxation Agreement and the inclusion in the income tax return of natural persons (form E1) of the amount of foreign corporate tax attributable to the shareholder and in order for this to be credited against that attributable to Greece, in accordance with administrative circular POL. E.2018/2019, it is mandatory to submit a certificate from the competent tax authority of the United Kingdom, which shall cumulatively include the following information:

• The full details of the legal entity that made the profit distribution
• Certification that the legal entity is a resident of the contracting State for the purposes of applying the relevant Double Taxation Agreement
• The total amount of income tax paid by the legal entity
• The percentage of participation of the shareholder (or partner) – natural person in the share (or corporate) capital of the legal entity that made the distribution
• The amount of the dividend received by the natural person and the corporate tax attributable to him.

Alternatively, certificates from other public authorities are also accepted, provided that they prove the above, even in combination. Certificates issued by the legal entity itself or other private individuals (chartered accountants, accountants or lawyers) are not accepted.

Please note that all foreign public documents issued in the United Kingdom must bear the Hague Apostille for the purposes of certifying their authenticity and be accompanied by an official translation into Greek.

With regard to the exact entry of foreign tax on Form E1, please note that the following should be entered:

• in codes 683-684 of E1, the amount of tax withheld and/or paid abroad on foreign dividend income that Greece is also entitled to tax, as well as the amount of foreign corporate tax attributable to the shareholder, so that this tax can be credited by the person responsible for this dividend in Greece.
• in codes 297-298 of E1, the amount of tax that has been withheld by mistake for foreign dividends and in Greece. The tax that has been withheld by mistake by a domestic financial institution when the dividend was imported into Greece is declared.

 

 

 

 

 

* 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.