Greek tax residence for individuals and legal entities
Tax Residence according to Greek law
The conditions under which an individual or a legal entity are considered a tax resident in Greece are defined in detail by the Greek Income Tax Code (L.4172/2013), and in particular by the provisions of Article 4 thereof, as amended and in force.
Specifically, the Greek tax legislation considers an individual as a tax resident in Greece when any one of the following conditions are met:
a) the individual has his/her permanent or main residence or habitual abode or the center of his/her vital interests, i.e. his/her personal and economic ties, in Greece (Article 4(1)(a) of the Income Tax Code), or
b) the individual is a consular, diplomatic or public official of a similar status or a civil servant who has a Greek nationality and serves abroad (Article 4(1)(b) of the Income Tax Code), or
c) the individual is present in Greece for a period exceeding 183 days, cumulatively, during any twelve-month period, in which case he/she is considered a tax resident in Greece from the first day of his/her presence in Greece (Article 4 paragraph 2 of the Income Tax Code).
Individuals who are in Greece exclusively for tourist, medical, therapeutic or similar private purposes and whose stay does not exceed 365 days, including short periods of stay abroad, are not considered tax residents in Greece.
A legal entity is considered a tax resident in Greece for any tax year when any one of the following conditions are met:
a) the legal person/entity is incorporated or established under Greek law (Article 4(3)(a) of the Income Tax Code), or
b) it has its registered seat in Greece (Article 4(3)(b) of the Income Tax Code), or
c) the place of exercise of the effective management is in Greece at any time during the tax year (Article 4(3)(c) of the Income Tax Code). The criteria that are particularly taken into account for determining the place of effective management include the place where the day-to-day management is carried out, the place where strategic decisions are taken, the place where the annual general meeting of shareholders or partners is held, the place where the company’s book and records are kept, the place where the meetings of the board of directors or any other executive management body are held, the place of residence of the members of the board of directors or any other executive management body. In conjunction with the existence of the above circumstances and conditions, the residence of the majority of the shareholders or partners may also be taken into account (Article 4(4) of the Income Tax Code).
The Greek tax administration has not issued any Ministerial Decision, Circular or other guidance in relation to the interpretation and application of the above provisions, therefore its context is interpreted and applied in accordance with the OECD Guidelines regarding the place of effective management, taking into account that this is the criterion most DTTs based on the OECD Model Tax Convention (“MTC”) use for determination of the tax residence of a legal person/entity.
In this respect, as the 2017 OECD MTC Commentary on article 4 of the MTC provides, competent authorities applying par. 3 of article 4 of the MTC (regarding place of effective management) would be expected to take account of various factors, such as where the meetings of the BoD or equivalent body are usually held, where the CEO and other senior executives usually carry on their activities, where the senior day-to-day management is carried on, where the headquarters are located, which country’s laws govern the legal status of the legal person, where its accounting records are kept etc.
Based on the above, a place of effective management will generally be where key management and commercial decisions necessary for the conduct of a business are in substance made and given. This will ordinarily be where the directors meet to make decisions relating to the management of the company, but the determination of a place of effective management is a question of fact and other relevant factors taken into account by the courts have included criteria such as where the center of top level management is located, where the business operations are actually conducted, legal factors such as the place of incorporation, the location of the registered office, where controlling shareholders make key management and commercial decisions in relation to the company, where the directors reside etc.
Based on the above, it derives that the determination of the place of effective management of a legal person will depend heavily on the actual facts which will need to be taken into account in a combined manner.
At the time of writing, the relevant Greek legal provision regarding the place of effective management has not been tested in practice, as there is no precedence of either tax audits challenging the tax residence of a foreign legal entity on the basis of the place of effective management rule or of relevant jurisprudence.
However, any such risk is certainly not eliminated, as tax audit practice may change in the future, and in this respect the actual facts and circumstances stipulated by the relevant legal provision of article 4 par. 4 of the Greek ITC would need to be such that demonstrate that the effective place of management of the legal person is indeed in the country where the legal person is established, especially in cases where the place of establishment is a low tax jurisdiction. In this respect, the meetings of the directors and the annual shareholders’ general meeting would need to take place in the place of establishment of the company, the bookkeeping would need to be effected in the place of establishment of the company, the directors should be resident in the place of establishment of the company, and in general there should be supporting documentation demonstrating that the actual day-to-day management and strategic decision-making for the conduct of the business is exercised in the country where the company is established.
On the occasion that the place of effective management of a foreign company is considered, at any time upon e.g. a tax audit by the Greek tax authorities, to be in Greece, this would mean that the company would be considered, for Greek tax purposes, as a tax resident in Greece, subject to the Greek tax legislation and the applicable DTT network of Greece.
* 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.