Who Is Liable For Income Taxes In Greece
Individuals who are residents of Greece are taxed on their worldwide income. Nonresidents are taxed on their Greek source income only.
Individuals are considered to be Greek tax residents if they satisfy any of certain specified conditions, including, among others, the following:
- They establish their domicile or place of habitual abode in Greece. An individual’s habitual abode is deemed to be in Greece if the individual spends more than 183 days per calendar year in Greece unless he or she proves otherwise.
- They are Greek individuals who transfer their domicile or place of habitual abode to an uncooperative country.
- They are deemed to be Greek tax residents for a five-year period from the date on which they change their tax residence status if they satisfy all of the following conditions:
— They transfer their domicile or habitual abode into a preferential tax jurisdiction.
— They filed Greek tax resident returns during the five years preceding the transfer.
— They have a substantial economic interest in Greece.
Individuals considered to be Greek tax residents must declare their worldwide income and are subject to tax on such income in Greece.
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of various income items.
Employment income. Employees are subject to income tax on income derived from employment, which includes income from salaries, wages, allowances, pensions, stock-based compensation and any other payments periodically made in cash or in kind for services rendered and certain other income items.
Bonuses paid to employees in the banking industry are now taxed at rates of up to 90%. The applicable tax rates are higher than the average tax rate applicable to other sources of income.
To calculate taxable income, income derived from all sources is accumulated. All deductible expenses (see Deductions) are subtracted, and the tax due is calculated at the graduated rates. Certain tax credits may be claimed (see Credits).
Under court decisions, expatriates working in Greece may take the position that certain benefits do not constitute taxable income. Although the tax authorities have sometimes disputed this position, they have generally accepted the position in recent years. However, the acceptance of the position by the authorities should not be assumed, and the issue should be examined on a case-by-case basis. Benefits for which this favorable position can be taken include the following:
- Home-leave reimbursement
- Moving expenses
Expatriates must be reimbursed for the actual amount of costs incurred rather than be paid lump-sum allowances, such as home leave allowances.
Other payments usually made to employees on international assignment are taxable, including the following:
- International service premiums
- Cost-of-living allowances
- Housing and education benefits
- Relocation bonuses
- Performance bonuses
- Employee tax reimbursements
- Other allowances paid periodically and regularly
Self-employment and business income. Individuals are subject to income tax on business income, which is defined as income derived from any commercial, industrial or other activity undertaken for profit, as well as from a profession. In addition, self-employed individuals engaged in commercial activities must use the accrual method of accounting and must include in taxable income various items, including all receipts, expense reimbursements and interest payments directly related to the commercial activities.
Income derived from the activities described above is subject to income tax at the rates or at the corporate rate, depending on the structure of the enterprise.
Investment income. Distributions and capitalizations by Greek companies (in the form of a société anonyme [SA] or eteria periorismenis efthinis [EPE]) that are approved on or after 1 January 2012 will be subject to a 25% withholding tax. Profits distributed or capitalized in 2011 are subject to a 21% withholding tax.
Profits distributed by Greek SAs or Ltds in the following forms are taxed at a rate of 25% (21% for dividends received during the 2011 fiscal year), regardless of whether they are paid in cash or in shares:
- Dividends or interim dividends
- Remuneration and percentages of profits paid to members of the board of directors and managers
- Remuneration to employees apart from salaries
The rate of 25% (or 21% for dividends received during the 2011 fiscal year) also applies to profits credited or remitted to the head office by branches.
Individuals who are tax residents in Greece are taxed on the basis of the personal income tax rate scale with respect to the dividends that they receive, but are subject to different treatment depending on their total income.
Individuals whose total income (dividends included) is subject to a maximum tax rate lower than 25% (or 21% for dividends received during the 2011 fiscal year) are entitled to a refund of the excess amount of tax that has been withheld on the dividends. In contrast, the tax liability for dividends is final for individuals whose total income (dividends included) is subject to a maximum tax rate higher than 25% (or 21% for dividends received during the 2011 fiscal year).
Foreign dividends received by Greek resident individuals from foreign legal entities or other foreign legal forms are subject to a final tax at a rate 25% (21% for dividends received during 2011).
Banks must withhold a 10% tax from accrued interest earned by Greek residents on the transfer of foreign bonds or interest coupons. This tax is considered a final withholding tax.
Interest paid by banks operating in Greece on all types of deposits denominated in euros is subject to a 10% final withholding tax. Deposits denominated in currencies other than euros in Greek banks are exempt from tax if the depositor is a nonresident. For Greek tax residents, foreign interest is also subject to a 10% final withholding tax.
Rental income and royalties are aggregated with income from other sources and taxed at the rates. For non-residents, the withholding tax rate for royalties is 25% unless otherwise provided by a relevant double tax treaty.
Profits derived by individuals from the sale of shares listed on the Athens Stock Exchange or in any recognized foreign stock exchange market that are acquired on or before 31 December 2011 are subject to transaction tax at a rate of 0.15%, which is increased to 0.20% for sales taking place on or after 1 April 2011. Capital gains derived from the sale of listed shares acquired on or before 31 December 2011 are exempt from income tax.
Capital gains derived from the sale of listed shares acquired on or after 1 January 2012 will be subject to tax according to the general income tax provisions. No transaction tax duty applies.
Directors’ fees. Effective from 1 January 2009, directors’ fees paid in accordance with an employment agreement of the company, excluding fees insured with the Social Insurance Institute (IKA; see Section C) are taxed at a rate of 35%.
Directors’ fees paid in accordance with an employment agreement with the company that are insured with the Social Insurance Institute are taxed at the progressive income tax rates for individuals.
Salary and payments of any kind paid by Greek EPEs to their partners that are not insured with IKA are taxed at a rate of 35%, effective from 23 April 2010.
Deemed income. The amount of declared income is compared with the amount of deemed income, determined based on evidence relating to amounts spent on the acquisition of assets and on living expenses.
In general, amounts spent for the acquisition of assets are considered evidence of income to the extent that such amounts cannot be justified by the following:
- Taxable income
- Tax-exempt income or income that has been taxed under special rules, such as bank interest and directors’ fees
- Capital that has been accumulated out of taxed or tax-exempt income of prior years or from the sale of assets
- The importation of foreign exchange into Greece (restrictions apply to the importation of foreign exchange by Greek tax residents to cover deemed income)
- Contracted loans
- Gifts received or gains from lotteries
Capital purchases (for example, a home or car) constitute deemed income on an “actual expense” basis. Certain items generate deemed income under the “living expenses” section. In this context, deemed income from “living expenses” is derived from assets that are owned, while deemed income from “actual expenses” is derived from amounts spent to purchase assets. Currently, the list of deemed income items consists of the following:
- Motor cars, pleasure boats, aircraft, and chattels of great value.
- The annual deemed income for using a private home, owned or rented or granted for free. The deemed income is calculated based on the square meters of the home and on the zone prices applicable for the respective location. For secondary residences, the amount described in the preceding sentence is reduced by half.
- The annual objective living expense for cars is calculated according to the engine capacity of each car.
- Swimming pools.
- Annual donations in excess of €300, except donations made to the state and municipal governments and other government bodies.
- Loans and gifts from parents to children in excess of €300.
- Annual expenditure for the payment of interest and principal with respect to loans or credit.
- Purchases of valuable articles over €10,000.
- Loans granted except for loans to companies, joint ventures or societies from partners or shareholders.
- Private education and private school tuition fees, and remuneration for housemaids, private drivers, teachers and other household personnel.
Detailed rules are provided for the calculation of deemed income.
Taxation of employer-provided stock options. Effective from 23 April 2010, the benefits derived from stock options is determined through a new method. Under the new method, the stock-exchange price taken into account is the price applicable at the time the right is actually exercised instead of the price applicable at the time the right is granted (the price taken into account under the prior rule). If the beneficiary has left the company as a result of retirement, change of employment or similar reasons, the benefits are taxed as freelancers’ income.
Capital gains. Gains derived from the transfer of a right connected with an enterprise, including a sublease, patent or trademark, are subject to a final tax at a rate of 25%. Gains derived from the transfer of a personal business or a limited or unlimited liability partnership to a first or second degree relative of the transferor, are taxed at a rate of 5% or 10%, respectively. Capital gains derived from the transfer of parts of EPEs are taxed at a rate of 20%. The actual sale value of unlisted shares of Greek companies or the agreed sale value of unlisted shares of foreign companies is subject to a 5% tax for individuals.
For individuals, no further tax is imposed on the gains described in the preceding paragraph.
Deductions
Personal deductions. An automatic dependent disability (over 67%) deduction may be deducted in determining an individual’s tax base.
Personal allowances. The first tax-free threshold is increased by the following amounts:
- €2,000 if the individual has one dependent child
- €4,000 if the individual has two dependent children
- €12,500 if the individual has three dependent children
- €2,500 for each child in excess of three children
The tax-free threshold is not granted if the taxpayer fails to file with the tax authorities invoices equaling 25% or more of his or her taxable income (up to a maximum of €60,000 of taxable income).
An EU resident who acquires more than 90% of his or her income in Greece is not required to file any invoices to be granted the tax-free threshold. He or she may also take advantage of the deductions and credits available to Greek tax residents. In general, tax nonresidents are not required to collect invoices because the first income tax bracket is taxed at 5% in all cases.
If the value of invoices is less than the value required for the tax-free threshold, a 10% income tax is imposed on the amount of the deficiency.
Business deductions. Certain business expenses that are deductible are specifically mentioned in the tax law. These include, among others, the following:
- Donations to approved organizations
- Interest, except interest and penalties on overdue tax payments
- Taxes, except from income tax and property taxes
- Provisions for employees’ termination indemnities, to the extent the provision refers to employees expected to retire within the following year
- Repair and maintenance costs incurred on leasehold property in the financial year
An additional tax of 1.5% is levied on gross income from the leasing of land and buildings, which is increased to 3% if the area of the real estate exceeds 300 square meters and if the real estate is used for residential purposes. The additional tax cannot exceed the amount of tax that corresponds to the overall net income of the individual.
Severance payments made by Greek companies to departing employees are not taxed for amounts up to €60,000 and additional amounts are taxed on a progressive scale at rates from 10% to 30%.
Credits. Individuals may subtract from the tax computed on their taxable income certain credits. All claims regarding expenses must be supported by documentation. The tax credits include the following:
- 20% of life insurance premiums. This credit cannot be applied to amounts exceeding €1,200 for an unmarried individual and €2,400 for a family.
- 20% of lawyers’ fees.
- 20% of donations to public entities, charities and nonprofit organizations.
- 10% of amounts incurred on certain energy-saving techniques with respect to real estate.
- 20% of medical and hospital expenses for individuals and dependent family members, up to a maximum credit of €6,000.
- 20% of rent payments for the individual’s principal residence, up to a maximum credit of €240. This deduction does not apply if the individual has been granted housing allowances.
- The amount spent by the individual for educational lessons with a private tutor or language lessons for the individual and the individual’s children, up to a maximum credit of €240 per taxpayer per child.
- Tax credit for a mortgage loan used to purchase a primary residence. The credit is equal to 20% of interest expense related to a loan used to acquire a primary residence. The interest is fully credited on homes up to 120 square meters. If the home is larger than 120 square meters, the interest is prorated.
- 20% of alimony payments made by either spouse. The maximum amount of alimony payments per year to which the 20% rate can be applied is €3,000.
- Obligatory and voluntary social security contributions in amounts that are established by law (excluding dependent services social security, which is fully deductible).
Nonresidents who earn income from Greek sources are not entitled to any of the above credits, unless they are EU residents who earn at least 90% of their total income in Greece.
Numerous tax credits provided by the tax law are reduced from 20% to 10% if the taxpayer has income over €40,000, but only for the portion of the expense exceeding this amount of income.
Residents are entitled to a credit for foreign taxes paid, up to the amount of Greek tax attributable to the foreign-source income.
Relief for losses. Losses incurred by any enterprise may be offset against income derived from other sources in the same year. The balance of unused losses may be carried forward to offset profits in the five following years.
B. Other taxes
Inheritance and gift taxes. All property located in Greece, regardless of ownership, and any movable property located abroad that belongs to a Greek citizen or to any other person domiciled in Greece are subject to inheritance tax. All property located in Greece and any movable property located abroad that is donated by a Greek citizen or by a foreigner to a person domiciled in Greece are subject to gift tax.
Movable assets located abroad and belonging to a Greek tax resident who was established outside Greece for at least 10 consecutive years is exempt from Greek inheritance tax retroactively from 23 April 2010 (the date of enactment of Law 3842/2010). Certain exemptions apply.
The categories of rates for inheritance tax and gift tax depend on the relationship of the beneficiary to the deceased or donor. The rates are higher for more distant relatives and unrelated persons.
Estate tax treaties. Greece has entered into estate tax treaties with Germany, Italy, Spain and the United States to prevent double estate taxation.
Real estate taxes. Purchases of new real estate are subject to value-added tax (VAT) at a rate of 23% under certain circumstances. An exemption from VAT can be obtained for the purchase of a primary residence.
Annual Real Estate Tax (FAP) has replaced the prior annual real estate duty (ETAK). FAP applies to real estate property in Greece owned by individuals or legal entities on 1 January of each fiscal year, effective from 2010. For individuals, the tax is levied at progressive rates ranging from 0.1% to 1%, with a tax-free threshold of €200,000.
A special 15% tax is applied to real estate owned by foreign companies in Greece. Many exemptions are available. In certain circumstances, actions must be taken to obtain such exemptions.
C. Social security
Coverage. Several organizations administer the state social security system in Greece. In general, employed persons must participate in the Social Insurance Institute (IKA), which is financed by employer and employee contributions. Its benefits include pensions, medical expenses and long-term disability payments.
Several other insurance organizations cover self-employed persons, depending on their trade or profession.
Contributions. Social security contributions are made by employers and employees based on a percentage of the employee’s monthly salary.
For employees insured with the social security system in Greece before 1 January 1993 and for employees insured in an EU country or in a country with which Greece has entered into a social security totalization agreement, the maximum monthly salary subject to social security contributions is €2,432.25. For other employees, the maximum monthly salary subject to social security contributions is €5,543.55.
Salaries in Greece are paid on a 14-month basis for private employees, and, accordingly, 14 monthly contributions are made.
Totalization agreements. To provide relief from double social security taxes and to assure benefit coverage, Greece has entered into totalization agreements with the jurisdictions listed below.
Argentina
Iceland
Switzerland
Australia
Libya
Syria
Brazil
Liechtenstein
United States
Canada
New Zealand
Uruguay
Egypt
Norway
Venezuela
EU member states
Quebec
To learn more about the history, culture, economy and other information about the Greece
We have been preparing US income tax returns for US Citizens and permanent residents living in Greece for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Greece and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Greece.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a request a consultation by phone, skype or email