Tax Facts - Greece
Gerard Associates Ltd. Financial Advisory Services does not provide individual tax advice, and nothing contained in this briefing should be construed as such. We make every effort to ensure the accuracy of the information but cannot be held responsible for any liability arising.
It is essential that all clients seek tax advice specific to their own personal circumstances with the relevant tax professional of the jurisdiction(s) in which you are liable to tax.
This has been prepared based on our understanding of current legislation and tax practice as at the date above. However, these are subject to change, and may result in income tax consequences different from those detailed below.
We cannot accept responsibility for its interpretation or any future changes to law.
Taxation in Greece occurs at national and municipal levels and is administered by the Ministry of Finance (MoF).
1st January – 31st December.
Individuals are not obliged to file a tax return unless they meet certain criteria, i.e. their annual income (actual or deemed) exceeds €3,000, they have purchased or have been granted by their parents certain items, for example real estate or cars, have gross rental income above €600 or have income from certain other sources. Salaried individuals with an annual income of less than €6,000 do not have to file a tax return, except under certain circumstances as defined by law, for example in the case of non-Greek tax residents. Married couples are liable to file a joint return, although their incomes are assessed separately for taxation purposes.
Taxable income is classified under various categories, namely employment, land and buildings, investments, business, agriculture and professional services. These income sources are added together before allowances and deductions are taken into account in order to derive the total taxable income. Any housing allowances and other allowances, such as benefits in kind, must also be included in the calculation of taxable income. There are a considerable number of deductions,
allowances and credits available on compulsory social security payments, medical expenses and life insurance premiums up to €1,200/€2,400, mortgage loan interest, child and educational expenses, all of which are subject to annual limits.
Taxable income is subject to progressive tax rates which are applied on income above €12,000 if the individual is salaried or a pensioner. The exempt income limit for self-employed persons has been abolished in 2010 as part of the Greek austerity measures. However annual profits of up to €30,000 derived from business activities of individual enterprises or professional services are tax free within the first 3 years of trading and provided the entrepreneurs/professionals are less than 35 years of age. This tax free allowance is increased in respect of dependent children by €1,500 for each of the first two children, €15,000 for three, with an additional €2,000 for each extra child. Only Greek tax residents or EU residents earning more than 90% of their worldwide income in Greece are eligible for the above forms of relief.
Tax rates range from 0% to 45% (2010) and different rates apply at different thresholds depending on whether the taxpayer is employed or self employed. Income in excess of €100,000 is taxed at 45% in all cases. A special contribution of 1% is imposed on taxpayers who declare income exceeding €100,000 on their 2010 tax return (in respect of income earned in 2009).
The Greek tax authorities operate a system of “objective criteria” whereby an individual’s ownership of certain “luxury goods”, e.g. a main residence exceeding 200m2, secondary residence exceeding 150m2, private recreation boats, private aircrafts, swimming pools, etc, implies a certain level of income. Based upon the “objective criteria” the tax authorities calculate an imputed level of income which is subject to taxation. This has been radically altered in 2010, and in no case can the annual
deemed income be less than €3,000 for a single or €5,000 for a married taxpayer, unless the difference between the total declared income and the annual deemed one is less.
Taxation of Investment Income
From December 2010 a final 40% withholding tax will be levied on dividends distributed from the after-tax profits of corporations (deriving only from Greek Societe Anonyme, “SA”), and the same now applies to dividends distributed by limited liability companies too. Income from securities includes, among others, dividends from domestic or foreign corporations,
which, as of January 1, 2010 onwards, are added to income and taxed accordingly. Exemptions or different treatment may apply to the extent the beneficiaries are tax resident of a country with which Greece has concluded a Double Tax Treaty and the provisions of the Treaty differ than the new domestic law. In case any foreign tax was paid abroad it can be further set off against the Greek liability. A final 10% withholding tax is levied on bank deposits, income from Government bonds and
treasury bills and bonds issued by resident companies.
Contracts of greater than 10 years’ duration are exempt from premium taxes in Greece. However, for policies of less than 10 years a rate of 4% applies.
Tax on Property Rental Income
Income from real estate is included in the taxable income calculation and taxed at progressive income tax rates. The net taxable income derived from real estate is determined after deductions in respect of depreciation and costs such as insurance and maintenance.
Real estate income is subject to a separate additional tax of 1.5% of the gross amount of rental income, which is increased to 3% if the surface area of the property is greater than 300m2.
There are no wealth taxes in Greece.
Capital Gains Tax
There is no capital gains tax on the sale of shares acquired up to December 2010 and if they are listed on any stock market. Capital gains arising on the sale of shares acquired after 1 January 2011 sold within the year are added to taxable income and taxed at the highest marginal rate, with a 0.15% transfer tax added to the proceeds. Capital gains on shares held for longer than 12 months are not subject to capital gains tax or the transfer charge.
Proceeds from the sale of unlisted shares in a Societe Anonyme (calculated according to a special formula provided by the Greek Ministry of Finance) are subject to tax at a rate of 5%. If the person realising the gain is a resident of a jurisdiction which has a double tax treaty with Greece, the terms of this treaty may override the provisions set out above.
Inheritance and Gift Tax
Inheritance and gift tax is imposed by the state on property acquired by inheritance or gift. It is imposed separately on each beneficiary in respect of their share of the estate, or each donee of the gift. Liability for inheritance tax arises at the time of death and, for gift tax, when the donee receives the gift. The rules, exemptions and allowances have been adjusted significantly as part of Greek austerity measures.
Taxable inheritances and gifts include transfers of all immoveable and moveable property located in Greece, regardless of the nationality or residency of the deceased/donor. Moveable property outside Greece is also subject to tax if the deceased was a national or resident of Greece at the time of death.
Inheritance and gift tax rates are determined by the proximity of the relationship between deceased/donor and the beneficiary/donee, as well as the value of the property received. Inheritance tax rates also differ according to the type of inherited property, with a zero rate band on which no tax is payable in place for inherited real estate and set at €400,000, €150,000, €30,000 or €6,000 depending on the relationship of the beneficiary to the deceased person and whether they are a spouse, under-age child or a handicapped dependant. Above this limit inheritance tax rates range from 1% to 40%, depending on the proximity of the family relationship and the value of the property. The maximum rate of 40% is charged to non-relatives on the value of estates exceeding €267,000 (2010).
Under the new rules the inheritance of monetary amounts will be subject to a flat tax applied to the full amount, of either 10%, 20% or 40%, with the rate depending on the relationship with the deceased.
Regional and Municipal Taxes
A number of individual taxes and duties are paid to the local authorities, the rates of which are determined by the local authority.
The annual flat real estate duty has been abolished and a real estate tax introduced and imposed on individuals irrespective of their citizenship. Individuals are subject to this tax at progressive rates varying from 0.1% to 1%, with a tax free bracket of €400,000 per owner. For 2010-2012 a tax rate of 2% applies to properties valued at over €5,000,000.
A local real estate duty is also levied. Payable annually, it is calculated on the value of the immoveable property and the rate is set by the local councils, usually between 0.025% and 0.035% of the assessed value.
Property Transfer Tax
Real estate transfer tax is imposed on land or used property for the first transfer made after 1st January 2006 and on new property with a construction licence granted prior to 1st January 2006. The tax is based on the higher of the contract price and the objective value of the property. The rates are 7% for the first €15,000 and 9% thereafter. These rates are increased to 9% and 11% respectively in areas covered by a fire station. Real estate transfer tax is also imposed on the acquisition of new buildings (with a construction licence granted after 1st January 2006) in cases where the building constitutes the principal / primary Greek residence. Properties with a construction licence issued after 1 January 2006 which
are being sold for the first time are subject to Value Added Tax (VAT) of 19%.
Following budget changes in 2010, subsequent transfers of property (further to the first transfer noted above) are subject to a new Real Property Transfer Tax at the rate of 8% on the first €20,000 of taxable value and 10% for the excess. This replaces CGT and a transfer duty.
An additional tax in favour of the municipality is levied at a rate of 3% calculated on the amount of the standard real estate transfer tax payable. The rates are reduced for permanent residents of islands with fewer than 3,100 inhabitants or if the purchase relates to a principal primary residence by a Greek natural, EU citizen and citizens of Turkey, Russia and Albania who are of Greek origin.
Stamp duty is payable on transactions and dealings not subject to sales tax or property transfer tax. There are various transactions subject to stamp duty and all are subject to a specified rate and basis of assessment, but the usual rate payable ranges between 2.4% and 3.6%.
Social Security Contributions
Greece does not have a uniform social security system and there are several social insurance funds covering various sectors of the population. Employed persons are required to contribute to the Social Insurance Fund and the Employee’s Supplementary Insurance Fund unless, by their trade or profession, they contribute to a different fund. Social insurance contribution rates are 16% for the employee and 28.06% for the employer (capped up to a maximum salary of €2,432.25 and €5,543.55 for employees that entered a recognised social security fund up to 31/12/1992 and after 1/1/1993 respectively).
Sales tax of 23% is generally added to the sale price of goods and services. Some goods are subject to lower rates of 11% and 4.5% depending on their nature, whilst others are zero rated or exempt. Sales tax rates are reduced by 30% for some goods and services in certain regions of Greece, such as some of the Aegean islands and borderlands.
Taxation of Expatriates Living in Greece
Subject to relevant tax treaty provisions, income tax is payable by all individuals earning income in Greece, regardless of
citizenship or place of permanent residence. Permanent residents are taxed on their worldwide income. There is no clear definition of “residency” in Greek tax law and individuals residing in Greece and indicating intent to remain permanently are considered to be tax resident.
Greece has concluded treaties for the avoidance of double taxation with over 50 countries. There is no special tax regime for expatriates, although relief may be obtained from payment of social security contributions if suitable certification is received from the individual’s home state and submitted to the Greek social security authorities.
Taxation of ‘Non-Residents’ Living in Greece
Non-tax residents are taxable only on their income from Greek sources or income related to Greek duties, at the same tax rates applicable to tax residents (as discussed under ‘Income Tax’ on the first page), with the exception of an additional 5% on the tax free bracket. Non-residents are not entitled to any of the deductions and allowances that may be claimed by residents, unless they are EU residents who earn at least 90% of their worldwide income in Greece.
Non-resident aliens are taxed on salary earned for work performed in Greece or work considered to be ‘Greek related’, regardless of where payment is made and regardless of where it is remitted. Non-residents are not taxed on compensation relating to services performed outside Greece and related to non-Greek duties.
Double taxation treaties cover the taxation of the local income of expatriates working in Greece. In order to qualify for treaty
treatment, the expatriate must be a resident of a treaty country and must fulfil all conditions provided by each treaty regarding the country of taxation. Alternatively, the expatriate must be employed by, or render their services to, an individual or legal entity of the treaty country where they maintain permanent residency. Particular treaties may contain other conditions.