Taxes Related to Doing Business in Greece

Taxes Related to Doing Business in Greece

The tax framework applicable in Greece for 2016 is summarized below as it was introduced by the Greek Income Tax Code (ITC) which came into effect as of 1 January 2014 (Law 4172/2013 as amended). It is imperative to refer to the tax measures as they are introduced by the ITC as well as to any amendments and administrative interpretations issued related to the ITC when planning any business transactions and/or expansions.




Most U.S. foreign businesses choose to formalize their presence in Greece by establishing a Corporation (AE company), a Limited Liability Company (EPE company) or a branch. Foreign entities may also establish an offshore office for the provision of specified services to their head office or other foreign affiliated companies under the provisions of Law 89/67 as revised by Law 3427/2005. Nevertheless, even if it is not formally registered in Greece, the activities of a US enterprise could lead to the acquisition of a "permanent establishment" in Greece, giving rise to corporate tax on income arising in Greece as well as other tax and accounting obligations. The provisions of the ITC in conjunction with those of the Double Taxation Treaty between U.S. and Greece define when a permanent establishment arises (normally the maintenance of a branch, factory, or other fixed place of business).

Tax provisions require a foreign entity that has acquired an "actual physical professional presence" in Greece to register with the Greek tax authorities and maintain accounting books and issue/receive certain tax records even if such a presence creates neither a permanent establishment nor a corporate income tax obligation for the foreign entity. Furthermore, all foreign companies who construct buildings on their land in Greece or expand existing buildings owned by them or earn income from real estate in Greece must maintain accounting books and issue/receive certain tax records, even if they have no establishment in Greece. All other foreign companies who merely own real estate have much fewer obligations.

Tax withholdings apply on certain payments made to U.S. residents even when they have no presence in Greece.

Corporate Taxation

The tax rate is 29% on profits of Corporations (AE companies) and Limited Liability (EPE) companies that maintain double entry accounting books. Partnerships, cooperatives, joint ventures etc. that merely maintain single entry accounting books are taxed at the rate of 26% on profits up to EUR 50 000 and at the rate of 33% for profits exceeding EUR 50 000. Distributed dividends/profits are subject to a withholding tax at the rate of 10% (not applicable where single entry accounting books are maintained). The 10% withholding tax does not apply to profits which are credited or remitted by a branch in Greece to its head office abroad nor to dividends paid to an EU affiliate (subsidiary) of a US entity (provided certain conditions are met as per the EU Directive 2011/96).

Under the beneficial provisions of Law 89/67, foreign entities may establish a presence in Greece with the exclusive purpose of providing certain services to their head office or any other foreign affiliate company (such as consulting, centralized accounting support, quality control of production, processes and services, project planning services, advertising and marketing and data processing services). Such establishments will be taxed on the higher of the actual revenues reported in their accounts or the deemed revenues that will be defined on a cost plus basis by application of a certain mark-up which is pre-agreed with the Ministry of Finance according to their specific sector and service, and in any case not lower than 5%.

Foreign shipping companies may establish a branch or an office in Greece under Law 27/75 enjoying a beneficial tax regime provided that certain conditions are met. According to this regime as currently in force payment of Greek tonnage tax for foreign flagged ships managed by a Greek ship management office results in the full exemption of profits derived from the exploitation of such ships from any other Greek income taxes (foreign tonnage tax paid abroad is credited against the corresponding Greek tonnage tax). Such branches/offices were also established under Law 89/67 until 2006 and although they now fall under Law 27/75, they are still commonly referred to as Law 89 offices etc. Moreover, an annual special contribution has been imposed for calendar years 2012 up to 2019 on such shipping offices which are engaged in activities other than the management and exploitation of Greek or foreign flagged ships. Furthermore, a 10% withholding tax is applicable on dividend distributions to Greek tax residents by such offices which are engaged in activities other than the management and exploitation of Greek or foreign flagged ships.

Construction Companies

The taxable profits of construction companies engaged in public or private construction projects are subject to taxation in the same manner as all other legal entities on the basis of their accounting profits. A 3% withholding tax that is set off against the final tax is applied on all payments made to construction companies.


Deductibility of Expenses and Other Issues

All expenses that meet certain criteria are deductible except for certain expenses that are specified as being non-deductible.

In particular, all actual and evidenced business expenses are deductible if they are incurred for the benefit of the business or are carried out in the course of its ordinary commercial transactions, their value is not considered lower or higher than the market value on the basis of information available to the tax authorities and they are recorded in the entity’s accounting books in the period in which they arose and evidenced by proper supporting documentation. Moreover, such business expenses must be incurred for the purposes of generating income in order to be deductible. The non-deductible expenses which are specifically defined include: interest on loans (other than bank loans) to the extent that the amount exceeds interest that would have been payable on revolving lines of credit provided to non-financial institutions, expenses exceeding EUR 500 where partial or total payment was not effected through banks, unremitted social security contributions, fees for illegal activities, income tax/penalties (including entrepreneurship duty and special solidarity contributions) as well as VAT which apply to non-deductible expenses, amounts paid to individuals or non-EU legal entities that are tax resident in non-cooperative countries or in countries with a preferential tax regime (unless the tax payer can prove that such payments relate to actual and ordinary transactions and they do not reflect the transfer of profits, income or capital gains for tax avoidance purposes) etc.

The maintenance of tax free reserves (except for reserves formed pursuant to Investment Incentive Laws) is not permitted.

Losses may be carried forward for five subsequent years from the end of the tax year in which they arose unless there has been a transfer of more than 33% of the (direct or indirect) shareholdings or of voting rights of the taxpayer and the taxpayer cannot prove that this transfer was carried out exclusively for commercial or business reasons and not for tax evasion/tax avoidance purposes

Capital gains (or losses) are generally regarded as ordinary business income (or losses).

Transfer Pricing Issues


Intra-group transactions should follow the arm’s length principle. More specifically, when intra-group transactions are carried out cross-border or domestically, under different economic or commercial conditions from those that would apply between non-associated persons or between associated persons and third parties, any profits which would have been derived by the domestic company without those conditions, but were not derived due to the different conditions, will be included in the profits of the company only to the extent that they will not reduce the amount of tax payable. An extensive definition of “associated person” is provided. Transactions covered are all transactions carried out between legal entities or any other form of entity with associated persons.

The ITC explicitly refers to the OECD Guidelines as far as the interpretation and application of its provisions relating to intercompany transactions is concerned. Moreover the documentation requirements of intercompany transactions is included in a separate law, i.e. the Tax Procedure Code.


A Transfer Pricing Documentation File must be prepared and a Summary Information Sheet must be submitted electronically to the General Secretariat of Information Systems of the Ministry of Finance. The deadline for both obligations is 4 months from the end of the entity’s tax year.

The documentation obligation encompasses all intercompany transactions irrespective of their value and not only cross-border intercompany transactions.

Moreover, in order for the arm's length nature of the transactions of a company to be supported in the Documentation File, the appropriate transfer pricing method needs to be verified and one or more benchmarking studies may need to be carried out.

It is also provided that the obligations for a Transfer Pricing Documentation File and Summary Information Sheet apply to all intercompany transactions with one or more associated persons unless the value of all transactions do not exceed the amount of EUR 100 000 in total where the gross revenues of the financial year of the taxpayer does not exceed the amount of EUR 5 000 000, or EUR 200 000 where the gross revenues of the financial year for the taxpayer exceed the amount of EUR 5 000 000. If these thresholds are exceeded, all intercompany transactions for each affiliated entity should be documented, irrespective of the value of each separate transaction.

Advance Pricing Agreements

Companies may obtain an Advance Pricing Agreement (APA) covering the transfer pricing methodology of specific future cross-border intra-group transactions. The APA duration cannot exceed four years (an APA cannot relate to a tax year prior to the submission of the APA application). The tax authorities have the right to revoke or cancel an APA in certain cases and it must be amended by the tax authorities/taxpayer under certain conditions. Following the issuance of the APA, the tax payer is obliged to prepare an annual compliance report, which must be filed with the relevant department of the General Directorate of Tax Audits. Where an APA exists, the tax audit is limited to the verification of the company’s adherence to the terms of the approval decision as well as the validity of critical assumptions.


Tax on the sale of shares by U.S. residents

Currently, the transaction tax on the sale of shares held by U.S. residents is 0.20% on the sale price for shares listed on the Athens Stock Exchange (not applicable to transactions effected by Market Makers in certain circumstances). Relief for this transaction tax is not available under the terms of the Double Taxation Treaty between the U.S. and Greece.

Profits arising from the transfer of shares (listed and non-listed) are treated as business income for legal entities disposing of the shares and taxed at the corporate tax rate (currently 29%). This tax does not apply to non-resident entities with no permanent establishment in Greece.

The transfer of shares (listed and non-listed) by individuals is subject to capital gains tax at the rate of 15%. There is specific exemption from taxation of capital gains arising from the sale of listed shares that were acquired after 1 January 2009 when their seller owns less than 0.5% of the share capital of the company whose shares are being sold. The same exemption also applies as regards listed shares that were acquired before 1 January 2009 (irrespectively of the seller’s percentage of ownership of the share capital of the company).

Notwithstanding the above, the tax is 0% for the sale of listed and non-listed shares where the Double Taxation Treaty between Greece and the U.S. is evoked. However, in case the seller of the shares is an individual resident in the U.S., treaty relief is not available (unless it is considered business income for them) but a tax credit for the 15% tax paid in Greece should be given in the U.S. against the tax imposed on the sale of the shares there.

Withholding Taxes

The rates in the Double Taxation Treaty between U.S. and Greece apply where they are lower than the rates provided under Greek tax law.

Royalties derived from Greece where the recipient does not have a permanent establishment in Greece are exempted from taxation in Greece except for motion picture film rentals, which are currently subject to the Greek domestic withholding tax rate of 20% since this is lower than the treaty rate of 25%.

There is also no withholding tax on interest received by a U.S. resident or a U.S. corporation that is not engaged in business in Greece through a permanent establishment, to the extent that such interest does not exceed 9% per annum. The regular local withholding rate (15%) applies on interest exceeding 9% and on all interest paid to a U.S. entity which controls more than 50% of the Greek paying entity. If interest and royalties are paid to an EU affiliate of a U.S. entity, 0% withholding tax will apply provided that certain conditions are met as per the EU Directive 2003/49.

The Double Taxation Treaty between Greece and the U.S. does not provide for any decrease of the Greek withholding tax rate (10%) on distributed dividends. This tax does not apply if the dividends are paid to an EU affiliate (subsidiary) of a US entity (provided certain conditions are met as per the EU Directive 2011/96).

Indirect and Other Taxes

The most important indirect tax is Value Added Tax (VAT) (the normal rate is 23%). Under certain conditions the appointment of a VAT representative is required where the supplier is not registered in Greece.

VAT at the rate of 23% also applies to the first transfer by businesses of newly constructed buildings whose construction license was issued on or after 1 January 2006 on the condition that such buildings have not yet been used prior to their transfer (exemptions may apply for the purchase of a primary residence).

Other taxes include capital concentration tax (1%) on certain capital injections and stamp duty (1.2% to 3.6%) which applies to certain transactions such as loans, assignments etc.

Special Taxes on Real Estate

Currently, individuals and legal entities owning real estate in Greece are subject to Unified Real Estate Tax (UREOT), irrespective of their citizenship, residence or registered address. UREOT is imposed on property owned as at 1 January of each year. Real estate subject to the tax includes plots of land located outside city limits. Exemptions continue to apply and cover certain categories of real estate and taxpayers (e.g. the State, public legal entities, churches, monasteries, museums etc.).

UREOT consists of a main tax and a supplementary tax and is determined by the tax authorities on the basis of E9 returns where tax payers declare all their real estate holdings. The main tax for real estate located within city limits ranges between EUR 2 and EUR 13 per square meter for buildings and between EUR 0.003 and EUR 9 per square meter for plots of land. The main tax for plots of land located outside city limits is EUR 0.001 per square meter and it is increased fivefold if a residence is built on the plot of land. The above rates are multiplied by coefficients that depend on a number of factors deemed to affect a property’s value, such as its location, surface area, age, etc.

The supplementary tax is imposed on individuals owning real estate whose cumulative aggregate value exceeds EUR 300 000 and it is calculated on the excess value at progressive rates ranging from 0.1% up to 1%. Legal entities are also subject to supplementary tax, which is calculated at the rate of 5‰ on the total value of their real estate.

Under conditions, partial or full reductions of tax can be granted to individuals and postponement of tax can be allowed for legal entities.

In addition, Greek and foreign companies owning or having usufruct rights on (use of) real estate located in Greece are subject to a special annual tax calculated at the rate of 15% on the objective tax value of real estate, unless certain conditions are fulfilled including if their ultimate individual shareholders are revealed/obtain a Greek tax number (certain entities, such as listed entities, banks etc., are exempted).

Furthermore, the holding of Greek real estate gives rise to certain municipal property taxes (not normally of significant value), which are collected through electricity bills.

Real estate transfer taxes apply for transfers of real estate not subject to VAT (see above), with the current rate being equal to 3% (exemptions may apply for the purchase of a primary residence).

Annual Tax Audit Certificate

Currently, Greek tax legislation requires a tax audit to be carried out by a Greek Certified Auditor for all AE and EPE companies and Greek branches of foreign banks that are obliged to have their statutory audits carried out by a Greek Certified Auditor. If the Annual Tax Audit Certificate is issued without any reservations, the tax affairs of the company are considered final and the tax authorities will not normally carry out their own audit except where the taxpayer is selected for a sample audit. Although, according to the relevant law provisions, as currently in force, the requirement for an Annual Tax Audit Certificate will not apply for periods starting from 01 January 2016 onwards, an extension of such requirement cannot be ruled out.

Changes to any of the above taxes should be posted on the Chamber and KPMG websites in the form of KPMG newsletters, newsflashes or other KPMG publications (such as the Investment in Greece guide) or of electronic updates of this Directory. 


© 2022 KPMG Advisors Single Member S.A., a Greek Societe Anonyme and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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