Greece

Thinking Beyond Borders for Greece

Thinking Beyond Borders for Greece

Persons residing in Greece are liable for income tax on their worldwide income, whether remitted in Greece or not. Where tax has already been paid outside Greece on non-Greek-sourced income, the tax may be deducted up to the amount of tax payable in Greece on the same income (tax credit method).

Key message

Non-residents are taxed only on Greek-sourced income.

The determination of residency status in Greece is based primarily on the center of vital interests as well as on a “number of days rule”. Specifically, if an individual maintains their permanent or main residence or habitual abode or center of vital interests, namely their personal and financial relations in Greece, then the residence of the respective individual for tax purposes is Greece. Furthermore, subject to the above provisions, an individual who is present in Greece for a period exceeding 183 days, cumulatively during any 12-month period is considered to be a Greek tax resident as of their first day of arrival in Greece. However, respective provision is not applicable in case of individuals who are present in Greece only for tourism, medical, medicinal or equivalent personal purposes on condition that their presence does not exceed the 365 days threshold including their short stay abroad.

Greece has recently introduced special tax regimes for High Net Worth Individuals, Pensioners and Skilled Migrant Workers.

Income tax

Liability for income tax

The rules governing the individual’s income taxation will be determined by reference to the individual’s tax residency status (i.e. Greek tax resident or non-Greek tax resident), as well as special tax regime application.

Tax trigger points

The taxability of employment income of non-Greek residents is determined by reference to the applicable double tax treaty for the avoidance of double taxation (if any).

On the assumption that the individual is registered as a non-Greek tax resident and in case of future tax audit, the Greek tax authorities might require tax residency certificates for the individual in order to evidence/support that the individual is tax resident (and therefore subject to tax on the individual’s worldwide income) in another jurisdiction/state. An individual who is not in a position to provide the requisite documents will automatically be classified as a Greek tax resident by the tax authorities, who will seek to assess tax on the individual’s worldwide income plus penalties (if applicable) for inaccurate filings (when due).

New Tax residence provisions

The definition of tax residence is introduced on the basis of the Organisation for Economic Co-operation and Development (OECD) Guidelines as of 1 January 2014 onwards. The concept of usual (permanent) residence is determined for tax purposes in Greece if someone resides in Greece for more than 183 days, cumulatively during any 12-month period, including their short term stay abroad. However, respective provision is not applicable in case of individuals who are present in Greece only for tourism, medical, medicinal or equivalent personal purposes on condition that their presence does not exceed the 365 days threshold including their short stay abroad.

 High Net Worth Individual Regime

In an effort to attract high net worth individuals, an alternative taxation on foreign source income earned by individuals (and/or their relatives) who transfer their tax residence to Greece is introduced, if the following conditions are cumulatively met (a) the individual was not a Greek tax resident for the 7 out of 8 years preceding the transfer of their tax residence to Greece and (b)can prove that they or their relatives or a legal entity in which they hold the majority of the shares, invests in real estate or moveable assets or shares of legal entities based in Greece. The amount of the investment should not be lower than 500,000 euros (EUR) and must be completed within a period of 3 years. Condition (b) is not required in case of an individual who has obtained a residence permit due to investment activity in Greece (based on article 16 of Law 4251/2014).

In particular, individuals who will utilize the alternative taxation method, should pay a lump sum tax of EUR100,000 on an annual basis, regardless of the level of their foreign source income. In case where a relative utilizes respective provisions, they should pay a lump sum tax of EUR20,000 on an annual basis. Utilization of these provisions cannot exceed a period of 15 tax years.

The Greek source income of the individuals subject to the alternative taxation method should be reported in the annual income tax return and taxed according to its classification, whilst their foreign source income is not subject to reporting and is taxed based on the lump sum tax.

It is worth mentioning that settlement of the annual lump sum tax exhausts any further tax liability for the individual on their foreign source income, whilst any tax paid abroad is not offset against any Greek tax liabilities. Furthermore, this individual is exempt from inheritance and donations tax on any foreign assets.

The required categories of investments, their retention period in Greece, the application process as well as any other details required for the implementation of respective provisions is determined amongst other by ministerial decisions. 

Foreign Pensioners Regime

In an effort to attract foreign pensioners, the alternative taxation regime on foreign source income earned by individuals who transfer their tax residence to Greece is expanded. In particular, the new provisions provide the option to foreign pensioners to benefit from the alternative taxation of their total foreign source income.

Individuals who will utilize the alternative taxation method should cumulatively meet the below conditions:

a) the individual was not a Greek tax resident for the five (5) out of the last six (6) years preceding the transfer of his tax residence to Greece and

b) the individual transfers his tax residence to Greece from a country with which Greece has in force an agreement for administrative cooperation in tax matters.

Under the alternative taxation regime, individuals will be subject to an annual flat tax rate of 7% on their total foreign source income. No solidarity contribution is due on such foreign source income. The tax is paid in lump sum for each tax year until the last business day of July and it does not offset against any other tax liabilities or credit balances of the individual. The settlement of this tax exhausts any further tax liability

for the individual on such income. The said alternative tax regime is in force for the tax year which the application is filed and for fifteen (15) tax years in total.

The individuals should report in their annual tax return both their Greek and foreign source income (e.g. world wide reporting requirement). Any foreign tax paid abroad on the foreign source income, may be claimed as a foreign tax credit (FTC) against the tax due in Greece, however up to the amount of Greek tax due on such foreign source income. Furthermore, the said provisions do not affect the application of the international agreements for the avoidance of double taxation ratified by Greece. Furthermore, this individual is not exempt from inheritance and donations tax on any foreign assets.

Attracting foreign individuals to work in Greece

In an effort to attract tax residents in Greece and further to the special tax regimes which have already been introduced (e.g. High Net Worth Individuals and Foreign Pensioners), a new regime of alternative taxation for individuals who transfer their tax residence in Greece is introduced as of tax year 2021. The conditions which must be cumulatively met in order to qualify for the special regime:

(a) the individual was not Greek tax residents for the five (5) out of the last six (6) years preceding the transfer of their tax residence to Greece,

(b) they transfer their tax residence from a member country of the E.U. or the E.E.A. or from a country with which Greece has an agreement in force for administrative cooperation in tax matters,

(c) they provide services in Greece on the basis of an employment contract with a Greek legal entity or a foreign legal entity with permanent establishment in Greece,

(d) they declare their intention to stay in Greece for at least two (2) years.

The above conditions equally apply in case of business activity in Greece. It should be highlighted that the newly introduced special tax regime applies only in case of “new job offerings/positions”.

The special regime applies on both employment income, as well as for business activity rendered in Greece. Specifically, the individual who will transfer their tax residency to Greece and qualify for the special taxation regime will be eligible to income tax and solidarity contribution exemption on 50% of their employment income earned in Greece during any tax year. The above exemption equally applies to individuals who will transfer their tax residency in Greece in order to operate business in Greece as entrepreneurs. Namely, 50% of their business activity income derived in Greece is income tax and special solidarity contribution exempt on any given tax year. Individuals who will qualify for the said special taxation may only enjoy this beneficial regime for seven (7) consecutive tax years. Following the seven years period, the special tax regime is no longer valid.

Although administrative guidance is yet to be issued, world wide reporting is expected for respective individuals, although eligible to claim foreign tax credit. It is worth mentioning that individuals who will be subject to the special tax regime are exempt from imputed income criteria arising from the use of a residency and private car.

Types of taxable income

Taxable income is classified into four categories:

  • employment income and pensions
  • business activity
  • capital
  • capital gains

Married persons are subject to tax separately on their own income but are required to file a joint income tax return unless an election for separate filing is submitted by 28 February of the year following the year for which tax return is to be filed. If such an election is not filed by both or one of the spouses joint filing will take place and no further amendment is possible for the tax year filing in question. Civil unions/partnerships (for both opposite sex and same sex couples) may as well file joint declaration by notifying the Registry Department of their competent tax office. No instruction by the Greek State has yet been provided for civil unions/partnerships previously filing joint tax return but deciding to file separately in the future.

Additionally, all individuals over 18 years of age, who earn income, are obliged to file an income tax return irrespective of whether the income earned by them is subject to tax or not (i.e. as a general rule the taxpayers are not exempt from filing their yearly income tax declarations even if the income received by them is tax exempt).

Tax rates

Each income category is separately computed and subject to tax.

For each category the tax rates are indicated below.

Employment Income and Pensions

As of 1 January 2020 for employment/pension income a progressive tax scale is applicable to both Greek and non-Greek tax residents, with no tax-free bracket, as provided in the table below in euros (EUR):

Income bracket

Tax rate

Tax per (Percent)

Aggregate income

Aggregate tax

First 0-10,000

9%

900

10,000

900

Next 10,001-20,000

22%

2 200

20,000

3 100

Next 20,001-30,000

28%

2 800

30,000

5 900

Next 30,001-40,000

36%

3 600

40,000

9 500

Over 40,001

44%

-

-

-

Source: KPMG in Greece, 2021

A new paragraph is added regarding the special taxation of athletes and coaches under certain conditions. Specifically, it is stipulated that income earned by professional athletes from sports corporations, departments of remunerated athletes or recognized sports clubs, is taxed at a flat tax rate of 22 percent exhausting any further tax liability provided that the amounts received in one lump sum or in installments for a transfer contract or the renewal or termination of their contract, exceed EUR40,000 within the respective tax year. Otherwise, the regular employment income tax scale applies.

Annual Family Tax Credits on employment/pension income (applicable as of tax year 2020):

Taxpayers without children

EUR777

Taxpayers with one child

EUR810

Taxpayers with two children

EUR900

Taxpayers with three children

EUR1,120

Taxpayers with four children

 EUR1.340

Taxpayers with five or more children

EUR1,340 plus additional tax credit of EUR220 per each additional dependent child

Income limit for full credit

EUR12,000

Reduction in credit if income above limit

EUR20 per EUR1,000 of income


Collection of expense receipts

For tax year 2020 onwards : As of 1 January 2020 a flat rate applies for the determination of the income tax return related to electronic transactions. Employees, pensioners, freelancers and other independent earners should incur expenses by using electronic means of payment within E.U. of E.E.A equal to 30 percent of their actual income, with a maximum expenses ceiling of EUR20,000.

A penalty of 22 percent on the difference between the required versus the amount spent, will incur. While calculating the actual income, solidarity contribution and alimony payments are not considered. Special provisions for certain categories of taxpayers apply.

Amongst other categories non-residents as well as Greek tax residents who reside or work abroad are exempt from such measure.

Board of Directors Fees

As for 1 January 2014 the Board of Directors Fees are classified as employment income and are taxed based on the applicable tax scale for salaried employees.

Business Activity

Business activity income, including private agricultural business, is subject to the same progressive scale as employment income which is provided below (in EUR):

Income bracket

Tax rate

Tax per (Percent)

Aggregate income

Aggregate tax

First 0-10,000

9%

900

10,000

900

Next 10,001-20,000

22%

2,200

20,000

3,100

Next 20,001-30,000

28%

2,800

30,000

5,900

Next 30,001-40,000

36%

3,600

40,000

9,500

Over 40,001

44%

-

-

-

However, for new private businesses and entrepreneurs with commencement date as of 1 January 2013 onwards and for the first 3 years of their operation the tax rate of the first scale is reduced by 50 percent.

Income earned from private agricultural business is subject to the same tax credit as employment/pension income (i.e. respective tax credit is not available for business income).

Capital

  • Dividends* are subject to withholding tax at the rate of 5 percent as of tax year 2020.
  • Interest* is subject to withholding tax at the rate of 15 percent.
  • Royalties* and other fees paid to advisors and construction entities as well as management fees are subject to withholding tax at the rate of 20 percent.
  • Rental income is taxed at the rate of 15 percent for income up to EUR12,000, 35 percent for income from EUR12,001 up to EUR35,000, and 45 percent for income exceeding EUR35,000.

* These rates are superseded by the provisions of the double taxation treaties concluded by Greece with other countries/jurisdictions.

Some tax exemptions apply to various types of investment income (e.g. dividends earned via European Union (EU)/European Economic Area (EEA) Undertakings for the Collective Investment in Transferable Securities (UCITS) mutual funds, etc.).

Capital Gains

Capital gains arising from the transfer of listed securities and derivatives are taxed at the rate of 15 percent **on condition that the following are cumulatively met:

  • the individual-shareholder seller holds at least 0.5 percent of the share capital of the listed entity, and
  • the shares were acquired after 1 January 2009.

 A new stock options tax framework is introduced, where if the shares that are acquired upon exercise, are retained for a period exceeding 24 months, or 36 months under certain conditions, are taxed as capital gains at a flat tax rate of 15 percent, or 5 percent for shares of newly established companies and if certain conditions are cumulatively met.

Income arising from the sale of free shares given by companies to their employees within the framework of a share plan, which requires the achievement of specific performance goals or the occurrence of certain event, is treated as capital gain and is taxed at a flat rate of 15%.

For listed shares, the capital gain is equal to the closing price of the share in the stock exchange on the vesting date, assuming the sale price is equal or lower than that. If the sale price is higher than the closing price on the vesting date, any excess amount is taxed based on the general provisions applicable to capital gains from listed shares (i.e. exempt from income tax, assuming conditions are met) but subject to solidarity contribution.

For non-listed shares, the capital gain is equal to the sale price, assuming it exceeds the share value, as this was calculated on the day the free shares were given. However, if it is lower, it is equal to the share value of the day they were given.

The above provisions are applicable to income earned in tax years after 1 January 2020.

Capital gains arising from the transfer of real estate is not subject to tax until 31 December 2022.

Some tax exemptions apply to various types of investment income (e.g. capital gains earned via EU/EEA UCIT mutual funds and the Greek State bonds etc.).

** Subject to the specifically signed Double Tax Treaty Agreement between Greece and the other country/jurisdiction concerned.

Special solidarity contributions

The contribution is imposed on the total income reported on the individual’s annual income tax return not taking into consideration any tax credits or deductions stipulated under Greek tax law (apart from some of the income categories that are exempted from special solidarity contribution – i.e. employment termination payments, child allowance etc.). The solidarity contribution scale is progressive.

Annual Income Amount (EUR)

2020 Rate

Tax per (Percent)

Aggregate income

Aggregate tax

From

To

0

12,000

0%

0

12,000

0

12,001

20,000

2.20 %

176

20,000

176

20,001

 30,000

 5 %

500

30,000

676

 30,001

 40,000

6.50%

650

40,000

1,326

40,001

65,000

 7.50%

1,875

65,000

3,201

65,001

220,000

9%

13,950

220,000

17,151

220,001

Over

10%

 

 

 


By analogy to income tax exemption provisions, all categories of taxpayers having 80 percent disability or more, are exempt from solidarity contribution.

In an effort to relieve the taxpayers from consequences of the negative economic environment in Greece caused by the ongoing pandemic of COVID 19, the gradual abolition of the special solidarity contribution was introduced.

Specifically, for tax year 2020, the income derived from business activities, capital (dividends, interest, royalties and rental income) and capital gains is exempt from the special solidarity contribution.

For tax year 2021 all types of income earned by an individual, except from income earned by public sector and pensions, are exempt from solidarity contribution (e.g. employment income in private sector, dividends, interest, capital gains etc.). If income is assessed based on the alternative method calculation as per deemed income articles, exemption applies only if such type of alternative calculation method did not apply for the previous two years.

However, for 2022 only employment income from private sector is exempt from solidarity contribution. If income is calculated based on the alternative method as per deemed income articles, exemption applies only if such type of alternative method did not apply for the previous two years.

By analogy to income tax exemption provisions, all categories of taxpayers having 80%, disability or more, are exempt from solidarity contribution.

Social security

Liability for social security

According to Greek law, all employees are subject to social security contribution. The employee’s social security contribution is withheld on a monthly basis from the salary by the employer whereas employer’s social security contributions are also due on the top of the agreed monthly gross salary. The standard rates to apply during 2021 and 2022for full time employees are 14.12 percent (employees) and 22.54 percent (employers) whereas a maximum monthly gross salary on which contributions are due is provided (currently EUR 6,500. As of 1 January 2022, the minimum gross monthly salary is amended to EUR 663 and the new ceiling amounting to EUR 6,630.00. It should be noted that not all the categories of the working force are covered by the same social security rates as the salaried employees. Further investigation is required in case the individual performs other kinds of entrepreneurial/business activities.

Compliance Obligations

Employee e Compliance Obligations

As of 1 January 2016 personal income tax returns must be filed electronically up to 30 June of the year following the end of the relevant tax year. The tax year for individuals is the calendar year. The filing deadline is extended to 31 December in case the individual filed an application for change of residency to that of a non-Greek tax resident.

Employers reporting and withholding requirements

Under Greek tax law, employment income is taxable in the hands of the employee in the year in which the employee is entitled to claim such income, whereas income tax withholding should be effected by the employer. Employers are under an obligation to withhold Greek income tax on the remuneration paid to employees in Greece on a monthly basis (in Greece, salary is payable 14 times per year – there are at least 15 payroll periods in a year, 12 months plus bonuses for vacation, Easter and Christmas). 

Amounts of payroll tax withheld on a monthly basis should be remitted by the employer to the tax authorities by the end of the second month following the month that income was paid, at the latest. Furthermore all payroll data shall be electronically reported , via the personalized online account TAXISnet with the Independent Authority for Public Revenue, on a monthly basis, except from benefits kind which may be reported cumulatively in the month of December (except from stock options and free shares which shall be reported in the month they are exercised and vested accordingly). Respective amounts appear automatically in the electronic form of the employee’s annual personal income tax return (Form E-1). Furthermore, the employer is also obliged to issue and provide an annual salary letter (either in hard copy or electronically) to the employee including the regular salary and any benefit paid to the employee during the tax year as well as the applicable payroll withholding.

Immigration

Work Permit/Visa Requirement

Citizens of EU member states, of the states of the EEA (i.e. Iceland, Liechtenstein, and Norway), and Swiss citizens must apply for the appropriate type of certificate of registration of EU citizens (i.e. for the provision of dependent employment services, for the provision of non-salaried services etc.) if they wish to work in Greece or decide to take up residence in Greece. A stay of up to 3 months does not require a permit. However, in practice, it may be necessary to obtain such a certificate even if the stay is shorter than 3 months.

Permanent establishment implication

The definition of permanent establishment introduced in the Greek Income Tax Code is aligned with the Organization for Economic Co-operation and Development (OECD) Guidelines. Permanent establishment is defined as the fixed place of business through which the business of an enterprise is wholly or partially carried on.

The term permanent establishment includes mainly:

  • a place of management,
  • a branch,
  • an office,
  • a factory,
  • a workshop, and
  • a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

Furthermore, the term permanent establishment includes a person acting in Greece on behalf of a foreign entity, who has and habitually exercises the authority to conclude contracts in the name of that foreign entity, unless this person’s activities are limited to auxiliary services (i.e. do not include core services) and provided that the independent agent exception does not apply.

Following the general rule, the provisions of the double taxation treaties concluded by Greece with other countries/jurisdictions, which may include a narrower definition of a permanent establishment shall prevail over the provisions of the Greek Income Tax Code.

Other Immigrations Considerations

Third countries’/jurisdictions’ citizens wishing to work in Greece must apply for the corresponding visa before arriving in Greece and apply for a residence permit immediately upon arrival.

Given that the application procedure for visa is lengthy, the procedure should be commenced well in advance of the planned date of arrival.

Certain third countries’/jurisdictions’ citizens may require a visa to enter the country/jurisdiction even for vacation or short business trips.

Other issues

Double taxation treaties

Greece has entered into double taxation treaties with 57 countries/jurisdictions (an additional double taxation treaty has been signed with Singapore however not yet ratified, thus not in force) to prevent double taxation and allow cooperation between Greece and other tax authorities in enforcing their respective tax laws.

Indirect Tax

Indirect taxation provides above 40 percent of the state’s tax revenue.

The value-added-tax (VAT) was introduced in Greece in 1987 and is one of the most important indirect taxes. The basic VAT rate applicable to most goods and services is 24 percent; other rates apply as well depending on the nature of goods/services and/or geographic location.

Transfer Pricing

In accordance with the provisions of Law 4172/2013 and Law 4174/2013 the intercompany transactions with one or more associated enterprises are exempted from the documentation obligation, if they do not exceed the amount of:

  • EUR100,000 cumulatively per tax year, if the Gross Revenue of the taxpayer does not exceed the amount of EUR5 million per tax year, or
  • EUR200,000 cumulatively per tax year, if the Gross Revenue of the taxpayer does exceed the amount of EUR5 million per tax year.

The Transfer Pricing Documentation File, where appropriate, must be prepared by the end of the deadline for the submission of the company’s annual Corporate Income Tax Return (i.e. last working day of the sixth month from the year-end of the company). The aforementioned Documentation File is accompanied by a Summary Information Sheet which must be electronically submitted to the Independent Authority for Public Revenue of the Ministry of Finance, within the same deadline that is provided for the preparation of the Transfer Pricing Documentation File.

Greece has not yet implemented the BEPS Action 13, in relation to Master File and Local File but has implemented the Country-by-Country (CbyC) Reporting. This obligation relates to Multi National (MNE) Groups with total consolidated group revenue exceeding EUR750 million during the immediately preceding fiscal year. Entities of such MNE Groups that are resident for tax purposes in Greece are obliged to notify the Greek tax authorities with respect to the filing of the CbyC Report, no later than the last day of the Reporting Fiscal Year to which it relates.

If the Greek tax authorities challenge a company’s intra-group transactions, then the following may occur:

  • The company’s taxable profit will be adjusted for any differences that may arise in respect of these transactions.
  • The company will be liable for the payment of additional taxes and fines calculated on the amount of tax so assessed.

Other Transfer Pricing penalties applying:

  • Penalty amounting to 1/1000 of the value of transactions under documentation, which cannot be less than EUR500 and cannot exceed EUR2,000 is imposed for late submission of the Summary Information Sheet or submission of an incomplete/inadequate Summary Information Sheet. The late submission of an amended Summary Information Sheet is subject to a penalty only if the value of the transactions is amended and the total difference exceeds EUR200,000. The penalty for the submission of an inaccurate Summary Information Sheet is calculated on the amounts relating to the inaccuracy and is imposed only if respective inaccuracy exceeds the 10 percent of the total value of the intercompany transactions under documentation.
  • Penalty amounting to 1/1000 of the value of transactions under documentation, which cannot be less than EUR2,500 and cannot exceed EUR10,000 is imposed for non-submission of the Summary Information Sheet.
  • The late submission or non-submission of the Documentation File are subject to a penalty of EUR5,000-20,000 depending on the days of delay of the submission. The maximum penalty of EUR20,000 is imposed in the case of non-submission of the Transfer Pricing Documentation File or in the case of its submission to the Tax Authorities after the 90th day of the relevant request.

Local Data Privacy requirement

Services performed within Greece shall comply with the provisions of the Greek and EU legislation regarding the protection of personal data i.e. the General Data Protection Regulation (EU) 2016/679 (which is applicable in Greece) and all the related Greek laws.

Exchange Control

There are no foreign exchange control restrictions. However, all monetary transfers abroad must be effected through commercial banks in Greece. When approving such transfers (as well as when approving transfers between residents when effected through commercial banks), commercial banks may ask for certain supporting documentation (related to the authenticity of the transaction). For payments made abroad, they may even seek to ensure that the payment has been subject to or exempt from withholding tax.

Non-deductible costs for assignees

Non-Greek residents are not allowed any tax credits, unless they are tax residents of the EU or the EEA and:

  • earn more than 90 percent of their global income in Greece, or
  • prove that their taxable income is so low that they should be eligible for tax deductions according to the tax legislation in the country/jurisdiction they reside in.

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Disclaimer

All information contained in this publication is summarized by 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, based on the Greek income tax laws 2859/2020, 2961/2001, 3091/2002, the Greek Income Tax Code 4172/2013 and subsequent amendments, the Greek Tax Procedure Code 4174/2013 and subsequent amendments, 4223/2013, 4251/2014, 4254/2014, 4307/2014, 4308/2014, 4312/2014, 4313/2014 and 4316/2014, 4330/2015, 4334/2015, 4337/2015, 4354/2015, 4387/2016, 4389/2016, 4438/2016, 4446/2016, 4447/2016, 4484/2017, 4490/2017, 4579/2018, 4583/2018, 4571/2018, 4549/2018, 4512/2018, 4646/2019, 4714/2020, 4670/2020, 4756/2020, 4799/2021 the website of the Independent Authority for Public Revenues (IAPR) in Greece.