Three Basic Kinds of Taxes in Greece
At first, the Greek tax system seems pretty straightforward. Unlike in some other countries, taxation begins with the first euro you earn. The tax rate in Greece is progressive.
There are three basic kinds of taxation:
Income taxes are paid by corporations and private individuals.
Capital or property taxes cover real estate and inheritance of property.
Consumption taxes include VAT and stamp duty. All taxes on different transactions from transferring house ownership to registering a car or paying a special duty for a cell phone service belong here.
However, it's the details and accompanying bureaucracy that can make Greek taxes for non-residents a nightmare.
Residents and Non-Residents
First, you should know whether you are a tax resident of Greece or not. It changes the way you declare your income and pay taxes. Greek tax residents are people that have lived in the country for at least 183 days. This time period includes your arrival and departure dates, and holidays.
If the tax residence applies to you, all your worldwide income will be taxed in Greece. Your country of origin can have a tax treaty with the Hellenic Republic. It can exempt you from some taxes or allow you to pay them in your home country.
If you are not a resident, only the income you've earned in Greece will be taxed. For example, you have a house in Athens that you rent out. But most of the time you live and work in the USA. The rent money you've earned in Greece will be taxed there, and your other income will be taxed in the USA.
Greece Taxes for Individuals
All your personal income in Greece is subject to taxation. Income tax rates in the country are progressive up to 44%. It means that they increase depending on how much money you've earned.
Your individual income can consist of your salary, pension, or profits from your business.
If you earn less than 10K euro, the income tax is 9%.
If you earn between 10K and 20K euro, the income tax is 22%.
If you earn between 20K and 30K euro, the income tax is 28%.
If you earn between 30K and 40K euro, the income tax is 36%.
Any income above 40K is taxed at a whopping 44%!
Greek tax residents are allowed to file for a personal income tax deduction. The size of the deduction is influenced by:
how many family members you have,
whether your employer meets a quota on buying Greek or EU products and services.
mandatory social security payments are deductible,
donations to recognized charities also provide a tax deduction.
For example, you are single with no dependent family members. If you've made less than 12K euro in a year, you can receive 777 euro back. To calculate your tax deduction, contact tax authorities or hire a professional accountant.
The VAT Tax Rates and The Stamp Tax
The value-added tax is the most common kind of tax that both individuals and companies pay. Together with the stamp tax, it belongs to the indirect systems of taxes.
The VAT tax rate in Greece is the highest in the Eurozone.
The standard rate which covers most goods and services is 24%.
Some tourist businesses, street food and flower vendors, and health services use a reduced rate of 13%.
Books, newspapers, and theatre tickets are sold with a further reduced VAT rate of 6%.
The islands of Chios, Leros, Lesvos, Kos, and Samos have had their VAT rate reduced to 17% since 1 July 2021.
International travel by planes and sea transport is VAT-free.
The stamp tax is 2,4% for most business transactions and money loans. In some cases, like renting out a non-residential property, the stamp duty is set at 3,6%.
Property Taxes in Greece
ENFIA is the real estate/property tax in Greece.
It consists of two parts:
the principal tax that is levied on your property,
the supplementary tax on the value of your property rights.
The principal tax is measured by multiplying the property's area squared by the coefficient ranging from 2 to 13 euro per sq. m.
The supplementary tax is measured by multiplying the property's area by the coefficient ranging from 0.0037 to 11.25 euro per sq. m.
The coefficients depend on your property value and location. The law gives you 250K euro in property value deduction. If you own and maintain a recognized historical building, you don't have to pay the supplementary tax at all.
The property Inheritance tax is a separate case. It usually depends on your relationship to the person you inherit from and the value of the inheritance. It can range from 1% to 40%. Anything under 150K euro is tax-free for close relatives like spouses and children.
Employment Income and Social Security Payments
If you are self-employed, you have to pay your income tax in advance. You can adjust your tax payments according to your future earnings. You should do so by hiring an accountant.
If you work for a Greek employer, in addition to your taxable income, you will have to make social security (EKA) payments. Since 1 January 2021, you will pay 14,12%, and another 22,54% of your salary is contributed by your employer. These payments will cover your pension, medical insurance, and possible unemployment benefits.
Reporting Your Greek Income Tax and Filing Forms
You can pay your taxes and file forms personally if you live in Greece. Non-residents can file their tax returns with the help of a tax representative. Your income taxes can be paid at the nearest tax office. Property tax forms should be filed at the tax office in the town of Greece where your property is located.
Before you are able to pay any tax, you should get a personal tax identification number (AFM).
The tax year corresponds to the calendar year. You have to file tax forms no later than the end of June of the following year.
Corporate Taxes in Greece
If you plan to start a company in Greece, you should know how your business profits are going to be taxed. The general corporate tax rate is 24%. The Greek government is planning to reduce it to 22% starting in 2022. Some businesses like banks, credit institutions, and loan providers are subject to a 29% corporate tax.
Like with individual income, worldwide corporate profits become a tax liability in Greece if the company is a resident. Non-residents pay taxes only on income that comes from doing business in Greece.
Capital gains tax is also 24%. You will pay this tax if the business property or capital assets you own increase in value.
If your business spends money on technological and scientific research it can claim tax deductions. Royalties, interest, and fees paid to the foreign affiliates of your company can be deducted, too. When it comes to deductible charity donations, Greek tax authorities decide on a case-by-case basis.
You will need an experienced lawyer and accountant to navigate the recent changes in the Greek taxation rules and regulations.
Withholding Tax Rates
If your Greek company pays royalties or dividends to a non-Greek resident, they are subject to a withholding tax. The tax doesn't apply to Greek subsidiaries of companies registered in the EU. Consulting and management fees paid to EU companies are also not taxed.
The general withholding tax rate is 5%.
15% is applied to interest payments.
Patent and royalty payments are taxed at a 20% rate.
Fees for technical services, management, and consulting are taxed at a 20% rate.
Controlled Foreign Company (CFC)
If you are a legal resident of Greece and own a controlling stake in a non-Greek company, such a company is classified as a CFC. A controlling stake is defined as owning more than 50% of shares, profits, equity, or voting rights in that company. It makes your income earned subject to taxation in Greece.
Other factors that force you to pay corporate and other taxes for a CFC in Greece include:
If the CFC pays less than half in taxes of what it would have paid in Greece.
If 30% or more of your income from such a company comes from activities that add little or no economic value (dividends, royalties, invoicing, or financial leasing).
However, these rules do not apply if your company or other legal entity is registered in an EU country. It should also be engaged in substantial economic activity. It includes trading, hiring staff, building and maintaining premises, etc.
Rules of Double Taxation
Greece has double taxation agreements with 57 countries, including the US and Great Britain. You should consult with your home country officials on the specifics of double taxation.
The Greek tax system had been criticized in the past. It was the biggest hurdle for many foreigners wishing to move to Greece. However, the state government tries to implement new laws that would lower some taxes and simplify the payment process.
Hiring professional help is advised when dealing with issues of accounting and taxation in Greece.