Greece Corporate Taxes
Corporate Taxes in Greece - A Guide for Expats & Foreigners
Table of Contents
Corporate Taxes in Greece
If you plan to establish a company in Greece, you should prepare for a lengthy list of taxes that you will be required to pay. The taxation system in this country is rather intricate, and seeking guidance from a local attorney may be necessary to gain a comprehensive understanding of it.
In this guide, we will provide a concise overview of the most significant tax categories and policies, allowing you to determine which ones may be applicable to your specific situation.
Rules to Prevent Tax Evasion
Tax avoidance has emerged as a major concern for the Greek government, capturing national attention. Startlingly, nearly 30 billion euros annually evade detection within Greece. Over the past decade, the country’s shadow economy has grown at an alarming rate, surpassing even Italy and trailing behind only a handful of Eastern European nations and Malta.
In response to this pressing challenge, the government has taken steps to combat tax evasion. The Income Tax Code has undergone revisions, allowing for the legal dismissal of arrangements designed to evade taxes during the tax calculation process. Additionally, the government has implemented various anti-evasion measures, including those outlined below:
1. Controlled Foreign Corporations
All the undistributed dividends and other passive income of a subsidiary owned by a foreign corporation are subject to taxation, with the primary shareholder being a Greek resident. However, there is an exception to this rule for the specific company if it meets the following conditions:
- It is registered in a European Union member state.
- It engages in a significant amount of economic activity in the country, as defined by the criteria outlined in the CFC regulation.
2. Thin Capitalisation
Interest on debt and the type of debt are no longer exempt from taxation. For instance, if the net interest expense exceeds 3 million euros, the deductible amount must not surpass 30% of the company’s earnings before interest, taxes, depreciation, and amortization.
3. Transfer Pricing
The term refers to specific pricing practices for commodities transferred across national borders or within companies under common ownership. Greece has joined the majority of EU member states in implementing the OECD pricing guidelines for multinational corporations (MNCs).
These policies apply to a wide range of transferable goods, including property, assets, loans, and services. Generally, in such cases, your taxable income will be increased by setting a lower price for a commodity purchased from a foreign affiliate. Additionally, a higher royalty fee can be enforced for the foreign affiliate’s use of its brand name in Greece.
Furthermore, it’s important to note that multinational corporations with a combined income exceeding 0.75 billion euros per year are subject to country-by-country reporting obligations as per Article 13 of the Base Erosion and Profit Shifting Policy.
Please bear in mind that these transfer pricing policies, along with others, can be disputed in court following standard principles and procedures of legal appeal and reassessment.
4. Exit Taxation
When a foreign corporation transfers assets to its subsidiary in Greece in a manner that prevents the Independent Authority for Public Revenue from taxing those assets, a fixed exit tax is calculated based on the daughter company’s corporate income tax for the year of transfer. Generally, this exit tax is determined by subtracting the taxable value of the assets in question from their market value. This ensures both clarity and fairness in the taxation process.
5. Tax Loss Limitations
Moreover, tax losses cannot be carried forward if the voting or shareholding participation in a legal entity increases by more than 33% in the current fiscal year or if amendments to a legal entity that exceed half of its turnover in the previous fiscal year.
When you establish a company in a different country from where you reside, both countries may impose taxes on your income. Double taxation poses a significant challenge to foreign direct investments.
However, many countries enter into agreements with each other to determine which country has the right to claim the tax, ensuring that you are not burdened with paying it twice. This alleviates the potential financial impact and encourages international business ventures.
At present, Greece has established double taxation agreements with nearly 60 countries across the globe. These agreements are comprehensively listed in the following table:
Austria, Albania, Belgium, Bulgaria, Bosnia-Herzegovina, Croatia, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Iceland, Hungary, Ireland, Italy, Lithuania, Latvia, Luxembourg, Malta, Moldova, Norway, Netherlands, Poland, Portugal, RF, Romania, San Marino, Serbia, Sweden, Slovakia, Slovenia, Spain, Switzerland, UK, Ukraine
Azerbaijan, Armenia, China, Georgia, Israel, India, Kuwait, Qatar, South Korea, Saudi Arabia, Turkey, UAE, Uzbekistan
Egypt, RSA, Morocco, Tunisia
Mexico, Canada, USA
To determine which country will claim your income tax, it is advisable to seek guidance from your lawyer. It is important to note that the agreements encompass not only income tax, but also the CGT and certain withholding taxes.
Another important factor to consider in this regard is whether you qualify as a tax resident in Greece. Put simply, if you spend more than half a year in the country, you become a tax resident. Otherwise, you are exempt from paying taxes on your foreign income. However, if you establish a company in Greece, that legal entity will automatically become a permanent resident.
If your company’s headquarters are registered overseas or if it is an online registered company, you may potentially benefit from tax residency provisions. Essentially, there are three options available to you:
- If your company is a Greek entity or if you spend more than 183 days per year in Greece (or both), you will be subject to the full amount of corporate and other applicable taxes.
- If your company is not a Greek entity but you spend more than 183 days In Greece per year, your profits from the company will be considered foreign income, and you will be exempt from corporate tax. However, you will be required to pay income tax on your foreign income, as indicated in the table below (monthly income in euros).
- If your company is not registered in Greece and you spend less than 183 days per year in the country, you may be exempt from both corporate and income tax, unless you are found to be evading taxes. However, you may still be liable for other taxes that are applicable to your specific situation.
Since 2022, Greece has implemented a reduction in corporate tax rates, from 24% to 22%, applicable to all types of legal entities. However, it’s worth noting that certain companies, particularly those in the financial sector, are still subject to a 29% tax rate.
Furthermore, there have been adjustments to capital gains taxes, with a maximum rate of 22%, although the average rate remains around 15%. In comparison to other European countries, Greece showcases a favorable position in terms of tax policies, as demonstrated in the table below. This demonstrates Greece’s commitment to creating a competitive business environment:
The table below illustrates the standard withholding taxes that may be applicable for your reference:
Technical Projects & Royalties
Dividends & Government Bonds
Real Estate Tax
When acquiring commercial property to house your business in Greece, it’s important to note the associated progressive property tax. Property tax rates are detailed in the table below. However, if you’ve owned the property for 5 years, the taxable amount will be reduced by €25,000. Rest assured, this information will assist you in making informed decisions regarding your property investment.
Please note that as part of the purchase transaction, you will also be required to pay a single real estate transfer tax of 3.09%, unless VAT is applicable to the purchase.
Tax Deductions and Exemptions
Similar to many Western European nations, as well as the USA and Canada, Greece offers tax reductions (typically around 15%) or complete exemptions in specific cases. This means you can benefit from tax deductions in the following scenarios:Final Word
- Mandatory social security payments
- Charitable donations made to religious, educational, medical, and other public organizations
- Taking out a mortgage for your first residential property purchase in the Greek real estate market
- Renting a fully-paid lease for a prime residential property in Greece
Additionally, certain exemptions from taxation apply to:
- Profits generated from transnational shipping of goods
- Dividends received from any Greek enterprise
- Income derived from sales on the Athens Stock Exchange
- Capital gains resulting from the transfer of a business entity between you and your family members within the country.
By availing these tax benefits, Greece provides attractive incentives for various financial activities while maintaining the core meaning of the original text.
Our objective was to emphasize the most important taxes in terms of their relevance and amount for residents, foreigners and expats. Additional taxes, like the VAT and possibly rental income tax, may apply. Moreover, these taxes will vary based on your specific circumstances. Therefore, we highly recommend consulting with your lawyer to ensure you secure the most advantageous and cost-effective tax arrangement for your business operations in Greece.
Greece Visa Homes is a trusted investment advisory firm, offering personalized guidance to individuals seeking the Greece Golden Visa. Our team of legal professionals in Greece ensures a seamless and transparent journey in acquiring real estate and investment funds.
Feel free to reach out to our knowledgeable team members for any inquiries or further assistance.