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Taxation system in Europe


Taxation system


Corporate Tax

For Limited Shares Companies (SA) with bearer shares not listed on the Athens Stock Exchange at year-end, the corporate tax is 35%. For Limited Shares Companies listed on the Athens Stock Exchange, the corporate tax is 35%.

The corporate tax rate for SA companies, limited liability companies and branches of foreign businesses is reduced if they increase the number of their employees. More specifically the following changes were recently introduced:

  • Effective with years ending between 1 September 2002 and 31 August 2003, the income tax rate is reduced from 35% to 34% or 33% or 32.5% provided that the number of employees has increased by 5%, 10% and 12.5% respectively compared with the previous accounting year. The terms and conditions for the application of the reduced rate will be set out in a decision to be issued by the Minister of Finance.
  • Businesses enjoying the above incentive are not allowed to reduce their personnel in the following accounting year.

Research expenses

50% of the scientific and technological research expenses as provided in the Ministerial Decision 12962/3-11-1987, may be deducted from the net profits in order to determine the taxable profits. If, following the deduction, there is a loss, such loss is carried forward for 5 years.

Deductible expenses without supporting documentation

The existing deduction without supporting documentation of an amount equal to 1% of the annual export related gross revenues of businesses involved in the provision of services of up to 8.800.000 Euro and to 0.5% on the excess is extended up to 31 December 2003. The above similarly applies in relation to businesses engaged in the publication of news papers/magazines from the sales and the advertisements and of radio and TV businesses from advertising. The deduction is also available to exporting business on the gross revenues from exports of goods and to hotel businesses on the gross revenue from foreign customers at the rate of 2% on gross revenues up to 2.200.000 Euro and 1% on the gross revenues between 2.200.000 and 8.800.000 Euro and 0.5% on gross revenues over 8.800.000 Euro. Top


Currently accounting audits of banks, insurance companies, government organizations, companies on the Athens stock exchange and companies which for two successive years fulfill two of the three criteria (assets of at least 433.000 Euro and at least 50 employees) may only be performed by a recognized auditing firm of certified auditors (i.e. member of the Institute of Certified Auditors “SOE”). All major International accounting firms are certified auditors.

Other regulations

A foreign-controlled Limited Shares Company (SA) may have the same year-end as its parent company provided that the parent company has a holding of at least 50% of the SA’s capital. Specific permission from the tax authorities is required for this purpose.

Limited Shares Companies (SA) and Limited Liability Companies (EPE) are obliged to file their tax returns by the 15th day of the fifth month following their accounting year end, whereas general and limited partnerships, as well as joint ventures maintaining category C books are required to file their tax returns within three and a half months from the end of their respective accounting period.

If they keep category B books, they file their tax returns each March, the exact date being determined by the letter of the Greek alphabet with which their company name begins.

Legal entities subject to corporate tax are also required to pay an amount equal to 55% (60% in the case of Greek Banks and branches of foreign banks) of the current year’s income tax as an advance against the following year’s tax liability. Credit is given for the advance tax paid in the previous year.
Companies having income from the leasing of real estate, the gross income there from is subject to a 3% supplementary tax, but such tax cannot exceed the corporate tax.

The main and additional tax owed by legal entities is paid in five equal monthly installments, the first being paid at the time of filing the tax return (within the prescribed time limit).

The profits of general and limited partnerships, joint ventures and LTDs are also liable to a stamp duty of 1.2%, which is settled in a single payment upon filing the tax return. Generally, when taxes are paid in one lump sum, or within the prescribed time for the first installment, there is a 2.5% cash discount. Top

International accounting standards

International accounting standards The International Accounting Standards (IAS) are introduced in Greece in relation to companies listed on the Athens Stock Exchange and will apply to annual or periodical accounting statements (including consolidated statements) prepared for periods ending after 31 December 2002. Not listed companies audited by certified auditors can optionally apply lAS after that date. Taking into account that the accounting results will differ from the taxable results, reconciliation will be presented in the notes to the financial statements.

Companies applying the lAS (either compulsorily or optionally) may deduct an amount equal to the cost of adaptation to the lAS incurred in the first accounting year in which the lAS were applied and place it on a tax-free reserve. Top

Withholding taxes levied on dividends, royalties and interest

Dividends: No dividend withholding tax is imposed, since distributions are made out of taxed corporate profits.

Royalties: Royalties paid to companies or individuals with no permanent establishment in Greece are subject to a withholding tax of 20% depending on the nature of the loyalty payment. However, where a treaty for the avoidance of double taxation is applicable, its provisions will apply. There is no withholding on payments to Greek residents.

Interest: Except for interest from bank deposits or state bonds which is tax free or taxed in a special way, interest remitted to non-resident entities is subject to withholding tax at the rate of 35%, or to the rate applicable in tax treaty for the avoidance of double taxation.

When taxable interest is paid to a resident entity, it is subject to a withholding tax in the form of an advance tax of 20%.

The interest on bank deposits and bank bonds is taxed at 15%, whereas the interest on state bonds and interest-bearing treasury bills is taxed at 10%. Certain state bonds are tax-free (savings bonds in the case of natural persons who are residents of Greece and all state bonds with respect to residents overseas). Top

Special provisions

1) Close-en mutual funds investing in companies (venture capital)
The government draft bill submitted for approval to the Parliament introduces a new investment tool in an effort to promote the investment in emerging companies. We set out below the most important provisions:

  • The close-end Mutual Fund investing in companies is a combination of assets consisting of securities, company share parts and cash and it is established for a certain period of time that cannot exceed 15 years.The assets of the close-end Mutual Fund are divided into equal parts and belong to the unit holders (co-ownership).
  • The close-end Mutual Fund invests exclusively in shares or share parts of companies that have their registered seat in Greece and are not listed in the Stock Exchange and also in convertible and/or profit participating bonds of the above mentioned companies.
  • The close-end Mutual Fund can participate in the capital of listed companies only if such participation has taken place before the approval of the listing of the company and this participation is disposed of within 5 years following the date of the listing of the company.

    Manager of a close-end Mutual Fund can be:

    a. A Corporation with share capital of at least 100.000 Euro having as exclusive object the administration of close-end mutual funds.

    b. A business that is licensed by the competent authorities of a member-state of the European Economic Area to manage similar venture capital vehicles.

    c. An Investment Company of L. 2396/1996.

    The minimum assets of a close-end Mutual Fund upon establishment must be at least 3 million Euro and the minimum participation of each holder should not be less than 150.000 Euro.

    The investment of the assets of the close-end Mutual Fund is subject to restrictions.

    The close-end Mutual Fund is not subject to any kind of taxation. Any income the unit holders realize in their capacity as co-owners of the Fund's assets is subject to tax in their hands. The transfer or other transaction in the units is treated for tax purposes as a transfer/transaction on the related ownership on the fund's assets.

    The contract for the formation and management of the close-end Mutual Fund as well as the payment of the holders' participation are not subject to any kind of tax, fee, stamp duty, contribution, right or any other charge imposed by the State, or any other third party.

2) Leasing companies
Leasing Companies are exempt from stamp duties and relevant charges levied on lease contracts, assignment of leasing contracts, leasing rent payments. Depreciation on the leased equipment is effected on the same terms as if the lessee had purchased said equipment.

3) Valuation of securities
Companies listed on the Athens Stock Exchange may set off the results arising from the valuation of securities, bonds and any other type of securities and derivative products at their current value (with the exception of participations in associated companies or securities which are obtained with the purpose of long term investment) against reserves formed from the sale of securities at a price higher than their acquisition price, or from profits from the sale of listed shares or from the exchange of shares or from obtaining free shares as a result of the revaluation of real estate.

Furthermore, if the amount of the above reserve is not sufficient to cover the amount of the loss that arises from the valuation, the amount of the loss that cannot be set off will be transferred to a special reserve in order to be set off against the above reserve that will be formed in the future. The above provision will apply in relation to accounting years ending only after 31 December 2001. It should be noted that this is a change from the original draft whereby the date of implementation was 31 December 2001.

For Portfolio Investment Companies the result arising from the valuation of securities is set off against the special reserves formed under the specific provision applying to such companies (article 10 par. 1 of L. 1969/91)

4) Companies establishing in Greek Islands
Companies established in Greek islands where the population does not exceed 3.100 people are subject to a reduced tax rate (21-24%) on their profits from business activities conducted on those islands.

5) Foreign drawing offices, engineering and construction companies
Foreign drawing offices, civil engineering and construction enterprises, which are engaged in projects within Greece, are taxed on their gross profits with exhaustion of the tax liability, as follows:

  • Drawing offices are subject to a 20% withholding tax on their gross remuneration.
  • Technical enterprises are subject to a 3.5% withholding tax on the total value of the project in the case public works and to a 4.2% withholding tax in case of private works.
  • In case the foreign contractor does not use its own materials, is subject to a 8.75% withholding tax on the value of the project (cost of materials not included).

6) Ships under the Greek flag
Ships under the Greek flag are taxed, irrespective of their profits, according to the tonnage and the year of their construction as follows:

Gross Regist. Tons (GRT) Progressive Scale
G.R.T. Rate
100 - 10.000
10.001 - 20.000
20.001 - 40.000
40.001 - 80.000
80.001 and over
Years from ship's construction
0 - 4
5 - 9
10 - 19
20 - 29

7) Ship investment companies

Certain provisions of Law 2843/2000, which set the conditions and the terms of investment by listed shipping investment companies and also of the listing in the Athens Stock Exchange of the securities of such companies, are amended. The most important amendments relate to the investment of listed companies in shipping the formation of the Ship Investment Companies, their investments, their lending, the procedure for their listing in the Stock Exchange, the obligations undertaken after the listing etc. The main changes are:

  • Listed companies (with few exceptions) are not allowed to invest in international cargo vessels or in companies managing international cargo vessels or to manage international cargo vessels.
  • The net assets must be at least 29.350.000 Euro.
  • The Ministry of National Economy and the Capital Market Committee are granted the right to change the minimum level of net assets.
  • When the application for listing is filed and upon listing, 60% of the total assets must be invested in ship companies owning international cargo vessels.
  • An exemption from inheritance tax is also introduced.
  • Tax exemptions are provided for the gain arising from the contribution of assets to Ship Investment Companies or from their dissolution.
  • Transactions in shares of Ship Investment Companies are subject to the same tax treatment as transactions in listed shares.

8) Real estate mutual funds and companies

Because the legal framework set by L. 2778/1999 was not attractive enough for the formation of real estate mutual funds the following improvements have been made:

  • The share capital of the Management Companies of Real Estate funds is set at 2.935.000 Euro.
  • The participation in the share capital of the Management Companies of Real Estate Mutual Funds are amended by requiting that at least 51 % of the share capital be held by one or more credit institutions or/and insurance companies or/and investment services companies, (each one of which having a minimum net equity equal to the minimum share capital applicable to credit institutions), or/and to social security funds with a minimum reserve of 2.935.000 Euro or/and to one or more state controlled legal entities.
  • The obligation of investing the assets in real estate is increased from 70% to 90%. However, a deviation is allowed so that 80% may be invested in real estate whereas 10% may be invested in cash, bank deposits and credit instruments of equal liquidity. The remaining 10% will continue to be invested in securities.
  • The prohibition on the time of transfer of real estate is reduced from three years to twelve months.
  • The transfer of real estate to a mutual fund is exempted from any tax, duty, stamp duty, contribution, royalty or any other kind of charge in favour of the State, the public legal entities or in general of any third party. This exemption does not apply to income tax on the gain arising when real estate is contributed. The transfers of real estate by the mutual fund are subject to transfer tax.

    Also regarding real estate investment companies the following improvements have been made:
  • The obligation of investing the assets in real estate is increased from 70% to 80%. However, a deviation is allowed so that 70% may be invested in real estate whereas 10% may be invested in cash, bank deposits and credit notes of equal liquidity. The remaining 20% will continue to be invested at a percentage of10% in securities and 10% in other assets that serve the operational needs of the company.
  • The transfer of real estate to Real Estate Investment Companies is exempted from any tax, fee, stamp duty, contribution, royalty or any other charge in favour of the State, of state corporations and of any other third party. This exemption does not cover the income tax imposed on gains arising when real estate is contributed. The transfer of real estate by Real Estate Investment Companies is subject to transfer tax.
  • Real Estate Investment Companies do not take depreciation on the real estate, in which the company's cash is invested. It is not clarified whether depreciation relate to any real estate purchased by the Company after its establishment or whether it is restricted to real estate that has been contributed to the company at the time of its incorporation. Top

Bilateral taxation conventions

 United Kingdom

Income tax

The taxation of the income of natural and legal persons is regulated by Law 2238/94, as amended by more recent laws.

Income tax of natural persons: tax has to be paid on:

  • worldwide income of residents in Greece.
  • income originating in Greece of each natural person, regardless of nationality and place of permanent or temporary residence.
Sources of income are classified as follows:
A-B: Income from real estate.
C: Income from securities.
D: Income from commercial activities.
E: Income from agricultural activities.
F: Income from salaried services.
G: Income from the services of self-employed professionals and all other sources.

The amount remaining after the deduction of allowances and expenses is subject to income tax on the basis of different tax brackets to which different rates correspond. The highest rate is 40% (for taxable income over 23.400 Euro) and the lowest is 15% with a tax-free limit of 10.000 Euro (for employees and pensioners).

Income taxIncome tax of legal persons

The following entities are subject to income tax:

  • Greek companies (corporations, Ltds, general and limited partnerships, civil partnerships, and joint ventures).
  • State, municipal and community enterprises and undertakings, irrespective of whether they are legal persons or not.
  • Cooperatives and other associations.Foreign undertakings operating in any corporate form and foreign organizations whose object is to have financial results.
  • Greek and foreign legal persons of a non-profit character, which are governed by public or private law, including foundations. Top

Value added tax (VAT)
The value added tax is a general indirect tax levied on consumption (Law 1642/86 and Law 2093/92). The relevant legislation has been amended in order to be in harmony with EU Directive 91/680. The tax is paid by the end consumer of goods and recipient of services.

The subject of the tax is:

  • delivery of goods and the provision of services, provided such activities are performed for value in Greece by a taxable person acting in this capacity.
  • import of goods into the country.
  • The intra-Community acquisition of goods for value in Greece by a taxable person or by a non-taxable legal person, when the seller is a taxable person established in another member state.
  • The intra-Community acquisition of goods which are subject to a special consumption tax, by a taxable person or by a non-taxable legal person, subject to the prerequisites of paragraph 2, article 10a of Law 1642/86
VAT is levied on all natural and legal persons, both Greek and foreign, or associations of persons, irrespective of place of establishment, the object or result of their activities, provided they are independently engaged in economic activity.

Exports to residents of non-EU counties and the deliveries of goods to residents of EU member states, which are subject to VAT, are exempt from Greek VAT.

The main rate is 19%, apart from the following, which are taxed at a lower rate:
• Newspapers, periodicals, books, and theater tickets (4%).
• Goods considered being essential items, e.g. fresh produce, pharmaceuticals, transport, electricity and various professional activities (such as services furnished by hotels, restaurants, writers, artists, etc.) (8%).

The rate is further reduced by 30% in the case of goods and services provided by or to taxpayers established in the Dodecanese and on other islands of the Aegean.

The following changes were introduced regarding value added tax (VAT) with effect from 1 January 2002:
  • With respect to the supply of goods, intra-community acquisitions and the provision of services, the VAT liability remains with the taxable person who is resident in the other member state directly, without such person having an obligation to appoint a fiscal representative. In order to fulfill its obligations, the person who is resident in the other member state should appoint an accountant -tax specialist or any other person evidenced through the execution of an agreement, which should be submitted to the Tax Officer of the competent tax authority of the accountant-tax specialist or of the other person.
  • The non-taxable counter party is jointly liable with the resident of the other member state or the fiscal representative of the non-EU resident for the payment of the VAT.
  • Taxable persons residing in another member-state who have already appointed a fiscal representative can continue to carry out their activities through the representative until 31 December 2002.
  • In cases where the appointment of a fiscal representative is still necessary, the relevant Power of Attorney for its appointment may alternatively (i.e. instead of being authenticated by the Greek Consulate of the country in which the taxable person-principal is established) bear the Apostille of the Hague Convention.
  • Certain exemptions are introduced regarding the importation and re-importation of materials which are intended for the use of Armed Services, as well as for certain categories of military materials. Top

Business tax

Limited Shares Companies and Limited Liability Companies are subject to a capital accumulation tax of 1% on the share capital and any increases thereof payable once upon the registration of the company and upon the approval of any capital increase. Top

With permission of © European Communities, 2009

   Corporate tax
   Research expenses
   Other regulations
   International accounting
   Withholding taxes
   Special provisions
   Bilateral taxation conventions
   Income tax
   Value added tax
   Business tax

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