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.
Auditing
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.
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.
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).
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 |
1,2 |
10.001
- 20.000 |
1,1 |
20.001
- 40.000 |
1 |
40.001
- 80.000 |
0,9 |
80.001
and over |
0,8 |
Years
from ship's construction |
Rate |
0
- 4 |
0,53 |
5
- 9 |
0,95 |
10
- 19 |
0,93 |
20
- 29 |
0,88 |
older |
0,68 |
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.
Bilateral taxation conventions
(revision) |
1927/1991 |
Austria |
994/1971 |
Belgium |
117/1969 |
Bulgaria |
2255/1994 |
Cyprus |
573/1968 |
Czechoslovakia |
1838/1989 |
Denmark |
1986/1991 |
Finland |
1191/1981 |
France |
4386/1964 |
Germany |
52/1967 |
Holland |
1455/1984 |
Hungary |
1496/1984 |
India |
4580/1966 |
Italy |
23/1967 |
Luxembourg |
2319/1995 |
Norway |
1924/1991 |
Poland |
1939/1991 |
Rumania |
2279/1995 |
Sweden |
4300/1963 |
Switzerland |
1502/1984 |
United
Kingdom |
2732/1953 |
USA |
2548/1953 |
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
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.
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.
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.
With
permission of © European Communities, 2009
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