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Tax in Greece: A guide for expats 2021

15 Nov 2021
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Greek Tax Guide 2021:

When it comes to taxation systems, they tend to be anything but straightforward. Navigating through the Greek multifaceted system can be a challenge. So instead of tirelessly trying to find the answers yourselves, our up to date guide should offer an insight into the Greek taxation system.

In this guide we will cover what Tax regulations apply in Greece with regards to the following categories:

  • Employees/Pensioners
  • Freelancers (Sole Proprietorship)
  • Legal Entities
  • Rental Income

More specifically we will encompass the following areas in relation to the Greek Tax system:

  • The different Tax Rates in Greece
  • Dates for Reporting and Payment
  • Double Taxation Treaties (DTT)
  • The 7% Flat Rate for Foreign Retirees
  • Additional Payments:  Solidarity Levy

When could you be classed as a Tax Resident in Greece?

The first step when relocating to Greece is to establish when one MUST pay taxes in Greece. You could be legally obliged to pay taxes in Greece under the following circumstances:

  • According to Greek Law, a person who is domiciled in Greece or resides in Greece for more than 183 days within a tax year is considered a ”permanent resident” and therefore will be classed as a tax resident in Greece.
  • If someone is a tax resident in Greece whilst also benefiting from economic activities in another country, he/she will need to declare his/her global income in Greece. It is imperative however  to establish if there is an existing bilateral treaty for avoidance of double taxation (DTT) between Greece and the other country. In the event that there is a DTT and depending on the nature of the income, the DTT will determine in which country each type of income will be taxed.
  • Non-residents of Greece are required to register as ”residents abroad” and to submit documentation proving that they are residents of another country for tax purposes, only if they were previously declared as Greek Tax Residents and now wish to change that status.
  • Non-Greek Tax Residents – based on the DTT applicable – will need to submit Tax Returns and pay taxes in Greece for income that was generated in Greece (for instance rental income or income for business activity).

According to the Greek Tax Code, taxable income includes salaries, pensions, income from self-employment, alimony from a spouse, income from agricultural activities, rental income as well as income from company shares, interest and royalties.

Tax Regulations in relation to each category:

Legal Entities in Greece

There are a number of different company types to choose from when establishing a Legal Entity in Greece. The eligibility depends on a number of factors some of which include the number of participants, the liability, the exposure, the nature of the participants (individuals, entities or combination) and the amount of the (expected) profitability.

The most notable and frequently used type of Companies in Greece are:

  • Sole Proprietorship (Freelancer Personal Business Activity)
  • General Partnership (G.P)
  • Limited Company (Ltd)
  • Private Capital Company (P.C or I.K.E. in Greek)
  • Established Branch of a Foreign Company
  • Maritime Company for Pleasure Yachts (M.C.P.Y. or otherwise known as N.E.P.A in Greek – solely available for yachting business)

VAT (Value-Added Tax)

With regards to taxes paid on revenue, the standard VAT applied in Greece for goods and services stands at 24%.  A reduced rate of 13% applies on fresh food, care for children, the elderly, the disabled and accommodation in hotels and similar establishments. There is also a super reduced rate of 6% which is mostly used for specific medicines and vaccines whilst also for certain products and services related to children (i.e. children’s books, theatre tickets, etc.).

Each legal entity, depending on the company type and the category it belongs to in terms of accounting books, will submit VAT reports every month or every quarter.

Profits for Legal Entities (excluding Sole Proprietorship)

When it comes to the tax a legal entity must pay in Greece on its profits there is a flat taxation rate of twenty two percent (22%) and it is applied on the first euro of profit produced per year.

Dividends are also capped and stand at five percent (5%) for shareholders.

The advance repayment tax applied to Greek Legal Entities (a tax repayment for the next fiscal year based on the previous years profits, which is counterbalanced with the next year’s actual profits), is eighty percent (80%). However, newly established Greek Legal Entities are subject to a reduced advance repayment tax standing at fifty percent (50%) for the first three (3) years of business activity.

Sole Proprietorship/ Freelancers in Greece

A sole Proprietorship is a personal company that has the same Tax Number as the Individual/ Entrepreneur involved. Creating a Sole Proprietorship does not require a minimum amount of capital.

Sole Proprietorship Income Tax rates

  • 9% for income up to 10k EUR
  • 22% for income between 10-20k EUR
  • 28% for income between 20-30k EUR
  • 36% for income between 30k-40k EUR
  • 44% for income over 40k EUR

Annual Business Tax

  • The annual business tax equates to 650.00 EUR (not applicable for the first 5 years of activity).
  • Additionally, Sole Proprietors/Freelancers are able to benefit within the first 3 years of their operation with regards to the taxation rate. The rate of nine percent (9%) is reduced to half (4,5%) provided that their annual turnover does not exceed the 10,000 EUR threshold.
  • Income tax additional advance payment rate is equal to fifty-five percent (55%).

Social Security Fees

There a number of different Insurance Categories that apply in Greece. Each individual is free to select the category most suited to the individual’s needs. However it goes without saying that the category one chooses will affect the pension one will consequently receive.

Social Contributions Tax Greece

The OAED sector contribution offers self-employed individuals the opportunity to contribute an additional 10€  per month to any of the above contributions in order to be eligible to claim unemployment benefits in the event that they need to.

For individuals that participate in a company in Greece for the first time, there is an additional lower category of 126,00  per month, which can be selected for 5 years at most.

Employees & Pensioners in Greece

Income Tax Scale

The following graph lists the tax rates with regards to employment income and pensions:

INCOME TAX SCALE PGOTO

It is important to mention that Pensioners and Employees are subject to a Tax Relief equating up to approximately 8.600 EUR of annual income at this point, which is translated to a tax reduction of 777 EUR per year. Income above 8.600 EUR is taxed with the above-mentioned rates.

Additional Payments:  Solidarity Levy

Due to the economic crisis that Greece endured, an additional ”extraordinary tax” measure was put in place based on income that exceeds 12.000 EUR per year and is known as the Solidarity Levy.

This levy applies to all taxpayers with Net income of over 12,000 EUR and is calculated on the annual income (net income) of the taxpayer and is based on the on the rates below:

– 0% for the first 12,000 EUR of annual income

-2.2% for the annual income segment from 12,001 TO 20,000 EUR,

-5% for the annual income segment from 20,001 EUR to 30,000 EUR,

-6.5% for the annual income segment from 30,001 EUR to 40,000 EUR,

-7,5% for the annual income segment  from 40,000 EUR to 65,000 EUR.

-9% for the annual income segment from 65,001 EUR to 220,000 EUR,

-10% for the annual income segment of 220,001 EUR and above.

Due to the pandemic for the tax year of 2021, all individuals’ income is exempt from solidarity contribution, apart from employment income from the public sector and pensions.

For the tax year of 2022, only employment income from the private sector is exempt from the special solidarity contribution. However it is predicted that the Solidarity Contribution will be abolished within the next couple of years.

Alternative taxation regime for foreign employees

The Greek government in January 2021 started offering an alternative method of taxation from salaried employment, for individuals wishing to transfer their tax residence to Greece.  In order to be eligible for favourable taxation in Greece, one must meet the following circumstances:

  • The individual was not a Greek Tax Resident for the previous five (5) of six (6) years prior to the transfer of his/her tax residence to Greece,
  • The individual transfers his/her tax residence from an EU member state or EEA country or from a country with which an administrative cooperation agreement in the field of taxation with Greece is in place, 
  • The individual provides services in Greece in the context of an employment relationship with a Greek legal entity or with a permanent establishment (PE) of a foreign company in Greece, and
  • The individual agrees to remain in Greece for the duration of at least 2 (two) years.

In the event that the individual’s application is accepted, then he/she will receive an exemption from income tax and the special solidarity levy of 50% of one’s employment income. 

To be eligible for this new regime, the application for the transfer of the tax residence is filed to the Tax Administration by the individual within the year of assuming one’s service and not later that the 31st of July of that year. 

The regulations on alternative taxation shall apply to the income of the tax year of which the individual files his/her application and expires after a total of 7 (seven) tax years, with no possibility for further extension. 

Flat Tax of 7% for foreign pensioners with tax residence in Greece

Greece recently implemented a new tax regime for pensioners who have their main residence in Greece or who wish to transfer their fiscal residence to Greece which in return enables them to benefit from a flat tax rate of seven percent (7%).

The new regulation suggests that a pensioner may transfer his/her tax residence to Greece and be subject to an alternative method of taxation, provided that cumulatively:

  1. The individual was not a tax resident in Greece for the previous five (5) of the six (6) years prior to the transfer of his tax residence to Greece, and
  2. The individual transfers his tax residence from a State with which an agreement on administrative cooperation in the field of taxation with Greece is in force.

How it works

Once the individual’s application is accepted he/she will pay each tax calendar year an independent tax rate of seven percent (7%) for the total foreign (non-Greek) income. The tax is paid for each tax year in one (1) installment until the last working day of July. In the event that the individual fails to meet the above mentioned conditions, the pensioner will lose the benefit of the 7% flat tax rate and will be subject to the tax based on general tax regulations in Greece.

The application to transfer the tax residence and consequently benefit from the alternative way of income taxation is submitted to the Greek Tax authorities by the individual until the 31st of  March of the respective tax year. The Greek Tax Authority will then examine the application and issue a decision within sixty (60) days from the date of submission. Once approved the Greek Tax Authority will notify the Tax Authorities of the country in which the individual was previously a Tax resident of, in order to make the transfer to Greece.

The individual’s alternative method of taxation will start from the tax year following on from the year the application was made and will end after a fifteen (15) year period (with no possibility for extension).

Real Estate Property Income Tax

Income derived from real estate is taxed according to the fallowing table:

income tax scale (rental)

Properties & Real Estate are also subject to Annual Property Tax otherwise known as ENFIA (regardless of whether income is generated from them or not) and they are defined by many different factors, such as the year of the property was constructed, the price zone, the size, etc.

How BeNative can assist you with the Greek Tax System

Our extensive knowledge of the Greek Tax system enables us to provide an all inclusive service to meet the needs of individual or legal entities seeking financial or tax services within the Ionian Islands Region. From advising individuals on Tax matters based on Greek legislation, to consulting legal entities with navigating the complexities, we posses the know how to make these all important matters effortless and stress free. If you would like to make a specific enquiry about an issue you are facing, then book in for a consultation with us simply by emailing us at info@benative.gr or by filling out this form.

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