Greece has entered a period of austerity measures and the tax laws are a part of this. This overview of the personal and corporate taxes for 2011 can help individuals and companies to plan their activities in Greece.
The current tax bands and tax rates for 2011 in respect of employees and pensioners are as follows:
- To EUR 12,000 – 0%
- Next EUR 4,000 - 18%
- Next EUR 6,000 - 24%
- Next EUR 4,000 - 26%
- Next EUR 6,000 - 32%
- Next EUR 8,000 - 36%
- Next EUR 20,000 - 38%
- Next EUR 40,000 - 40%
- Over EUR 100,000 - 45%
To obtain the tax free bracket, there is a requirement to present certain evidence relating to the living expenses of the taxpayer. In the absence of adequate evidence, the taxpayer may be liable to tax at 10%.The tax-free bracket may be increased in the case of persons who have dependent children.
Taxation of Non-Resident Individuals
Non-residents are subject to income tax on their income at the same rates as residents, and are also liable to a 5% surcharge on their income up to EUR 12,000. Non-residents are not entitled to the personal deductions and allowances available to residents unless they are resident in an EU member state and 90% of their income is derived from sources in Greece.
Interest earned by non-residents on Euro bank deposits is subject to a final withholding tax of 10%, while other types of income are liable to a final withholding tax of 20%. Royalties paid to non-residents are also subject to a final withholding tax of 20%.
Where a non-resident sells shares of a Greek corporation not listed on a stock exchange, the shares are liable to tax of 5% on the higher of the contractual sale price or the deemed sale price. Capital gains tax applies to non-residents on the sale of buildings in Greece at the same rate as for residents.
Other capital gains of non-residents are subject to a 20% withholding tax on the following types of income:
- participations in partnerships;
- sale of a business (including intangible assets); or
- trademarks and goodwill that are sold separately.
Inheritance and gift tax
Inheritance and gift tax applies to all transfers of movable and immovable property located in Greece, and to transfers of foreign property owned by Greek residents. Exemptions apply to dwellings, subject to certain conditions. Rates of inheritance and gift tax range from 0% to 40%.
Corporations in Greece are taxed on their income in Greece and from overseas, subject to relief for foreign tax paid. Foreign companies in Greece are taxed only on income that is generated in Greece.The corporate income tax rate in 2011 is 23% for retained profits and 40% for distributed profits. The corporate income tax is being reduced by 1% per year until it reaches 20% by 2014. However a draft tax law introduced into parliament in January 2011 will, if passed, reduce the corporate tax rate to 20% with effect from 1 January 2011.
The tax rate for partnerships is 20% in relation to the proportion of profits relating to partners who are individuals, and 25% otherwise.
Value Added Tax
Value added tax (VAT) is charged on goods and services supplied in Greece and on imports into Greece. Businesses whose turnover is at least EUR 12,000 must register and charge VAT on the goods or services they supply. The standard rate of VAT is 23%. A lower rate of 13% can apply to food and medicine, while a rate of 6.5% may be applicable to goods such as books and newspapers. A number of supplies including insurance, education, health and legal services are exempt from VAT.
Real estate transfer tax applies to the sale of land and buildings if VAT applied to the original transfer. The rate of real estate transfer tax is 8% where the market value is up to EUR 20,000, with any excess taxed at 20%. There is also a 3% local surcharge.
A transfer tax also applies at a rate of 0.15% to the transfer of shares listed on the Athens Stock Exchange or other recognized stock exchange worldwide.
A capital duty of 1% applies to any contribution to the share capital on the formation of a company, and to any increase in the company's capital, unless the increase results from the compulsory revaluation of immovable property or from the capitalization of profit, reserves or provisions (apart from share premium).
Contributions by a non-resident company of assets or working capital to its branch in Greece are also subject to the 1% capital duty. There is an exemption for a non-resident company that has its seat or permanent establishment in an EU member state.
Stamp duty applies to a number of types of transaction that are exempt from VAT. The applicable rates of stamp duty are as follows:
- 2.4% on the issue of loans between businesses or between individuals and companies;
- 2.4% on certain insurance transactions;
- 3.6% on rents of properties used for business purposes; and
- 1.2% on directors' fees.
Stamp duty also applies on the acquisition of a business as a going concern.
The draft tax law introduced into parliament in January 2011 will, if passed, reduce the corporate tax rate to 20% from 1 January 2011 and subject profit distributions to an additional 25% withholding tax, creditable against the final tax liability of the recipient. The corporate tax rate for 2010 remains at 24% as before, but distributed profits are subject to an additional 21% withholding tax.
If the draft law is passed, the transfer tax on shares listed on a recognised stock exchange will increase from 0.15% to 0.2% for sales up to 31 December 2011.
The draft law also provides that where payments are made directly or indirectly to persons who are established in tax havens, these will not be deductible as expenses for tax purposes unless the expenses are demonstrated to be for genuine purposes rather than for tax avoidance.