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THE GREEK TAX SYSTEM
Personal income tax matters are regulated by Legislative Decree
3323/1955, as amended by subsequent legislation, and Law 2065/92. Sources of Income All natural persons, irrespective of nationality and place of
permanent or temporary residence, are liable to tax on income earned in
Greece Natural persons residing in Greece are also liable to tax on
income earned abroad. Net Taxable Income In order to determine net taxable income, certain deductions are made
from gross income, so that the taxable income is less than that which
was actually declared. The amount remaining after deduction of
allowances and expenses from the taxpayer's tota l income is then taxed
on the basis of a predetermined scale. In the case of persons residing abroad who acquire income from a
source in Greece, the tax assessed in accordance with the tax scale is
increased by an amount calculated by applying a proportional rate of 5%
for that part of the income up to 1 million dra chmas. Income from interest earned on all forms of deposits is taxed at a
rate of 15%. The tax is withheld by the banks, irrespective of whether
the depositor is a natural or legal person, an association of persons
etc., and regardless of the depositor's nationa lity, place of residence
etc. Exemptions: (a) Interest-bearing treasury bills. (b) Foreign
currency deposits. (c) Housing-loan deposit schemes, provided the
deposits are used exclusively for securing housing loans. TAXATION OF COMPANIES, ASSOCIATIONS AND JOINT
VENTURES Also liable to tax are general and limited partnerships, associations
of civil law engaged in business or exercising a profession, civil
associations of a profit-making or non-profit-making nature,
participating companies and joint ventures (of article 2, par. 2 of the
Code of Books and Documents). Their net profits are taxed at a rate of
35%, after deduction of profits which are not subject to tax (or which
are taxed separately), as well as of profits from the dividends of Greek
companies limited by s hares (societies anonymes) or mutual funds, while
in the case of general and limited partnerships, after deduction of the
business fees of up to 3 general partners (those with the highest
percentages of participation).
The taxation of legal persons is regulated by the provisions of Law
3843/58, as amended by Law 2065/92. Tax is assessed on the net income
(from all sources) acquired by all legal persons. The income of
companies limited by shares (societes anonymes) is ta xed before the
distribution of profits at a single rate of 35% and no other charge is
levied. However, income from the real estate of legal persons is subject
to an additional tax, assessed at a rate of 3% of total gross annual
income. Undertakings Subject to Taxation The following undertakings are subject to taxation: (a) Companies
limited by shares (societes anonymes). (b) Greek limited liability
companies. (c) Foreign companies operating in any corporate form and
foreign organizations whose objective is to acqui re financial gain. (d)
Public, municipal and community enterprises and undertakings,
irrespective of whether they constitute legal persons. (e) Co-operatives
(as provided under Law 602/1914) and their associations. Also subject to
taxation are the legal e ntities of public and private law (Greek and
foreign) operating on a non-profit-making basis, including all types of
institutions. Object of Taxation The object of taxation is as follows: (a) Greek companies limited by
shares (societes anonymes) and limited liability companies (with the
exception of banks and insurance companies): the total net income or
profit earned in Greece or abroad. (b) Foreig n companies operating in
Greece (in any corporate form) and all foreign organizations: the income
or profit from a source in Greece, as well as the net profit arising
from their permanent establishment and operation in Greece, irrespective
of the way in w hich profits are appropriated. Different criteria apply
however if there is an agreement for the avoidance of double taxation
between Greece and the country in which the foreign company is based.
(c) Greek legal entities operating on a non-profit-making b asis: the
income from the leasing of buildings, land and securities. Income
acquired while in pursuit of their objectives is not taxed. (d) Foreign
legal entities of a non-profit-making nature: net income from all
sources, with the exception of that acqui red while in pursuit of their
objectives. (e) Co-operatives of Law 602/1914 and their associations:
the total income or profit acquired in Greece or abroad, before
deduction of the relevant allowances and the profits which are
distributed to their members . The profits distributed by Greek companies limited by shares and
limited liability companies are taken from the balance of profits
remaining after deduction of the income tax assessed. Greek banks and insurance companies are taxed on their total income
or profit acquired in Greece or abroad, after deduction of certain
amounts corresponding to income which is taxed in a special way, until
extinction of all tax liabilities. Foreign companies and organizations which are administered from
Greece, regardless of whether their registered office is located abroad,
are taxed on their total income (acquired in Greece and abroad). The net
profit realized in Greece by a foreign com pany which is permanently
established in Greece is calculated after deduction of administration,
organization and operating expenses incurred by the company's registered
office, which cannot however be in excess of 2% of the gross income
realized in Greec e. The following income of legal persons is exempt from tax: (a) The
profits of Greek companies limited by shares and co-operatives derived
from the operation of Greek-flag vessels. Such profits, for
distribution, are not subject to income tax. (b) Subje ct to
reciprocity, the profits of foreign companies realized in Greece from
the operation of foreign-flag vessels and aircraft. (c) Greek legal
entities pursuing objectives pertaining to public welfare, with respect
to income from buildings and the leasin g of land. (d) Subject to
reciprocity, the presumptive income from real estate belonging to
recognized foreign religions, used by such religions for the purpose of
worship. (e) Subject to reciprocity, the presumptive income from real
estate belonging to f oreign states which is used for the establishment
of embassies and consulates. (f) The Greek state, municipalities and
communities. (g) The Church of Greece, with respect to income from
buildings and the leasing of land. The following are also exempt from tax: (a) The interest on national
loans floated in the form of treasury bills or bonds. (b) The interest
on the bond issues of the Public Power Corporation and the Hellenic
Telecommunications Organization. (c) The int erest on mortgage loans
extended to Greek vessels. (d) The dividends from the shares (including
founder's shares) of Greek societes anonymes, whose profits are subject
to the special tax prescribed by Law 27/1971. (e) Income which has been
made exempt fro m taxation in accordance with a contract ratified by
law. (f) Income from the share dividends of domestic and foreign
societes anonymes and from the interest earned on bonds, acquired by
domestic public welfare institutions. For the purpose of determining income, the following periods of time
apply: (a) Companies keeping category 3 books of the Code of Books and
Documents: the business year or accounting period. (b) In all other
cases: the calendar year. (c) In the case of legal entities in
liquidation, the accounting period is considered to be the period from
the time it goes into liquidation until this completion date. In order to determine the total net income of legal persons operating
on a profit-making basis, their gross receipts are first calculated,
from which certain amounts are then deducted. Gross receipts are
considered to be the following: (a) The proceeds from final sales. (b)
Fees from the provision of services. (c) Income from buildings, the
leasing of land, securities, participation in other undertakings etc. When the income of legal persons includes dividends or profits from
participation in other companies whose profits have already been taxed,
such income is deducted from the total net profits of the legal person
in question. However, if the net profits of a legal person (societe
anonyme, limited liability company, co-operative) include income which
is taxed in a special way involving extinction of all tax liabilities,
or tax-free income followed by the distribution of profits, such profits
for distribu tion are calculated on the basis of the total net profits
as presented in the balance sheets of the legal person in question. If the net profits, as shown in the balance sheets of legal persons
such as societes anonymes (with the exception of banks and insurance
organizations), limited liability companies and co-operatives, include
tax-free income, then that part of the tax-f ree income corresponding to
the profits distributed in any way is added in order to compute taxable
profits. Irrespective of when they were informed, if the tax-free reserves of
companies limited by shares, limited liability companies and
co-operatives are distributed or capitalized, they are added to the
taxable profits of the legal person at the time of suc h distribution or
capitalization. The same applies in the case of the distribution or
capitalization of reserves derived from income which has been taxed in a
special way involving extinction of tax liabilities. In the event of the dissolution of a domestic societe anonyme or
limited liability company, the legal person is liable to the payment of
tax on the amount received by the shareholders, over and above the
paid-in and non-returnable share capital and pr ofits which have already
been taxed. Share capital paid in by the shareholders is considered to
be the company's share capital plus the reserves formed from payments by
the shareholders for any issue of shares above par. In the case that a Greek societe anonyme purchases or acquires its
shares in any other way, for the purpose of reducing or amortizing its
capital, the amount given to the shareholders comes from the balance of
profits resulting after deduction of the c orresponding tax from the
total profits. Tax is computed on the taxable income of legal persons at the same
rate (35%) for all categories of income. This applies irrespective of whether a company's shares are listed
and regardless of the object of its business. The imposition of this
rate of 35% discharges all those who acquire income from a legal person
(dividends, directors' fees etc.) from furth er tax liabilities. Computation of Tax* (see pages 98 and 99) *Paragraph 4.8.27 of page 99 remains, ''Payment of Tax-Prepayment of Tax'', but the monthly installments are increased from 3 to 5.
The tax returns of legal persons of a profit-making-nature are filed
on the 15th day of the 5th month after the end of the accounting period,
while those of non-profit-making entities are submitted up to March 2 of
the corresponding financial year. Payment of Tax - Prepayment of Tax The main and supplementary tax owed by domestic and foreign legal
entities of a profit-making nature is payable in 3 equal monthly
installments, the first of which is paid upon submission (within the
prescribed time limit) of the return. If all taxes are paid within the time limit set for the first
installment , i.e. main and supplementary tax, prepayments, stamp duty,
water supply and drainage charges, a 10% rebate is granted. Together with the main and supplementary tax, a tax prepayment is
also made for the income of the following accounting period, equal to
50% of the tax assessed on the income of the accounting period which has
ended. Taxation of Dividends The profits distributed by Greek societes anonymes as ordinary and
preference share dividends are subject to an income tax withholding as
follows: (a) Dividends for shares listed on the stock exchange at least
4 months before the end of the accounting period to which they
correspond are taxed at a rate of 42% provided they have been paid for
shares which became registered before the end of the financial year, and
at a rate of 45% if they have been paid for bearer shares, without any
other levy being im posed. The beneficiaries of the above dividends are
granted a tax allowance of 50,000 drachmas per shareholder for dividends
received from the same societe anonyme. The tax allowance for each
shareholder cannot exceed a total of 200,000 drachmas when the dividends
have been paid by ore than one societe anonyme. (b) Dividends for shares
which are not listed on the stock exchange are subject to a withholding
tax without any allowance, calculated at a rate of 47% in the case of
dividends paid on shares whic h became registered before the end of the
financial year, and 50% if they have been paid on bearer shares, without
any other levy being imposed. (c) The dividends paid to the shareholders
of one or more investment portfolio companies,, up to a total amoun t of
200,000 drachmas, are exempt from income tax subject to certain
conditions. (d) The dividend to be distributed by investment portfolio
companies is exempt from income tax up to the percentage by which that
dividend has resulted from the sale of secu rities or shares at a price
higher than the acquisition price. TAXATION OF FOREIGN CONSTRUCTION COMPANIES Foreign companies and organizations which undertake (in Greece) to
draw up studies and plans or conduct technical, economic or scientific
research in general, irrespective of whether the studies, research etc.
are carried out in Greece or abroad, or w hich undertake to supervise
and co-ordinate projects performed by third parties in Greece, are
subject to taxation on the income they acquire from such operations, at
a rate which varies according to whether the principal is a private
company or the state and whether the materials used belong to the
contractor. The income of shipowners from the operation of Greek-flag vessels is
taxed in a special way. Imposition of Tax and Levy on Greek-Flag Vessels Each vessel is taxed as an independent economic unit, while the tax
itself is payable by the shipowner registered in the appropriate
shipping register on the first day of each calendar year. Payment of the
special tax and levy (on Category A vessels re gistered under the Greek
flag before 22.4.75) discharges the shipowner and shareholder or partner
of a Greek or foreign company from all tax liabilities with respect to
profits deriving from the operation of vessels. However, such discharge
does not apply when a ship's operator is not the owner of the vessel on
which the tax or levy has been assessed. Classification of vessels For taxation purposes, vessels are rated in the following categories:
(a) Category A (I) Cargo vessels, tankers and refrigerated ships of a
least 3,000 gross register tonnage (GRT). (ii) Iron cargo vessels (for
dry and liquid cargo) and refrigerated sh ips of between 500 and 3,000
GRT operating overseas routes. (iii) Passenger vessels which sail to or
between foreign ports. (iv) Tour or cruise vessels of over 500 GRT
which, during the previous fiscal year and for at least six months,
operated between do mestic ports, foreign ports or both. (v) Floating
drills with a displacement of over 5,000 tonnes, as well as floating
refineries and oil storage facilities of over 15,000 GRT. (b) Category B
All other power vessels, sailing ships and boats in general. Computation of Tax (a) Taxation of Category A vessels (i)Vessels registered under the
Greek flag after 22.4.1975: Tax rates are calculated in terms of dollars
per GRT and range between 0.53 and 0.68 dollars according to the age of
the vessel. The amounts resulting from t he application of these rates
are then multiplied by rates according to GRT, ranging between 1.2 and
0.8. The tax per gross registered tonne is increased by 4% each year as
of the year following the entry into force of Law 27/1975. (ii) Vessels
registered under the Greek flag before 22.4.1975: - Vessels between 10
and 20 years of age are taxed at a rate of 0.20 dollars per net register
tonnage (NRT). -Vessels between 20 and 25 years of age are taxed at a
rate of 0.30 dollars per NRT. -Vessels over 25 year s old are taxed at a
rate of 0.40 dollars per NRT. The taxation of floating drills is
calculated in terms of GRT. Category A vessels which were registered under the Greek flag before
22.4.1975 are also subject to a levy, calculated according to the age of
the vessel and its total capacity in tonnes. (b) Taxation of Category B
vessels: The tax levied on Category B vessels is calculated annually on
the basis of GRT and is paid in drachmas according to a scale of rates
for vessels up to 100 GRT. For vessels of over 100 GRT, tax is computed
at a rate of 35 dr./GRT. The tax resulting from the application of the
above rate is reduced: (a) By 50% in the case of vessels operating
regular routes between Greek and foreign ports or between foreign ports
only. (b) By 60% in the case of passenger ships, power vessels and
sailing ships, regardless of their type of constructi on. (c) By 75% in
the case of fishing vessels. Vessels of Category A and Category B are entitled to certain tax
deductions and exemptions. In the event that a vessel qualifies for more
than one such deduction or exemption, a choise of only one must be made. The tax and levy may be paid in dollars or sterling, as chosen by the
taxpayer. However, the tax and levy may also be paid in drachmas,
provided the drachmas originate from the import of shipping exchange
(dollars or sterling). A special lump sum levy of 5% is imposed on income acquired from the
exercise of a sole proprietorship, professional occupation or
undertaking of any legal form (general/limited partnership, limited
liability company, company limited by shares). The l evy is calculated
on the net income shown in the annual balance sheets. Business Commencement Dues The commencement of business activity entails the payment of dues as
follows: sole proprietorship - 20,000 dr. General and limited
partnership - 10,000 dr. for the company and 20,000 dr. for each
partner. Limited liability company - 50,000 dr. for the company and
20,000 dr. for each partner. Company limited by shares - 150,000 dr.,
irrespective of the number of shareholders. Turnover Tax (Law 660/1937) Law 660/37 provides for the imposition of tax on the income of
insurance companies. The tax is levied on all types of premiums due as
well as on the charges pertaining to the insurance policy. It is
calculated on the initial amount (before any rebates) at the following
rates: Fire insurance premiums 20%, Life insurance premiums 4%, Other
branches 10%. Turnover tax is not imposed on the motor insurance branch.
In the case of a group insurance policy, the single premium is divided
for the purpose of appl ying the appropriate rate. Stamp Duty Stamp duty constitutes an indirect tax levied on transactions which
are drawn up in writing. There are two types of duties: (a) Pro rata
duty, calculated as percentage of the value referred to in the relevant
document. (b) Fixed duty, levied on docume nts at a fixed rate,
irrespective of the value referred to in the document. Value Added Tax is general indirect tax levied on consumption (Laws
1642/86 and 2093/92). All natural and legal persons (Greek or foreign) and associations of
persons, irrespective of their place of establishment, object or result
of the activity in question are subject to VAT, provided they are
engaged in economic activity in an independen t manner. Also subject to
VAT are all persons who from time to time carry out the delivery of a
new means of transport, which is either sent or transported to another
E.C. member state. For the purposes of the law, economic activities are considered to be
the following: (a) Production activities, (b) Commercial activities, (c)
Provision of services. Mining, farming and professional occupations are
also regarded as economic activities, as too is the exploitation of
tangible or intangible goods with the aim of acquiring income. Computation of VAT (A VAT rate reduced by 30% applies to the
prefectures of the Dodecanese, Samos, Chios, Lesbos and the islands of
Thassos, Samothrace and the Northern Sporades -Skiathos, Alonissos,
Skyros and Skopelos- which is however not applicable for tobacco
products and vehicles). VAT is computed on the consideration received by the supplier for the
delivery of goods or the provision of services. There are two VAT rates:
(a) The lower rate of 8%, charged mainly on basic consumer goods. (b)
The upper rate of 18%, charged on the m ajority of goods and services. Right to Deduct VAT Persons subject to VAT are entitled to deduct the amount of VAT which
they have paid on their purchases, or for services rendered by third
parties or imports, from the VAT which they must pay, provided such
transactions are subject to the tax. However, VAT may not be deducted if
it has been paid on the purchase or import of tobacco products and
alcoholic beverages, when such expenses were incurred for the
realization of non-taxable activities. Also excluded from the right to
deduct VAT are expenses per taining in general to personal use, public
relations and expenditures for a company's personnel or representatives. Filing of VAT Return VAT returns are filed as follows: (a) Every two months, up to the
20th day of the month following the two-month period in question, in the
case of persons or companies keeping Category B books (of the Code of
Tax Documents). (b) Up to the 25th day of e ach month, in the case of
Category C books. (c) Every three months and up to the 15th day of the
month following the three-month period in question, in the case of
Category A books.
(Information Courtesy of the Greeek Embasy in Washington D.C) Back to the GreekInternet.Com Index
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