With the number of individuals immigrating to the United States from Greece on the rise, it is important that foreign nationals and Legal Permanent Residents who reside in the United States but maintain assets and investments in Greece understands the different tax laws. This is also important for US citizens who invest in Greece.
Is important to remember that US citizens, Legal Permanent Residents and foreign nationals subject to the substantial presence test are taxed on the U.S. on their worldwide income and may be subject to Greek tax as well.
Below please find brief summary regarding tax law in Greece:
BUSINESS & COMPANY TAX
Corporate Tax: A Greece resident company is subject to tax on their worldwide Income, which is a common theme throughout most countries. In other words, if Greece is your company’s home base then you will be paying tax in Greece on your worldwide Income. Conversely, if you are a nonresident company that operates in Greece then you are generally only going to be taxed on income that is sourced from Greece – and not other countries.
Corporate Tax Rate: The corporate tax rate in Greece is a straight 26% which is more than 10% lower than it was back in 2006 when it was 29%.
Capital Gains Tax: The capital gains structure in Greece is somewhat different than other countries. Unlike several other countries, capital gains are not taxed separately but rather are added to the Company’s taxable income. There are various instances when the dividends will be exempt from the structure and will require more in-depth analysis with a particular company to determine your company’s tax liability.
Branch Profit Tax: Unlike other countries, Greece does utilize a branch foreign tax. The tax rates for undisputed profits are generally 26% of the company if the company is a Greek branch of a foreign company.
Value Added Tax: Many countries utilize a Value Added Tax instead of a sales tax. Greece also utilizes the value added tax concept and the VAT taxes charged is a (relatively high) flat rate of 23%, while certain goods and services be exempt.
- Greece reduces the VAT tax rate to 13% and 6.5% for certain goods and services.
- Further, the tax rates can be reduced by upwards of 30% in certain circumstances and there is no VAT tax for public services.
Dividends: Since 2011, Greece modified its tax system with respect to dividends. Dividends are subject to dividend tax of 10% and the total of the company’s profits for distribution are taxed at 26%.
- There are certain exemptions such as when the dividend qualifies for the application of the ED parent-subsidiary directive or if the tax rate is otherwise reduced due to a tax treaty being in place.
Related Party Transactions: In order to avoid companies that are related from artificially inflating and deflating tax liability, Greece maintains related party transaction guidelines and adjustments will be made when the transaction was not an arms length.
Withholding Tax: When a tax treaty is not in place between Greece and another country there is a withholding tax of 20% which is deducted from royalties and other earnings when they are paid to foreign enterprises and persons who are not “permanently established” in Greece.
PERSONAL INCOME TAX
Personal Income Tax: When an individual is permanently established in Greece, he or she will be subject to income tax on their worldwide income. Otherwise, if the individual is not permanently established in Greece then they will pay taxes on Greek income.
- Taxable income is determined in Greece by deducting expenses such as Social security contributions, medical care expenses, and interest paid for purchasing your first home.
Permanent Resident: In order to determine whether Greece is your place of permanent residency, the individual must show that their life is centered around Greece.
- While different countries use different terminology, the gist of the matter is you need to show that Greece is remaining country of residence – essentially, where you live your life.
Personal Income Tax Rate: Currently, the personal income tax rate in Greece ranges from 22% to 42%. There are various exemptions for taxpayers who are certain types of income.
Estate Tax: Greece utilizes a more intricate estate tax equation, the calculation which is beyond the scope of this article. There are various tax rates and exemptions depending on the relationship of the parties to the decedent and other factors.
FATCA & OVDP: Whether or not Greece taxes certain income, it is important to keep in mind that as a U.S. citizen or Legal Permanent Resident, you are still required to make sure you disclose the money on your tax returns and FBAR statements (Assuming you meet the threshold requirements) and pay any necessary tax to the U.S. government – unless a Foreign Tax Credit applies.
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