Corporate tax in Greece

Rules to Prevent Tax Evasion

The issue of tax avoidance has become a subject of major national concern for the Greek government. Statistically, almost 30 billion euros per year go "unnoticed" in Greece. The size of its shadow economy, expressed as a percentage of its gross domestic product, has risen sharply by the EU standards in the last ten years, growing even more than in Italy and surpassed only by a few countries in Eastern Europe and Malta.

In response to the challenge, the government has revised the Income Tax Code to the general effect that any arrangement whose purpose seems to be tax evasion may legally be disregarded in the process of tax calculation. It has also imposed some additional anti-evasion policies, such as the ones listed below: 

1. Controlled Foreign Corporations

The undistributed dividends and other passive income of a daughter company of a foreign corporation is subject to taxation with the primary Greek resident shareholder. The rule will not apply to the company in question in case:

• It is registered in a member state of the European Union.

• It carries out a significant amount of economic activity in the country in terms of the criteria stipulated by the CFC regulation. 

2. Thin Capitalisation

The interest on and type of debt is no longer to be exempt from taxation. For example, if the net interest expense is more than 3 million euros, the deductible amount must not exceed 30% of the company's earnings prior to interest, taxes, depreciation and amortization. 

3. Transfer Pricing

The term refers to specific pricing practices in the case of commodities transferred across national borders between or within companies under common ownership. Greece has joined the majority of the EU member states and begun to implement the OECD pricing guidelines for MNCs.

These policies apply to virtually all categories of transferable goods, from property and assets to loans and services. As a general rule, your taxable income will be increased in such cases by imposing a lower price for a commodity purchased from a foreign affiliate. In addition, they can enforce a higher royalty fee for the respective foreign affiliate to use its brand name in Greece.

Furthermore, you should keep in mind that a multinational corporation with a combined income of more than 0.75 billion euros per year becomes subject to the country-by-country reporting obligations, as stipulated in Article 13 of the Base Erosion and Profit Shifting Policy. 

Note: these and other transfer pricing policies can be disputed in court following the standard principles and procedures of legal appeal and reassessment.

4. Exit Taxation

In the event of an assets transfer between a foreign corporation and its daughter company in Greece in such a way that the Independent Authority for Public Revenue cannot tax the assets concerned, a fixed exit tax is calculated from the daughter company's corporate income tax for the year of transfer. As a general rule, the exit tax equals the market value minus the taxable value of the assets in question. 

5. Tax Loss Limitations

In addition, tax losses are not to be carried forward in case:

• The shareholding or voting participation in a legal entity increases by more than 33% during the current fiscal year.

• Amendments to a legal entity exceed half of its turnover in the previous fiscal year. 

Double Taxation

If you reside in one country and register a company in another, both countries can tax your income. Double taxation is a considerable obstacle to foreign direct investments, and many countries sign agreements with each other that specify which of the two will claim the tax so that you do not have to pay it twice.

Currently, Greece has double taxation agreements with almost 60 countries worldwide, which are listed in the following table: 

You will need to consult your lawyer on the subject of which of the two countries will claim your income tax in your particular case. And keep in mind that the agreements cover income tax as well as the CGT and certain withholding taxes too. 

Resident Status

Whether you are a tax resident in Greece is another relevant factor in this context. Simply put, you become one if you spend more than half a year in the country. Otherwise, you become exempt from taxation on your foreign income. Of course, if you found a company in Greece, this legal entity will, effectively, become a permanent resident by definition.

However, if your head offices are registered overseas or the company is registered online, you can potentially benefit from tax residency provisions. Basically, there will be three deals available to you: 

1. Either your company is a Greek entity or you spend more than 183 days per year in Greece, or both.

In this case, you will pay the full amount of corporate and other applicable taxes. 

2. Your company is not a Greek entity, but you spend more than 183 days per year in Greece.

In this case, your profits from your company become your foreign income, and you will be exempt from corporate tax, except when you fall into one of the categories described in our article under tax evasion. But you will have to pay income tax on your foreign income, as shown in the table below (your income is shown in euros per month): 

3. Your company is not a Greek entity, and you spend less than 183 days per year in Greece.

In this case, you become exempt from both corporate and income tax, except when you fall under the tax evasion policies. However, you will still have to pay other taxes applicable in your particular case. 

Corporate Tax

Starting from 2022, Greece has reduced its corporate tax from 24% to 22%, irrespective of the legal entity's organisational structure. However, some companies, mainly financial institutions, still have to pay 29%.

Moreover, capital gains taxes have been reduced to a maximum of 22%, although the average CGT still remains around 15%. In this regard, Greece compares quite favourably to other countries in Europe, as the table below shows: 

Withholding Taxes

The following table shows the typical withholding taxes that you will have to pay, if applicable: 

Real Estate Tax

If you purchase commercial property to accommodate your enterprise in Greece, you will also have to pay a progressive property tax, which breaks down as the table below shows. However, they will reduce the taxable amount by €25,000 if you have owned the property for 5 years. 

Note: you will also pay a single real estate transfer tax of 3.09% as part of the purchase transaction, unless VAT is to be imposed on the purchase.

Tax Deductions and Exemptions

In line with the majority of Western European nations, as well as the USA and Canada, Greece reduces certain taxes (typically by 15%) or even removes them entirely in several clearly defined cases. Thus, you can count on a tax deduction in the case of:

• Mandatory social security payments;

• Charitable donations to religious, educational, medical and other public organisations;

• Mortgage for your first purchase on the Greek residential real estate market;

• Fully-paid lease of your prime residential property in Greece.

In addition, you will be exempt from taxation in the case of:

• Profits from transnational shipping of any goods;

• Dividends from any Greek enterprise;

• Income from sales on the Athens Stock Exchange;

• Capital gains from the transfer of a business entity between you and your family members in the country. 

Final Word

Our purpose was to highlight the most significant taxes in terms of their relevance and amount. There will be additional taxes, such as VAT and, possibly, rental income tax. Plus, all of them will vary depending on your particular circumstances. Therefore, we strongly recommend you to consult your lawyer on the subject to make sure you settle on the most convenient and cost-effective taxation deal for your business activity in Greece.