The present article aims at concisely present in a schematic form, the main taxation categories in Greece that every candidate businessperson should be aware of, if they wish to set up a business in Greece.
Private and General Companies
Taxation System
• Citizens of Greece (private companies and corporations) are taxed for general income. Non citizens of Greece are taxed only for the income produced in Greece.
• Contracts of double tax evasion are applied between contracting countries.
• The profits of Ltd and S.A. are taxed in the name of the companies. Only in the distributed profits of S.A. there is an extra tax deduction of 10%.
• Companies can apply a self-control system
Types of Taxation
1. Income Taxes: α) Companies taxation, b) tax on private companies.
2. Transactions Taxation: α) Value added tax (VAT), b) stamp duties. c) Contribution to ΟΓΑ, d) municipal taxes, e) special consumption tax. f) Vehicles taxes, g) taxation on donations and family benefits, h) tax of funds gathering etc
3. Property Taxation: α) Value added tax on newly-built constructions, b) tax of property transfer, c) taxation on unearned increment, d) transactions taxation, e) flat fee on property,
f) Municipal property taxes, g) supplementary taxation on property 1, 5-3%.
INCOME TAXATION OF CORPORATIONS. (S.A, Ltd, FOREIGN BUSINESSES, ETC) – TAX CALCULATION (ARTICLE 109, L. 2238/1994)
Taxation is calculated on the total taxable income of all companies in charge, with a tax –factor of twenty-nine; per cent (25%). Taxation is calculated with the same factor (25%) and on net profit which results from the permanent installation of foreign businesses in Greece that operate under any type.
Moreover, net profit that is distributed by native societe anonyme companies to their shareholders in the form of dividends or interim dividends, to the members of the Board of Directors or the General managers in the form of extra payment and proportion and to their employees in the form of rewards, is subjected to tax deduction of 10% during the payment to the beneficiaries or during their credit ability.
Thus, the dividends that are collected by the shareholders (investors), who are non-Greek citizens, are taxed in Greece unless this is regulated differently from the contracts of double tax evasion.
Especially in the case of foreign corporations that gain profits from Greek sources (fees, interests, fees for research, fees for hiring pieces of machinery and other movable staff, etc.), there is tax retaining with tax factor 20%, with the exhaustion of tax obligation on behalf of the foreign beneficiary accepting with reservations the already applied bilateral agreements on double tax evasion.
It has to be noted that especially for the fees and interests paid to other countries-members of the European Union, the relative European regulations are applied, unless the contract of double tax evasion provides a more favorable dealing and in that case the original contract is applied.
PENSION TAXATION
It is necessary to resort for each case to the relevant article of every Contract or Agreement concerning double tax evasion and examine carefully the terms.
Additionally, it is a prerequisite in order to categorize the issue of pension for taxation reasons, according to the relevant provisions of the Contract, is the collecting of evidence related to i) the department that pays the money to the pensioners, ii) the public and private sector that the pensioner has worked for and iii)the type of pension.
Α. In case a Greek citizen receives the money of the pension from sources of a contracting country and the provisions of the relative contract, the money in focus is taxable.
i) In both contracting countries, that is the country of residence (Greece) and the country that the financial source of the pension comes from. Double taxation that probably results from that will be avoided according to the relevant provisions of the Contract applied to the relevant provisions of the Greek taxation system. Thus, the tax retained from the Source country (certified by official quarters) is compensatory partially from the country of residence of the beneficiary (Greece), up to the amount of taxation which is proportional to the same income in Greece.
ii) only in the country of residence (Greece), then if the provisions of the relative contract are to be directly applied and there is no tax retaining on behalf of the other contracting party (the financial source country), the beneficiary should submit the Certificate of taxation on residence to the taxation authorities of the other country, which is issued upon request from our department (See. ΠΟΛ 1130/01.06.1999). If the source country that the pension money comes from has deducted taxes by stretching the regulations of Σ.Α.Δ.Φ., the tax in focus is not compensatory to Greek taxation. The beneficiary of the pension money should ask for refund from the foreign financial quarters where the above certificate should be submitted.
iii) Only in the source country (where the pension money comes from), then the country of residence (Greece), will not impose taxes.
Β. In case that a citizen of a contracting country receives pension money from Greek sources and according to the regulations of the relevant contracts and agreements, the right is acknowledged for the pension money in focus to be taxed:
i) Only in Greece or in Greece as well, then the declaration of income should be submitted to the relevant revenue office which is responsible for foreigner citizens, where the income in focus is included.
- ii) only in the residence country, then in order not to retain income tax from the pension given by the Greek state, the beneficiary should submit an ’Application concerning the contracts of double tax evasion’ at the beginning of every year to the according revenue office, fully completed and signed. In this very application form, the Certificate of taxation on residence is included, which should be completed, signed and sealed by the revenue office that the beneficiary belongs to. The Certificate in focus is valid only for the year the income was acquired. I n case the application form is not submitted, all the regulations of our local legislation should be applied (Κ.Φ.Ε. ν.2238/94). In case of tax retaining to the beneficiary of the income, an Annual Claim to Refund of Income Tax form should be submitted fully completed and signed. In this very application form, the Certificate of taxation on residence is included, which should complete, signed and sealed by the revenue office that the beneficiary belongs to.
Application Forms for the «Application concerning the contracts of double tax evasion’ and forms for the Annual Claim to Refund of Income Tax», can be requested either from our department or the revenue offices.