Investment Taxation in Greece
Investment taxation in Greece varies, depending on the object of investment, and whether the investor is a legal entity or private person. In this context, the Code on profit taxation indicates, among other, the cases where the income comes from the capital, the immovable property or business operations.
1. Сapital income
As stated in the article 35 of the Code on profit taxation, the capital income is derived by a private person during the fiscal year in cash or in kind in the form of dividends, interest, rights and income from immovable property.
In particular, if the investments relate to the participation in a legal entity, the income from such investments is taxed in accordance with the combination of the provisions of the article 36 about dividends taxation and article 40 of the Code on profit taxation concerning tax rates. As it is provided by the article 36 of the Code on profit taxation concerning the profit taxation, the term "dividends" means income from shares, founders’ shares or other rights of participation in profits, as well as income from equity interest, participation in the earnings of private enterprises, the distribution of profits from any legal entity or legal organizations and any other relevant amount of the distribution. In accordance with the article 40 of the Code on profit taxation the income from dividends is taxed at 10%.
In addition, according to the article 37 of the Code on profit taxation, the term "interest" means income derived from any kind of anticipated revenues, secured by a mortgage or not, granting the right to participate in the debtor’s profits or not, and, in particular, income from deposits, government securities, securities and bonds, with or without guarantees, and loan of any kind, including premiums, repurchase agreements (repos / reverse repos), the benefits arising from securities, bonds or shares. The interest on the bonds and treasury bills are not subject to tax payment of the Greek state, acquired by private persons, as well as accrued interest on the bonds issued by the European Financial Stability Facility, while executing the program of restructuring of Greek debt. Interest income is taxed at 15%.
In the case of income earned as a result of the use or exchange of the license of use of the copyright on literary, artistic or scientific works, patents, trademarks, benefits, plans or models, drawings, confidential chemical formulas and other relevant rights, the tax rate is 20%.
2. Income from immovable property
In cases where a private person is selected to invest in immovable property, then the income derived from the lease or sublease of the property is taxed 11% up to 12.000 euro and 33% for the sum exceeding 12.000 euro. The provisions of the article 11 of Law 4346/2015 (Government Gazette, issue 1, 152, 20/11/2015) provide that, from January 1, 2015, the income from the property rent, which was not recovered by the rightholder, shall not be included in the sum of total income, if, before the deadline for submission of annual income tax return has been issued in the name of the tenant a payment order or an order for the payment of rent or a judgment of eviction or judicial decision of the rental payment or in the name of tenant has been issued a cessavit or claim for adjudication. This income is taxed per year and for the amount that was recovered evidenced. The not recovered income is declared by the special code of the not recovered income from property rent in the income tax return.
3. Business income of a private person
The business income of a private person is taxed at 26% up to 50.000 euro and at the rate of 33% for the amount exceeding it.
4. Business income of a legal entity
In accordance with the provisions of the article 47 of the Code on profit taxation, all income earned by legal entities and organizations is considered business income. In addition, in accordance with the provisions of the article 58 of the Code on the taxation of profits, the taxation system of the companies differs depending on the type of its books of accounts and legal form. Consequently, if the investment in Greece will be implemented through the establishment of the company, taxation of income of the company fall within the provisions of the Code on profit taxation of legal persons and entities (article 44 onwards), a brief analysis of which is provided below. The income that is subject to the special tax (eg interest, dividends) is not taken into account.
i. Taxation system of the partnerships (general partnership, limited partnership)
Under the current law, in accordance with the article 58 of Law 4172/2013 (Code on profit taxation), the business income, in particular, of the partnerships with simple books of accounts is taxed on the scale according to the par. 1 of the Article 29, that is, income not exceeding 50.000 euro is taxed at 26%, while the amounts larger than this sum are taxed at 33%. In this case, the company doesn’t have any tax obligations on this income, an additional income tax should not be paid.
The partnerships that operate with double-entry accounting system are subject to income taxation at the rate of 29%, as it is provided by the article 58 par. 1 of the Code on profit taxation, as amended by the article 1 par. 4 of Law 4334/2015 (Government Gazette 80, Issue 1, 16.07.2015). In addition, if the profit is distributed among the shareholders, tax on profits of 10% is withheld, that is returned by the company.
The wage of the partnerships’ executives is taxed in accordance with the scale of the employees, as it is provided by the article 15 of the Code on profit taxation. In particular, from 0-25.000 euro the rate is 22%, from 25.001-42.000 euro the rate is 32%, and 42.000 and more – the rate is 42%. Nevertheless, the provisions of the article 16 of the Code on profit taxation provide the reduction of the tax amount for two thousand one hundred (2.100) euro, if the taxable income does not exceed twenty one thousand euro (21.000 euro), if the amount of tax is less than two thousand one hundred euro (2.100 euro), the amount of the reduction is limited to the corresponding tax. In cases when the taxable income exceeds the amount of twenty-one thousand euro (21.000 euro), the amount of reduction is reduced to one hundred (100) euro per one thousand (1000) euro of taxable income, whereas when the taxable income exceeds the sum of forty-two thousand (42,000 euro), tax reduction is not granted.
ii. Taxation system of the companies with share capital (stock company, limited company, private company)
According to the currently effective regulations, the tax levied on the profits of these companies is 29%, and while the distribution among the shareholders / partners an additional tax is collected on distributed profits at a rate of 10%, which is held by and paid to the tax office.
The company executives (members of the Board of Directors, CEO, managers, etc.) are taxed on income derived from the company, according to the rates of salary taxation. More specifically, 0-25.000 euro at the rate of 22%, from 25.001-42.000 euro at the rate of 32% and 42.000 or more - at the rate of 42%. In addition, the tax reduction is applied under the provisions of the article 16 of the Code on profit taxation, the analysis of which is provided above for the taxation of income of the company executives.