Taxation on natural persons & Corporate tax

Income taxation on natural persons | top Law 2238/1994 (Income Tax Code) Article 1 Tax is imposed on the total net income generated in Greece or abroad that is derived by any natural person that fulfils the requirements of article 2. Article 2 Every natural person that derives income generated in Greece is subject to tax regardless of his nationality and his place of domicile. Every natural person that domiciles in Greece, regardless of nationality, is subject to tax for income derived outside Greece. Article 3 Tax is imposed in every financial year on income derived during the previous economic year. The duration of each financial year is from the 1st of January until the 31st of December of the same calendar year. Article 4 Income on which tax is imposed is the gross income derived from any source after deduction of the expenses incurred to produce it. Tax imposed according to the provisions of this law, penalties or additional taxes are not deducted from this income. Income is distinguished according to its source into the following categories: A-B Income from real property C Income from financial instruments D Income from commercial activities E Income from agricultural activities F Income from remunerated services G Income from the exercise of a liberal profession and from any other source. Income tax is computed on the aggregate income from all sources. Loss from any source is in principle offset against profit from another. Losses incurred in the exercise of commercial, agricultural, mining, industrial and hotel activities can be carried forward up to 5 tax years in order to be set off against profits. Losses incurred from sources outside Greece can only be set off against profits of the taxpayer made outside Greece. Income from the lease of real property or interest on loans that is deemed to have been derived but has not been collected by the taxpayer can be excluded from the computation of the total income provided that a) the taxpayer proves the non-collection of this deemed income and b) the debt is assigned (gifted) by the taxpayer to the State which latter acquires all the legal rights against the taxpayer’s debtor. Article 5 Married couples are obliged to fill in a common tax return but each spouse is taxed on his/her own income separately. Losses of one spouse cannot be set off against gains of the other. If the income of one spouse (A) comes from the exercise of a business / profession which is depended financially on the other spouse (B), this income is added up on the income of that other spouse (B) and is taxed on his/her (B’s) name. Article 8 Provides for certain deductions that are allowed from the net income of the taxpayer: – the annual rent paid for the principal residence of the taxpayer and his/her family – life insurance premiums and nursery fees – medical and hospital expenses – tuition fees for private lessons of foreign languages etc for the taxpayer’s children or for himself – money paid for the purchase of a personal computer, peripherals that constitute an integral part with the p.c. and money paid for gaining access to the Internet. Article 9 The net income remaining after deduction of the expenses (according to article is taxed according to the following tables: Income received between 1.1.2001 – 31.12.2001 (In Greek drachmas) Income scale Tax rate Tax Total income Total tax 2.100.000 0% 0 2.100.000 0 746.000 5% 37.300 2.846.000 37.300 1.706.000 15% 255.900 4.552.000 293.200 3.407.000 30% 1.022.100 7.959.000 1.315.300 9.088.000 40% 3.635.200 17.047.000 4.950.000 over 42,5% n/a n/a n/a Income received after 1.1.2002 (in Euros) Income scale Tax rate Tax Total income Total tax 6.163 0% 0 6.163 0 2.190 5% 110 8.352 110 5.006 15% 751 13.358 860 10.000 30% 3.000 23.357 3.860 26.670 40% 10.668 50.027 14.528 over 40% n/a n/a n/a 4. Corporate income tax | top Taxation of the “E.P.E.” (Limited Liability Company) An E.P.E. pays corporation tax on the profits which actually arise during its accounting period. The rate of the tax for the financial year (1 January to 31 of December) during which the profits arise is currently 29% and as of the 1st of January 2007 it will drop to 25%. With this taxation at 25% of the net profits of the E.P.E., the tax obligation is fulfilled both for the company and its members. This applies for all members of the E.P.E., whether Greek or foreign natural or legal persons regardless of whether there is a treaty for the avoidance of double taxation between Greece and the country of their permanent residence. Profits are considered to be acquired on the same day the meeting of the shareholders resolves on the balance sheets and profits distributed; otherwise they are presumed to be acquired on the last day of a three month period after the expiry of the fiscal year. Until the introduction of law 3190/2002 a so called “business or entrepreneur fee” was deducted from the profits of the EPE. After deduction, the remainder was taxable in the name of the legal entity. That business fee was considered as income of the managing members from commercial activities for which a withholding tax of 15% was imposed plus stamp duty @ 1,20%. By virtue of law 3190/2002 article 8 the business fee system was abolished so that the total income of the EPE is now taxed in its name at 29% (25% as of 1.1.2007). Taxation of the “A.E.” (Company limited by shares or “S.A.”) According to �1e of Law 2238/1994 (Greek income tax code) Greek S.A. companies, other than banks and insurance companies, are taxed based on their total net income or profit derived from their business activity in Greece or abroad. By the same article it is provided that the profits distributed are taken from the remainder of their profits left after the deduction of the corporate income tax payable. Consequently, corporate income tax on S.A. companies is calculated on their total taxable income before the deduction of any profits to be distributed. Of course, dividends distributed are free from any further taxation because they correspond to profits already taxed. An A.E. pays corporation tax @ 29% on the profits which actually arise during the fiscal year. The applicable rate for profits that will arise after 1.1.2007 is 25%.

Bilateral treaties for the avoidance of double taxation

Bilateral treaties for the avoidance of double taxation |  Greece has entered into such treaties with the following countries:

COUNTRIES

LAW / LEGISLATIVE DECREE / EMERGENCY LAW

GOVERNMENT GAZETTE ISSUE

SIGNED

DATE OF ENFORCEMENT

U.S.A

L.D.2548/53

231 & 333/1953

20/02/1950

30/12/1953