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ADVICE #61

Paculiarities of the tax system of Greece

Despite the fact that almost all European countries are committed to the unity of laws and integration in the areas of economic and social policies, tax systems of European countries do not differ with unity.

Russian analysts of the consulting company "Texart Group researched the tax system 38 European countries with developed market economies, and weak, still "wobbly" after the collapse of the socialist states.

Some of the investigated countries are already EU members, others are candidates for membership in the single currency area, but in the meantime, in most States, a United Europe, you may encounter drastic differences in tax systems and the principles of taxation.

If you are going to live abroad and operate your business, you should carefully review the tax code of the country: what size of income tax in this country; the amount of tax "at the source"; VAT; what are the taxes levied on the income of individuals and their property, and more.

We offer to your attention an analytical report with detailed information about the economy, the characteristics of the market, as well as tax rates and the criteria for levying taxes in each country of Europe.

Greece is one of the most crisis countries of the European Union. Since 2010, implementing the second programme of financial assistance from international lenders. The volume of both programs exceeded 230 billion euros, not counting private loans from the European investment Bank for development of small and medium enterprises, transport infrastructure, energy and agriculture.

The income tax

Income tax in Greece are subject to commercial companies and nonprofit entities (including non-residents), the purpose of which is to make profit. Exempt from sales tax state and municipal enterprises, as well as the Greek Church (in respect of income from the rental of land lease).

The tax base for tax on profit is calculated as revenue received from all sources less expenses. The tax period is a year.

You should pay attention to the concept of tax residency in Greek law –according to article 10 of the Civil code of Greece, jurisdiction of organization is determined by the geographical location (country in which its seat is located) that is often interpreted as the country of incorporation of such organization. However, in practice, in deciding residency status can be used the principle that "nationality" of a company is determined by the territory of which is the actual management of the activities (place of effective management). In this case, the tax authorities in practice, problems arise with the recognition of such organization a legal entity and as a consequence the taxpayer, as the de facto such organizations did not pass the registration procedure in Greece.

The basic rate of income tax is 26% (since 2014. Formerly 20%).

A separate tax on capital by the Greek legislation is not provided: such income is subject to income tax in the general order subject to certain exceptions provided in the General law on corporate income tax (in particular, there is a special way of set-off of loss on sale of shares).

The transfer pricing legislation was introduced in Greece relatively recently: the Law 4110/2013, establishing the application of "rules of a long arm" transactions between affiliated persons was adopted in 2013.

Withholding tax

The tax rate on dividends is 25 % if the dividends are paid from profits of the resident company reflected in the financial statements 2012-2013 and 10% if a dividend is paid out of the profits reflected in the financial statements 2014 and later. Specified rate (25%/10%) is common for payments to companies resident in Greece, and nonresidents (in the latter case, a lower rate may apply based on SODNOM or European Directive on Parent-subsidiary EU Parent-Subsidiary Directive (90/435; currently 2011/96). The tax is withheld at the source of payment.

Dividends received by Greek company from non-residents, are taxed on the profits of the recipient at the General rate of 26%. If other rates and manner of payment is not provided SODNOM or European Directive PSD, as a General rule, upon payment of such tax may be credited against the tax previously withheld on these dividends at the source of payment abroad.

Interest on loans between companies in Greece are taxed at source at the rate of 20%.

The rate of tax deducted at source in respect of interest payments to residents on the bonds (including the state), Bank deposits, and in respect of income from REPO transactions is 15% (up to 01.01.2013 – 10%). The tax from these sources shall not be withheld when paid to non-residents. However, if the income received directly from a non-resident Bank deposits in € and REPO transactions, such income is taxed at 15%. All other interest payments received by non-resident, are taxed at the rate of 33%, unless otherwise provided for in the relevant SODNOM (if any).

As a rule, withholding tax is not withheld at the payment of royalties to residents of Greece. With payments to the address of the non-resident tax in the General case is withheld at a rate of 25%. However, there are some exceptions to these rules.

VAT

In Greece as in other EU countries, operate pan-European rules for the calculation and payment of indirect taxes, the established number of European Directives (Community VAT Directive – in force until 31.12.2006., Directive 2006/112 from 01.01.2007 and Directive 2008/8d – valid from 01.01.2010)

The standard rate of VAT in Greece is 23%. Use reduced rates (13% and 6.5%) may in respect of essential commodities, food and other agricultural products, untreated, medicines, organization of transportation of people and Luggage, books, Newspapers, periodicals. Also possible to use 30% benefits to VAT rates across prefectures (i.e., the tax rates will be, respectively, 16%, 9% and 5%).

0% rate applies if export sales and deliveries within the EU.

The legislation also establishes a list of non-taxable transactions, which exempts from VAT, and the other makes it impossible deductions "incoming" VAT on costs associated with the performance of such operations/services.

Taxation of incomes of physical persons

The Greek law a progressive scale of tax assessment. For income not exceeding 25 000 € per year applicable rate of 22%, from 25 000 € 42 000 € – 32% for income in excess of 42 000 € per year – 42%.

Resident in Greece for tax purposes are recognized individuals observed if one of the 3 criteria: (1) location in Greece for more than 183 days (2) the Center of vital interests of an individual (CI) is located in Greece (3) the person is a Consul, diplomat, working outside Greece, but have Greek origin.

This is interesting:

In the period from 1 January 2014 to 31 December 2015 for the islanders, whose population does not exceed 3 100 people, the lower threshold is a progressive scale 25 000 € increased by 50% (and is 37 500 €).

Derived by an individual dividends taxed at 10% (before January 1, 2014 – 25%). Income from interest on debt obligations levied from natural persons at the rate of 15%. Payments for royalties received by individuals are subject to tax at the rate of 20%. These taxes are withheld at the source of payment.

The real estate tax of individuals

From 1 January 2014, Greece introduced a new procedure for tax payment immovable property tax. New tax consists of two components: a base part that depends on a natural number and characteristics of the property and type of such rights (the nature of the use, the surface on which the object is located, size of object, its location, and usage, etc.) and additional parts. The latter is a fixed amount of from 0.1% to 1% of the property value. When there is a tax deduction – a tax levied only on value of the property, in excess of 300 000 €. Also included is a regional property tax set by local authorities. The rate of this tax can vary in the range from 0.025% to 0.035% of the appraised value of the property.

The text prepared by the Russian consulting company TaxArt Group LLC specifically for Banki.ru

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