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2016/17

Greece

PKF Worldwide Tax Guide 2016/17 1

FOREWORD A country's tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. As you will appreciate, the production of the WWTG is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country's taxes that forms the heart of this publication. The PKF Worldwide Tax Guide 2016/17 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of the world's most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current on 30 April 2016, while also noting imminent changes where necessary. On a country-by-country basis, each summary such as this one, addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country's personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. Services provided by member firms include: Assurance & Advisory;

Financial Planning / Wealth Management;

Corporate Finance;

Management Consultancy;

IT Consultancy;

Insolvency - Corporate and Personal;

Taxation;

Forensic Accounting; and,

Hotel Consultancy. In addition to the printed version of the WWTG, individual country taxation guides such as this are available in PDF format which can be downloaded from the PKF website at www.pkf.com

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IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International Limited (PKFI) administers a family of legally independent firms. Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. PKF INTERNATIONAL LIMITED JUNE 2016 © PKF INTERNATIONAL LIMITED All RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION

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STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE

COMPANY TAX CAPITAL GAINS TAX VALUE ADDED TAX (VAT) PROPERTY TAXES OTHER TAXES SOCIAL SECURITY CONTRIBUTIONS

B. DETERMINATION OF TAXABLE INCOME

DEPRECIATION STOCK / INVENTORY DIVIDENDS INTEREST DEDUCTIONS LOSSES FOREIGN SOURCE INCOME TAX INCENTIVES

C. FOREIGN TAX RELIEF D. CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAX G. EXCHANGE CONTROL H. PERSONAL TAX I. TREATY AND NON-TREATY WITHHOLDING TAX RATES

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MEMBER FIRM For further advice or information please contact: City Name Contact information Athens Alexandros Sfarnas +30 210 7480 600

[email protected] BASIC FACTS Full name: Hellenic Republic Capital: Athens Main language: Greek Population: 11.1 million (2013 estimate) Major religion: Christianity Monetary unit: Euro (EUR) Internet domain: .gr Int. dialling code: +30 KEY TAX POINTS • Companies resident in Greece are subject to corporate income tax on their worldwide income

and gains. Non-resident companies are liable for tax on income or capital gains derived through a permanent establishment in Greece.

• There are no special rules for groups and there is no controlled foreign companies’ legislation, but transfer prices between related parties may be adjusted on an arm's length basis.

• Capital gains are added to a company's income, except where specific rules apply to particular disposals.

• VAT is charged on the supply of goods and services at a standard rate of 23%, apart from those which are subject to a reduced rate, are zero-rated or are exempt.

• Dividends are subject to a dividend tax of 10% and a company’s undistributed profits are taxed at 29%.

• Relief is available for foreign taxes paid on overseas income by way of credit against Greek corporate income tax. Relief is restricted to the Greek tax payable on the overseas income concerned.

• Many payments within Greece are subject to income tax withholding. Most withholdings for payments to non-Greek residents have been removed.

• Greek residents are subject to income tax on their worldwide income. Non-residents are taxed on net income sourced in Greece.

• A real estate tax is imposed as a percentage of the value of real property. A. TAXES PAYABLE COMPANY TAX Companies resident in Greece are subject to corporate income tax on their worldwide income and capital gains. Non-resident companies that have a permanent establishment in Greece are subject to corporate income tax on income and capital gains derived through the permanent establishment. A financial period is 12 months and usually coincides with the calendar year. In certain cases, however, it may start on 1 July and end on 30 June of the following year. Also, the financial period of a company in which a foreign enterprise has at least a 50% capital participation may coincide with that of the foreign enterprise. The tax rates applicable to undistributed profits are as follows: Public limited companies (SA) = 29%. Banks = 29%. Limited liability companies (EPE) = 29%. Branches of foreign companies = 29%.

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Distributed profits are subject to an additional income tax at 10%. Dividends paid to parent companies based in European countries, which maintain the participation for at least 24 months, are exempted from such tax. Note: Income tax is payable in eight (maximum) equal monthly instalments commencing in the sixth month from the end of the financial period, in which the tax return must be filed. CAPITAL GAINS TAX Capital gains are taxed as follows: 1) Gains from the sale of quoted shares on a Stock Exchange (from 1 January 2014):

Individuals: at a rate of 15% of the profit, on the condition that the sold shares represent more than 0.5% of the company’s capital;

Legal entities: in the same way as any other income. 2) Profits from the sale of shares not quoted on a Stock Exchange:

Individuals: at a rate of 15% of the profit; Legal entities: in the same way as any other income. Profit from sales of participations in any

kind of company: In the same way as above; 3) Dividends (gains) earned due to participation in a Societe Anonyme Company (any other kind of

company): Individuals: 10% of dividend income; Legal entities: as any other income;

4) Interest income earned due to any kind of claim: Individuals: 15% of interest income; Legal entities: as any other income;

5) Income earned due to sales of royalties: Individuals: 20% of royalty income; Legal entities: as any other income;

6) Property Income (Rents): Individuals: according to the following tax scale: Up to EUR 12,000 = 11% tax rate Over EUR 12,000 = 33% tax rate

Legal entities: as any other income 7) Profit due to sale of property:

Individuals: Postponed until 31.12.2016 Legal entities: as any other oncome

VALUE ADDED TAX (VAT) VAT is charged on every supply of goods and services by a commercial enterprise, with the exception of the Aghion Oros area. The VAT rate is 23%, except for specific categories of goods and services for which the tax rate is 13% and 6% respectively. The above rates are reduced by 30% in certain circumstances. Public services (health, education, insurance etc) are not subject to VAT. These services are considered VAT exempt. Exports of goods are zero-rated. VAT is collected at each stage of the process of production or distribution of goods and services. The burden of the tax falls on the ultimate consumer. PROPERTY TAXES For each transfer of real estate, the following taxes are paid: For land and old buildings: Transfer tax 3%. For new buildings: VAT 23%. Owners of properties (individuals or companies) are subject to a yearly property tax. This tax includes two different tax amounts: Primary tax. This tax is imposed on each property item and is calculated as follows:

a) Primary tax on buildings The primary tax on buildings is calculated as follows:

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Tax = surface (m2) x basic tax rate of the geographical position of the building x tax rate of the age structure x tax rate of the floor x tax rate of the front of the building x tax rate of auxiliary spaces x tax rate of incomplete buildings.

b) Primary tax on land The primary tax on land is calculated as follows: Tax = surface (m2) x basic tax rate of the value of the land x tax rate of the position of the land x tax rate of the use of the land x irrigation rate x expropriation rate x residence rate.

Secondary tax. In respect of legal entities, this tax is imposed on the total value of the property of each owner and amounts 5 ‰ of the total value of all the properties. Concerning individuals, this tax is imposed on the total value of the property of the owner, according to the following table:

Property Value (€) Tax factor

0,01 – 300.000 0,0% 300.000,01 – 400.000 0,1% 400.000,01 – 500.000 0,2% 500.000,01 – 600.000 0,3% 600.000,01 – 700.000 0,6% 700.000,01 – 800.000 0,7% 800.000,01 – 900.000 0,8%

900.000,01 – 1.000.000 0,9% > 1.000.000 1,0%

OTHER TAXES Transactions not subject to VAT are subject to Stamp Duty at rates from 1.2% to 3.6%. SOCIAL SECURITY CONTRIBUTIONS Companies pay contributions to the social security organisation (IKA) for their employees. The contribution is computed on the employee's salaries at a rate of 40.06% (15.50% employee contribution and 24.56% employer contribution). B. DETERMINATION OF TAXABLE INCOME Taxable profits are determined by ascertaining total gross income and then subtracting allowable expenses. These expenses must be incurred for the purposes of the enterprise. DEPRECIATION Fixed asset depreciation is computed annually at fixed rates, the most important of which are: • Plant and other buildings = 4% • Transportation means = 5% • Machinery = 10% • Furniture and other equipment = 10% • Intangible assets = 10% • Transportation means for cargo = 12% • Transportation means for personnel = 16% • Computers, hardware and software = 20% STOCK / INVENTORY Stock is valued at the lower of acquisition cost or market value.

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DIVIDENDS Dividends are subject to a dividend tax of 10% and the total of the company’s profits before distribution are taxed at 29%. INTEREST DEDUCTIONS Interest on loans is generally tax deductible. The amount of the net interest costs is deductible if it does not exceed the amount of 3.000.000 Euro per year (5.000.000 Euro for the year 2015). In general, net interest expenses are deductible only to the extent that they do not exceed a specific percentage of the company’s EBITDA (50% in 2015). Furthermore, interest on loans from third parties, other than banks, is tax deductible only for the amount that would occur if the interest rate was equal to the rate on loan overdrafts to non-financial corporations, as given in the Statistical Bulletin of the Bank of Greece for the nearest period before the date of the loan. LOSSES Losses incurred in a business year may be carried forward to be set off against profits of the following five business years. FOREIGN SOURCE INCOME Foreign sourced dividends are added to the taxable income of the company. Exceptionally, dividends received from companies of the same group are not taxable, on the following three conditions: The recipient participates to the payer of the dividend with at least 10%; The recipient of the dividend maintains the participation of the affiliated company for at least 24

months; The payer is an EU company. TAX INCENTIVES Tax incentives are given if a company makes productive investments. There are two kinds of investments: state grants and tax reliefs. The total amount of the support depends on the size of the enterprise and the geographical area. Both incentives require a decision from the related authorities. The amount allocated every year for both grants and tax reliefs is limited. C. FOREIGN TAX RELIEF The Greek tax liability is reduced by the tax actually paid in other countries, in where the profits arise. Relief is restricted to the amount payable for the foreign income in Greece. D. CORPORATE GROUPS There are no special tax provisions for corporate groups. E. RELATED PARTY TRANSACTIONS Transactions with related parties must be made at prices defined by the application of the Arm's Length principle.

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F. WITHHOLDING TAX Many payments within Greece are subject to income tax withholding (salaries, payments to individuals for services, contractors of technical works, etc). Most withholdings for payments to non-Greek residents have been removed, assumed that the foreign resident does not have a permanent establishment in Greece. G. EXCHANGE CONTROL According to the EU Directives, there are no longer any exchange controls. Such controls still exist for transfers of capital to non-EU countries. H. PERSONAL TAX An individual is subject to income tax on his total net income in Greece and abroad. Net income sourced in Greece is taxed irrespective of the residence of the individual. Income arising abroad is taxed if the relevant individual is a resident of Greece. The tax year is the calendar year. Personal tax is calculated as follows: a) Employees and Pensioners Taxable income is found after deducting the social security contributions. The remaining amount

is taxed as follows:

Income Bracket (Euro)

Tax Rate %

Tax per Bracket (Euro)

Aggregate Income Tax (Euro) (Euro)

25,000 22% 5,500 25,000 5,500

17,000 32% 5,440 42,000 10,940

Over 42% - - -

The tax occurred according to the above table is reduces with the following amounts: 2,100 Euro for taxable income until 21,000 Euro. For taxable income, which exceeds the

amount of 21,000 Euro, the amount of the reduction shall be reduced by 100 Euro per 1,000 Euro of taxable income.

10% of the cost for medical expenses, provided that the total amount of medical expenses exceed 5% of the taxable income. The amount of the reduction shall not exceed the amount of 3,000 Euro.

10% of the amount given for donations, provided that the total amount of donations within the tax year exceeds 100 Euro. The amount of the donations shall not exceed 5% of the taxable income.

b) Income from individual practices

The income from individual practices is found after deducting the expenses incurred for the purposes of the practice

Income Bracket (Euro)

Tax Rate %

Tax per Bracket (Euro)

Aggregate

Income Tax (Euro) (Euro)

50,000 26% 13,000 50,000 13,000

Over 33% - - -

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I. TREATY AND NON-TREATY WITHHOLDING TAX RATES Under the tax treaties which have been concluded by Greece, the residents of certain foreign countries may enjoy reduced rates of withholding taxes on interest and royalties as follows.

Dividends (%)

Interest (%)

Royalties1 (%)

Non-treaty countries: 10 10/25 20 Treaty countries: Albania 5 5 5 Armenia 10 10 5 Austria 15/5 8 7 Azerbaijan 8 8 8 Belgium 15/5 0/10 5 Bulgaria 10 10 10 Canada 15/5 10 10 China 10/5 10 10 Croatia 10/5 10 10 Cyprus 25 10 0/5 Czech Republic -7 10 10/03 Denmark 38 8 5 Egypt 10 15 15 Estonia 15/5 10 5/102 Finland 47 10 0/10 France -7 10 5 Georgia 8 8 5 Germany 25 10 0 Hungary 45 10 10 Iceland 15/5 8 10 India –7 –7 –7 Ireland 15/5 5 5 Israel -7 10 10 Italy 15 10 5/0 Korea 15/5 8 10 Kuwait 5 5 15 Latvia 10/5 10 5/10 Lithuania 15/5 10 5/10 Luxembourg 38 8 7/5 Malta 10/5 8 8 Mexico 10 10 10 Moldova 15/5 10 8 Morocco 10/5 10 10 Netherlands 35 10/84 7/55 Norway 40 10 10 Poland -7 10 10 Portugal 15 15 10 Qatar Romania

5 45

5 10

5 7/5

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Dividends (%)

Interest (%)

Royalties1 (%)

Russia 10/5 7 7 Saudi Arabia 5 5 10 Serbia 15/5 10 10 Slovak Republic - 10 0/10 Slovenia 10 10 10 South Africa 15/5 0/8 5/7 Spain 10/5 0/8 6 Sweden 0 10 5 Switzerland 15/5 7 5 Tunisia Turkey

35 15

15 12

12 10

Ukraine 10/5 0/10 10 United Kingdom -7 0 0 United States –6 –6 0 Uzbekistan 8 10 8

NOTES: 1. Where the withholding tax rate on royalties is indicated as nil, no income tax is due. The

withholding tax on rental payments may also be reduced under the provisions concerning royalties in various tax treaties. The text of the relevant treaty should be consulted.

2. The 5% applies to royalties paid for the use of industrial, commercial or scientific equipment. The 10% rate applies to all other royalties.

3. No tax on royalties on intellectual property. 4. 8% if paid to a bank or other institution. 5. 5% for copyright and film royalties. 6. Where the US resident receiving the interest is not engaged in a trade or business through a

permanent establishment in Greece, the interest is exempt from tax in Greece to the extent that it does not exceed a rate of 9% pa. The exemption is not available (and the domestic withholding tax rate therefore applies) where the US corporation holds more than 50% of the voting power of the Greek payor.

7. The domestic rate applies. There is no reduction under the treaty.

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