Taxes Related to Doing Business in Greece
Posted with permission from the American Hellenic Chamber of Commerce

The most common ways to establish in Greece are to register a Corporation (AE company), a Limited Liability Company (EPE company) or a branch. Foreign shipping companies can also establish an off shore office of Law 89/67.. Nevertheless, even if it is not formally registered in Greece, an American enterprise can acquire a "permanent establishment" in Greece giving rise to corporate tax on income arising in Greece as well as other tax and accounting obligations. The Double tax treaty between U.S. and Greece defines when a permanent establishment arises (normally the maintenance of a branch, factory, or other fixed place of business).

CORPORATE TAXATION

Greek corporations are taxed on their profits before distribution. Dividends are distributed from after tax profits and are not subject to further taxation in the hands of the recipient. Branches and permanent establishm
ents of foreign entities are taxed on their aggregate profits irrespective of any profit remittances.

TAX RATES

AE companies 35%
EPE companies 35%
Branches 35%

Offshore offices of foreign shipping companies established under Law 89/67 are exempted from corporate income tax, however, they are not permitted to carry out commercial activity in Greece. Offices of foreign commercial and manufacturing businesses established on or before 31 December 2001 will continue to enjoy the exemptions until 31 December 2005.

CONSTRUCTION COMPANIES

Following amendments to tax legislation, the taxable profits of construction companies engaged in public or private construction projects (including the construction of flats) are no longer determined by applying a fixed rate to their gross income for contracts signed on and after 1 January 2002. They are instead subject to taxation in the same manner as all other legal entities, that is on the basis of their accounting profits.

Should, however, the accounting books of construction companies not be maintained in accordance with the provisions of the Greek Code of Books and Records, with the result that they will be rejected for the purposes of determining taxable profits, they still are taxed on deemed profits (with penalties also applying).

In such a case, the taxable profits of Greek construction companies engaged in public or private projects are determined by applying a fixed rate to their gross income. The fixed rates are:

Public project 10%
Private project including supply of materials 12%
Private project with no supply of materials 25%
Construction/sale of buildings, flats etc. 15%

Taxable profits of construction companies engaged in public or private construction projects (including the construction of flats) are no longer determined by applying a fixed rate to their gross income...They are instead subject to taxation in the same manner as all other legal entities, that is on the basis of their accounting profits.
A 3% withholding tax is applied on all payments made to construction companies which is set off against the final tax.

Where a foreign entity undertakes construction projects, withholding rates of 3.50% (for public projects), 4.20% (for private projects), and 8.75% (for private projects with no supply of materials) as a final tax may apply subject to the terms of the Double Taxation Treaty.

DEDUCTIBILITY OF EXPENSES AND OTHER ISSUES

Expenses incurred by legal entities normally qualify for tax deductibility under certain conditions although deductions for provisions are limited. The tax law provides a method to compute the non-deductible portion of expenses if an entity has both taxable and tax free income. Loss carry forwards are permitted. Capital gains (or losses) are generally regarded as ordinary business income (or losses).

Tax on the sale of shares held by US residents is:

· 0.3% on the sale price for shares listed in the Greek stock exchange (not applicable to transactions effected by Market Makers in certain circumstances).

· 0% for non-listed shares (where the Double Taxation Treaty is evoked).

WITHHOLDING TAXES

The rates in the Double taxation treaty between U.S. and Greece apply.

Royalties derived from Greece where the recipient does not have a permanent establishment in Greece are exempted from taxation in Greece except for motion picture film rentals which have a 20% withholding tax.

There is also no withholding tax on interest to the extent that such interest does not exceed 9% per annum. Also, no exemption applies if the US entity controls more than 50% of the Greek entity. The regular withholding rate is 35%.

INDIRECT AND OTHER TAXES

The most important indirect tax is value added tax (VAT) (the normal rate is 18%). Under certain conditions the appointment of a VAT representative is required where the supplier is not registered in Greece or in the EU. Other taxes include capital concentration tax (1%) and stamp duty (1.2% to 3.6%).

SPECIAL TAX ON REAL ESTATE

A special annual tax at the rate of 3% on the value of real estate is imposed on companies which have ownership or usufruct on real estate located in Greece.

SEVERAL EXEMPTIONS EXIST

FOR MORE DETAILED INFORMTION PLEASE VISIT OUR WEBSITE AT HTTP://WWW.KLEGAL.GR LINKED ALSO to our international site's references or contact Angela Illiadis, Solicitor at KLegal.Athens, Greece.

The American Hellenic Chamber of Commerce, is a non-profit, self-supporting organization, and was established in 1932 to promote economic and business relations between the United States and Greece. With a corporate membership today of some 1,000 U.S. companies operating in Greece and major Greek enterprises doing business with the U.S., it continues to encourage and facilitate trade, investments and professional partnerships from both sides of the Atlantic. Additionally, the Chamber is a fully accredited member of the U.S. Chamber of Commerce in Washington, D.C., and affiliated with the European Council of American Chambers of Commerce (ECACC).