Simple Tax Guide for Americans in Greece
US Expat Taxes - Greece
At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and green card holders working in Greece for over 10 years. We have been checked by the State Department and are listed on the list of approved Tax Preparers by the US Consulate in Athens. Our clients hail from all parts of the country - Athens and Thessaloniki, Patrai and Heraklion, Larissa and Peristeri.
As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country.
We offer professional tax services. That means we figure out the best and most optimal way to file your U.S. tax return and avail you of all possible exclusions and deductions. But just as importantly - avoid the errors that would allow IRS to disallow your return and levy fines & penalties on top. You can also do them yourself - not that we recommend it. For more information please see IRS.
The expatriate Foreign Earned Income Exclusion can only be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file and can even be lost.
We have many clients living in Greece and know how to integrate your U.S. taxes into the local income taxes you pay. Any Greek income tax you already pay can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Greece for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax; we look forward to working with you.
Below we include information on the Greek Tax System for the American Expatriates.
Personal income tax rates in Greece are progressive up to 40%.
Tax scale for 2010:
|Income bracket||Tax Rate||Tax per bracket||Aggregate Tax|
For income earned by employees, the first bracket is increased by EUR 1 500 (therefore the second bracket is no longer applicable).
The taxfree amount of the first income bracket (as determined) is increased by EUR 1 000 if the taxable person has one dependent child, by EUR 2 000 for two children, by EUR 10 000 for three children and by EUR 1 000 for each child above three.
The employees' income tax scale applies on condition that income from employment exceeds 50% of total income.
There is also a supplementary tax which is computed at the rate of 1.5% or 3% on the gross rental or imputed income from real estate that is taxable.
The 3% rate applies where the real estate in question is used for residential purposes and exceeds 300 square meters in size. This tax cannot exceed the taxpayer's main income tax. Foreign residents are taxed on the basis of the above income tax scales but they must also pay tax at the rate of 5% on the first EUR 10 500 of their income (except for EU residents earning over 90% of their income in Greece).
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.
Income taxed separately:
- interest on bank deposits
- interest on Greek State Treasury Bonds
- profits from shipping business
- gains from the sale of shares quoted on a Stock Exchange
Basis â€“â‰¤â€“Ð â€“Â£Â¬Ñ’Ð²Ð˜Ð’ Individuals domiciled in Greece are taxed on their worldwide income. Those not domiciled in Greece are subject to tax only on Greek-source income.
Residence â€“â‰¤â€“Ð â€“Â£Â¬Ñ’Ð²Ð˜Ð’ Greek tax law does not define the term "residence". According to civil law, residence is the place of main and permanent establishment and is based on factual circumstances.
Filing Status â€“â‰¤â€“Ð â€“Â£Â¬Ñ’Ð²Ð˜Ð’ Married persons file a joint return, but each spouse is taxed separately on his/her share of the income.
Taxable income â€“â‰¤â€“Ð â€“Â£Â¬Ñ’Ð²Ð˜Ð’ Individuals are taxed on total net income in Greece. This includes income from employment, income from a business, professional income and investment income. EUR 12,000 is tax free for salary earners and pensioners and EUR 10,500 for entrepreneurs (provided certain conditions are satisfied for the latter). Greek tax resident individuals receiving dividends from Greek or foreign companies are subject to a final withholding tax of 10% on dividends received after 1 January 2009.
Capital gains â€“â‰¤â€“Ð â€“Â£Â¬Ñ’Ð²Ð˜Ð’ Capital gains tax ranges from 0% to 20%, depending on the type of gain.
Deductions and allowances â€“â‰¤â€“Ð â€“Â£Â¬Ñ’Ð²Ð˜Ð’ Various deductions are allowed for expenses and certain allowances are available.
Greece Corporation Tax
Greece corporate income tax rates are as follows:
|Public limited companies (SA)||24% in 2010, 23% in 2011, 22% in 2012, 21% in 2013, 20 % in 2014|
|Banks||24% as above|
|Limited liability companies (EPE)||24% as above|
|Branches of foreign companies||24% as above|
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.
Income tax is payable in eight equal monthly instalments commencing in the fifth month from the end of the financial period in which the tax return must be filed. Societe Anonyms: Profits which are distributed to the shareholders are subject to additional dividend tax 10% (effective from 1 January 2009).
CAPITAL GAINS TAX
Capital gains are not taxed separately but are added to the company's taxable income except for the following cases:
(1) Gains from the sales of shares quoted on a Stock Exchange are taxed at a rate of 10%. This 10% tax is only a prepayment since the gains are taxed eventually according to the general provisions. If these gains are distributed at a later time, the company pays the normal company tax and dividend tax and deducts the above mentioned 10%.
(2) Sales of shares not quoted on a Stock Exchange are taxed separately at a rate of 5% on the sale value (i.e. gross proceeds). If this income is gained by a company, the above 5% tax is considered as a prepayment and the profits are taxed as any other taxable income.
(3) Profit from sales of (a) interests in any kind of company (except a public limited company), and (b) an enterprise as a whole, is taxed separately at a rate of 20%.
(4) Profit from the sale of a right, relevant to the operation of the enterprise, is taxed separately at a rate of 20%. In cases (3) and (4), the profit is taxed together with other income if the seller is a public limited company.
OTHER TAXES IN GREECE
Insurance business income is not subject to VAT but to turnover tax at a rate of 10%.
Each transfer of real estate which has been acquired before 1 January 2006 is subject to transfer tax computed on the market value of the real estate at a rate of 9 â€“â‰¤â€“Ð â€“Â£Â¬Ñ’Ð²Ð˜Ð’ 11%. This tax is borne by the buyer. From 1 January 2006, buildings are subject to VAT at 19% under certain circumstances. Sale of real estate was not subject to VAT until 31 December 2005. The value of real property is taxed every year (starting from 1 January 2008) as follows:
- Individuals 1/1000
- Companies 6/1000
- Non-profit organisations 1/1000
Transactions not subject to VAT are subject to stamp duty at rates from 1.2% to 3.6%.
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 approximately 30%.
DETERMINATION OF TAXABLE INCOME
Taxable profits are determined by ascertaining total gross income and then subtracting allowable expenses. These expenses must be wholly incurred for the purposes of the enterprise. Below are some of the allowed deductions.
Fixed asset depreciation is computed annually at fixed rates, the most important of which are:
- plant and other buildings 5% - 8%
- machinery 11% - 15%
- furniture 15% - 20%, office machines 15% - 20%, computers 24% - 30% or 100%
- private cars 11% - 15%, trucks and buses 15% - 20%
Stock is valued at the lower of acquisition cost or market value.
CAPITAL GAINS AND LOSSES
Capital losses are deducted from the taxable trading income.
Dividends are subject to dividend tax at 10% (effective from 1 January 2009). This tax is paid additionally to the corporate tax.
All loan interest paid at home and abroad is deductible and there are no thin capitalisation provisions.
Losses incurred in a financial year may be carried forward to be set off against profits of the following five financial years.
FOREIGN SOURCED INCOME
Foreign sourced dividends are added to the taxable income of the company.
Tax incentives are given if a company makes productive investments such that:
- part of the profit is non-taxable
- part of loan interest and/or part of investment cost is covered by government
The type and the amount of incentive depend on the amount and geographical area of investment.
FOREIGN TAX RELIEF
The Greek tax liability is reduced by the tax actually paid in the foreign country on which the profits arose. Relief is restricted to the amount relating to the tax suffered on the profits in Greece.
There are no special tax provisions for corporate groups.
RELATED PARTY TRANSACTIONS
When income from a related party transaction, at home or abroad, is not at arm's length prices, a transfer pricing adjustment is carried out.
In the absence of Double Tax Treaties, withholding tax of 20% must be deducted from royalties paid to foreign enterprises or foreign persons not permanently established in Greece.
Withholding tax is also deducted from interest income at the following rates:
- 10% on bank deposits in Euro denominated accounts
- 25% on any other thpe of interest
Under the provisions implementing the EC Interest and Royalties Directive, no withholding tax will be chargeable on interest and royalty payments to 'associated' EU companies. A rate of tax of 10% applies between 1 July 2005 and 30 June 2009 and 5% between 1 July 2009 and 30 July 2013. Broadly, companies are associated where one holds at least 25% of the capital of the other or they are under common 25% ownership (for a continuous two-year period).
According to the EU Directives, there are no longer any exchange controls. Such controls still exist for transfers of capital to non-EU countries.
VAT in Greece (Value Added Tax)
The VAT rate is 19%, except for specific categories of goods and services for which the tax rate is 4% and 9% respectively. The above rates are reduced by 30% in certain circumstances.
Public services (health, education, legal, insurance etc.) are not subject to VAT. These services are considered VAT exempt. Exports of goods and services 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. VAT is charged on every supply of goods and services by a commercial enterprise, with the exception of the Aghion Oros area.