Who is considered a tax resident in Greece?
Generally, an individual’s tax residence status is determined by their physical presence in Greece for any 12-month period. However, several other factors may also be considered by the Greek authorities when determining an individual’s tax residence status, including the center of one’s ‘vital interests.’
The term ‘vital interests’ has yet to be officially interpreted within the meaning of Greek tax law. However, the authorities may consider several elements to establish the grounds for determining an individual’s vital interests, such as ownership of assets in Greece, citizenship, social security registration, children’s schools, and the country where the family resides or usually spends holidays.
It’s worth noting that an individual’s tax residence status may also be determined by the provisions of a bilateral Double Tax Treaty (DTT) concluded between the contracting states. In such cases, it’s advisable for individuals to seek professional advice to ensure they are correctly classified as tax residents in Greece.
Once an individual is considered a tax resident in Greece, they are subject to Greek taxation on their worldwide income. This includes employment, business, investment, and rental income. Non-residents who earn income in Greece may also be subject to Greek taxation under certain circumstances. Therefore, it’s essential to understand how the Greek tax system works and seek professional advice to ensure compliance with tax regulations.
What taxes do foreigners pay in Greece?
Foreigners living and working in Greece may be subject to several different types of taxes, including income tax, social security contributions, and property taxes.
Income tax is based on an individual’s income earned in Greece and is paid annually. Non-residents are taxed only on income earned in Greece, while residents are taxed on their worldwide income. The tax rates for income tax range from 9% to 44%, depending on the amount of income earned.
Social security contributions are mandatory for both employees and employers in Greece. The contributions are based on the employee’s salary and are paid monthly. The current rate of social security contributions is 26.95% of an employee’s gross salary, with a cap on the maximum amount that can be contributed.
Foreigners who own property in Greece may also be subject to property taxes. Property taxes are paid annually and are based on the value of the property. The rate of property tax varies depending on the location and size of the property.
In addition to these taxes, there are also other taxes that may apply to specific situations, such as capital gains tax on the sale of property or shares, value-added tax on goods and services, and inheritance tax.
Read also: The Greek Residency by Investment Program
Let’s have a closer look at how the income tax works in Greece. The income tax rate depends on the source of income, such as employment or rental income, and is calculated accordingly. The tax scale that applies to employment income, pensions, and business profits is as follows:
- For the first €10,000 of income, the tax rate is 9%, which corresponds to €900 in taxes
- For the next €10,000 of income, the tax rate is 22%, which corresponds to €2,200 in taxes
- For the next €10,000 of income, the tax rate is 28%, which corresponds to €2,800 in taxes
- For the next €10,000 of income, the tax rate is 36%, which corresponds to €3,600 in taxes
- For any income above €40,000, the tax rate is 44%
Real estate taxes
The real estate tax, also known as property tax, is applicable to income derived from rental properties in Greece. This income is taxed at the following rates:
- Income up to €12,000 is taxed at 15%
- Income between €12,000 and EUR 35,000 is taxed at 35%
- Income above €35,000 is taxed at 45%
It is important to note that these rates apply to rental income only, and not to capital gains from the sale of real estate. In addition, an income tax reduction of 40% is available for individuals who upgrade their buildings with regard to energy efficiency, functionality, and aesthetics, provided that such buildings have not been or will not be included in a building upgrading program. This reduction is applicable to the amount of the relative expenditure incurred between 1 January 2020 to 31 December 2024.
It is worth noting that in addition to the above real estate tax, property owners in Greece may also be subject to a municipal property tax known as the "ENFIA" tax, which is calculated based on the location, size, and age of the property. The ENFIA tax is payable annually and is assessed by the municipality in which the property is located.
As of 2022, the ENFIA rates for residential properties in Athens range from €0.0016 to €13.20 per square meter, depending on the objective value of the property. For example, a residential property with an objective value of €100,000 in Athens would have an annual ENFIA tax of approximately €311.50.
It’s important to note that the ENFIA rates and calculations are subject to change by the Greek government, and property owners should consult with a tax professional or the Greek tax authorities to get the most up-to-date information on their specific property tax obligations.
To calculate your taxes, we need to know your total income from the rental property for the year. Assuming you have no other income in Greece, we can use the rental income of 1300 euros per month to calculate your total income.
- €1300/month x 12 months = €15,600 per year
Next, we can use the income tax scale for rental income to calculate your tax liability:
- For the first €12,000 of rental income, the tax rate is 15%: €12,000 x 15% = €1,800
- For the next €3,600 of rental income (from €12,001 to €15,600), the tax rate is 35%: €3,600 x 35% = €1,260
Therefore, your total tax liability on the rental income would be:
- €1,800 + €1,260 = €3,060
In addition to income tax, you will also need to pay an ENFIA tax. Assuming that the objective value of the property is 150,000 euros and the applicable ENFIA tax rate for the municipality is 0.0015, the calculation would be as follows:
ENFIA = (objective value x applicable tax rate) + fixed amount
- ENFIA = (150,000 x 0.0015) + 200
- ENFIA = 225 + 200
- ENFIA = €425
Please note that this is just an example calculation, and the actual ENFIA for a property in Athens may vary depending on various factors.
Capital gain tax
Capital gains tax is a tax on the profit that an individual or entity makes when they sell an asset, such as shares, that has increased in value since they acquired it. In Greece, the transfer of non-listed shares is subject to a capital gains tax of 15%, which means that 15% of the profit from the sale of such shares is payable to the Greek tax authorities.
Similarly, the transfer of listed shares is also taxed at a rate of 15%, unless specific conditions or exemptions apply. For example, if the shares have been held for more than five years, or if the transfer is between spouses or between a parent and a child, then no capital gains tax is payable.
It’s worth noting that in addition to the capital gains tax, a transfer duty of 2‰ (i.e., 0.2%) is imposed on the gross sale proceeds of listed shares. This transfer duty is payable by the seller and is calculated based on the gross sale price of the shares.
The same 15% rate is applied for the capital gain received from the sale of a real estate property.
Foreign tax relief
Foreign tax relief is a mechanism that allows individuals or businesses to claim a credit or a deduction on their taxes in their home country for taxes paid on income earned in a foreign country. In Greece, income tax paid abroad is deductible from Greek tax only if certain conditions are met.
Firstly, the taxpayer must file a Greek tax return as a Greek tax resident. Secondly, the taxpayer must provide the original supporting documentation such as a foreign income tax return and tax payment notice, bearing the seal of Apostille per the Hague Convention and being officially translated into Greek. Finally, the foreign country must have the right to apply tax on the income.
However, it is important to note that the deduction cannot exceed the part of income tax that would be attributable had this income been earned in Greece. In other words, the taxpayer cannot claim a deduction for foreign taxes that are higher than the amount of taxes they would have paid on the same income had it been earned in Greece.
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