Moving to Greece can be an exciting adventure, but understanding the tax system is crucial for a smooth transition. Whether you're planning to work, retire, or invest in Greece, this guide will help you navigate the complexities of Greek taxation for expats, including digital nomads, pensioners, and Golden Visa holders.
Greece, with its stunning landscapes and rich history, is a dream destination for many. But when it comes to taxation, the dream can quickly become a headache if you’re not well-prepared. In this article, we’ll break down the essentials of the Greek tax system for expats, ensuring you can focus on enjoying your new home.
1. Residency Status and Tax Obligations
First things first: your tax obligations in Greece largely depend on your residency status. Let’s analyze all possible cases:
Earning 100% of Your Income Abroad but Spend <183 Days in Greece?
No need to file any taxes in Greece.
Earning 100% of Your Income Abroad but Spend More Than 183 Days in Greece?
You need to report your abroad-earned income to the Greek tax authorities. Whether you will pay additional taxes will depend on the country where the income comes from (see below for an example).
Earning Income Both Abroad and in Greece (Either as an Entrepreneur or Employment) but Spend <183 Days in Greece?
Report to the Greek tax authorities the income sourced from Greece and pay taxes according to the Greek tax rates.
Earning Income Both Abroad and in Greece (Either as an Entrepreneur or Employment) but Spend More Than 183 Days in Greece?
Report to the Greek tax authorities your income earned abroad and the income sourced from Greece. The Greek portion of your income will be taxed based on the Greek tax rates, and your income from abroad tax, will depend on the country of origin.
2. Income Tax in Greece
Greece's income tax system is progressive, meaning the tax rate increases as your income increases. Here’s a quick rundown:
Up to €10,000: 9%
€10,001 - €20,000: 22%
€20,001 - €30,000: 28%
€30,001 - €40,000: 36%
Over €40,000: 44%
3. Special Considerations for Different Types of Expats
As a digital nomad, your global income may be subject to Greek taxes if you qualify as a tax resident. It’s essential to keep detailed records of your travel and stay in Greece to determine your residency status accurately.
Greece offers a favorable tax regime for foreign retirees, taxing foreign pensions at a flat rate of 7% for the first ten years of residency. This makes Greece an attractive destination for pensioners seeking a sunny retirement spot.
Investors holding a Golden Visa may have different tax considerations based on their investment income. While residency status determines your tax obligations, having a Golden Visa itself does not automatically change your tax status unless you meet the residency criteria.
4. Property Taxes
Owning property in Greece comes with its own set of tax obligations:
ENFIA (Uniform Real Estate Property Tax): This is an annual tax on real estate, based on the property's value and other factors like location and size.
5. VAT (Value Added Tax)
VAT in Greece is applied at different rates depending on the goods or services:
Standard Rate: 24%
Reduced Rates: 13% and 6% for specific goods and services.
As an expat, if you're running a business, understanding VAT regulations is crucial for compliance and pricing strategies.
6. Social Security Contributions
If you’re employed or self-employed in Greece, you must contribute to the social security system. These contributions fund benefits like healthcare and pensions.
7. Tax Filing and Deadlines
Tax returns in Greece are typically filed annually. The deadline is usually the end of June for the previous year's income. Staying on top of these deadlines is vital to avoid penalties.
8. Potential Benefits for Expats
Double Taxation Treaties
Greece has double taxation treaties with many countries to prevent dual taxation. If your home country has such a treaty with Greece, you might be eligible for tax credits or exemptions specific to your situation.
Case in Focus: Agreement Between Greece and USA
The Double Taxation Avoidance Agreement between Greece and the United States, established in 1953, aims to prevent residents and businesses of both countries from being taxed twice on the same income. The agreement covers various forms of income, including business profits, dividends, interests, royalties, and earnings from real estate. For instance, American companies operating in Greece aren't taxed on Greek-earned profits unless they have a permanent establishment in Greece. Likewise, Greek residents working temporarily in the U.S. for less than 183 days aren't taxed by the U.S. for earnings under $10,000.
Exceeding the 183-Day Threshold: A Practical Example
Suppose you're a U.S. citizen working as a freelance graphic designer and decide to live and work in Greece for an extended period. You arrive in Greece on January 1st and stay until December 31st, spending the entire year there. Since you have exceeded the 183-day threshold, Greece may consider you a tax resident and subject your income to Greek taxation.
Now, let’s say you earned $100,000 that year. Greece taxes this income at its applicable rates, and you end up paying $20,000 in Greek taxes.
Thanks to the DTAA, you don’t have to pay taxes on this income twice. The U.S. tax system allows you to claim a foreign tax credit for the $20,000 paid to Greece. If your U.S. tax liability on the same $100,000 is $30,000, you can subtract the $20,000 Greek tax credit from this amount, leaving you with a U.S. tax liability of $10,000.
Tax Incentives Under Greek Income Tax Code
The Greek Income Tax Code (Law No. 4172/2013) includes tax incentives under Articles 5A, 5B, and 5C aimed at attracting new tax residents to Greece. Here's a summary:
Article 5A
Target Group: High-net-worth individuals considering transferring their tax residence to Greece.
Incentive: Alternative taxation on foreign-sourced income.
Eligibility: Must not have been Greek tax residents for seven of the previous eight years and must invest at least €500,000 in Greece within three years.
Tax Obligation: A fixed annual tax of €100,000 on foreign-sourced income for fifteen years, with additional benefits for close relatives.
Article 5B
Target Group: Beneficiaries of foreign pensions.
Incentive: Alternative taxation on foreign pension income.
Eligibility: Must not have been Greek tax residents for five of the previous six years and must transfer from a country with a tax cooperation agreement with Greece.
Tax Obligation: 7% tax on aggregate foreign-sourced income, applicable for fifteen years.
Article 5C
Target Group: Individuals engaging in employment or business activities within Greece.
Incentive: Special tax treatment for domestically earned income.
Eligibility: Similar residency requirements as Article 5B and must work in new job positions or conduct business activities in Greece.
Tax Obligation: 50% income tax exemption on income earned in Greece from these activities for seven years.
Conclusion
Navigating the Greek tax system as an expat doesn’t have to be overwhelming. By understanding your residency status, income tax obligations, property taxes, and potential benefits, you can ensure compliance and make the most of your new life in Greece. If you need personalized advice, consulting with a tax professional who understands both Greek and international tax laws can be invaluable. Our law agency cooperates daily with highly trusted and knowledgeable tax professionals who can provide personalized advice based on your specific situation.
For more detailed information, check out our FAQ section on taxation for expats in Greece.
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