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Greece: Taxation

Overview

An important consideration when buying a home in Greece, even if you’re a non-resident, is taxation, which includes property tax, wealth tax, income tax (if you earn an income from a home) and inheritance tax. Note that there’s no capital gains tax in Greece. If you live permanently in Greece, you will also have to pay Greek income tax on all your earnings.

Like most people, the Greeks hate paying taxes and tax evasion is a national sport. Most Greeks don’t consider cheating the tax man a crime, and it’s estimated that many self-employed people don’t declare a substantial part of their income. However, the Greek authorities have tackled the problem of tax evasion by introducing compulsory tax returns on obvious signs of income or wealth, e.g. property, cars, motorbikes, boats and even swimming pools. As a result, all property owners in Greece must make an annual tax return.

If your tax affairs are investigated and you’re found to have made a false declaration, even as a result of an ‘innocent’ mistake, the authorities often take a hard line. The tax authorities maintain computer records of tax declarations, employers and bank accounts to help them expose fraud, and if your perceived standard of living is higher than would be expected on your declared income, you may be suspected of fraud.

On the other hand, tax avoidance (i.e. legally paying as little tax as possible, if necessary by finding and exploiting loopholes in the tax laws) is highly recommended! Residents have a number of opportunities to legally reduce their taxes, while non-residents have very few or none at all, and moving to Greece (or another country) often provides opportunities for legal ‘favourable tax planning’.

To make the most of your situation, it’s advisable to obtain income tax advice before moving to Greece, as there are usually a number of things you can do in advance to reduce your tax liability, both in Greece and abroad. Be sure to consult a tax adviser who’s familiar with both the Greek tax system and that of your present country of residence. For example, you may be able to avoid paying tax on a business abroad if you establish both residence and domicile in Greece before you sell it. On the other hand, if you sell a foreign home after establishing your principal residence in Greece, it becomes a second home and you may then be liable for capital gains tax abroad (this is a complicated subject and you should obtain expert advice). You should notify the tax authorities in your former country of residence that you’re going to live permanently in Greece.

The Greek tax system is extremely complicated (most Greeks don’t understand it), although most non-resident homeowners will find they have little contact with the system, particularly if they employ the services of a fiscal representative (see below). There’s little information available in English (although an English-language section of the tax authorities’ website: www.gsis.gr – is under construction), added to which, taxes change every year.

Disclaimer: Note that the tax rates referred to in this article are those available at the time of writing (January 2005) and are included for reference only. Rates in Greece are subject to frequent change (the new government has promised tax reform) and you’re advised to check the current rates with an expert before making any decisions based on Greek tax rates.

Tax File Number

All residents and non-resident foreigners with financial affairs in Greece must have a Tax File Number (Arithmo Forologiko Mitro/AFM – known as the ‘A-Fi-Mi’). An AFM is unique for each person and works as a form of identification for the Greek authorities. Without an AFM you won’t be able to purchase property, buy a car or boat, import a foreign-registered car or obtain any kind of tax certificate from the authorities. Your AFM must be used in all dealings with the Greek tax authorities (e.g. when filing an annual tax return), when paying property taxes and in various other transactions.

You can apply for an AFM at the local tax office in the area where you’re buying a property or living at the time. You need to present your passport and the number is usually issued within a few days of application. Your lawyer or representative can obtain an AFM on your behalf; to do this he needs a legalised copy of your passport plus written authorisation from you.

Fiscal Representative

The term fiscal representative refers to any person or agent who provides tax and other financial services; this may be a professional, such as an accountant or tax adviser, or it may be a non-professional who merely deals with your financial affairs on your behalf.

It’s highly recommended for non-resident property owners to have a fiscal representative in Greece who presents annual tax returns and receives communications from the tax authorities. A fiscal representative can also look after your financial affairs, e.g. receive your bank statements, make sure standing orders are being paid and that you have sufficient funds in your bank account to pay them. Your fiscal representative can also apply for a tax file number (AFM) on your behalf (see above). Most foreign residents employ a fiscal representative (usually an accountant) to manage their financial and/or taxation affairs.

Before employing a representative, you should obtain recommendations from friends, colleagues and acquaintances. Once you have appointed a fiscal representative, you should give him power of attorney to manage your financial affairs and he should inform the tax authorities that he’s acting on your behalf. Note that many accountants, particularly those based on the islands, are very busy and it may be difficult to find one willing to take on new clients.

Professional fiscal representation including the handling of your financial affairs plus tax returns usually costs around €180 per year. The completion and filing of a single tax return costs between €15 and €30. There may be additional charges for handling tax administration – the cost depends on the complexity of your tax affairs. For the relatively small cost involved, most people (both residents and non-residents) are usually better off employing a professional to handle their tax and other financial affairs than doing it themselves, particularly as the regulations change frequently. You can also often save more than the representative’s fee in avoided tax.

Value Added Tax

Value added tax (foros prostithemenis axias), was introduced in Greece on 1st January 1986, after the country joined the European Union. Most prices in stores are quoted inclusive of value added tax (VAT), although sometimes exclusive prices are quoted, e.g. for commercial goods. Certain goods and services are exempt from VAT, including medical services, legal and notarial services, post office services, building leases, agriculture and imports from other EU states. Exports are also exempt from VAT. On all other goods Greece levies three rates of VAT, as follows:

4% (low)
Books and other printed materials; theatre tickets.

8% (reduced)
Food products; pharmaceutical products; medical equipment and ancillary goods; public transport; food and drink in coffee shops, cafeterias and restaurants; products and services relating to agricultural production.

18% (standard)
All other goods and services including new homes built with licences issued after January 2005.

On some of the Greek island groups such the Dodecanese, North-Eastern Aegean and the Sporades, the 18 and 8 per cent rates are reduced by 30 per cent (to 12.6 per cent and 5.6 per cent respectively) on all goods with the exception of tobacco products and vehicles.

All businesses in Greece must register for VAT and returns are normally filed monthly and due within two months of the end of the month to which they relate. Smaller enterprises with annual sales below a certain amount can file quarterly returns, when any tax due is paid when the return is filed. If you´re self-employed, VAT returns must be filed via the internet.

VAT fraud is rife in Greece and payments are often paid in cash to avoid VAT. Note that it’s necessary to have legitimate bills showing registered names and VAT numbers in order to reclaim VAT. Furnished property lettings are exempt from VAT, although you may need to charge clients VAT if you provide certain services.

VAT is payable on goods imported from outside the EU, but not on goods purchased from another EU country where VAT has already been paid, although you may be asked to produce a VAT receipt. Companies located in other EU countries may obtain a refund of VAT paid on goods and services purchased in Greece, and VAT may also be refunded to companies in a non-EU country when Greece has a reciprocal agreement with that country.

More pages

Page 1: Overview
Page 2: Income Tax
Page 3: Leaving Greece
Page 4: Non-residents
Page 5: Capital Gains Tax
Page 6: Types of Will

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