DOUBLE TAXATION AND RELIEF FOR FOREIGN TAXES
In the absence of a double taxation treaty, a Greek corporation or permanent establishment is entitled to claim credit for the foreign tax charged on income from any overseas source against the Greek corporate tax payable on that income. The amount of the credit is limited to the amount of Greek tax attributable to such income. Treaties for the avoidance of double taxation have been concluded with Austria, Belgium, Cyprus, the Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Italy, Luxembourg the Netherlands, Norway, Poland, Romania, Slovakia, Sweden, Switzerland, United Kingdom and the United States of America. A tax treaty with Luxembourg has been signed but is not yet in force. The tax treaties cover, inter alia, the withholding tax treatment on payments of dividends, interest and royalties from Greece to residents of the Treaty countries.
TREATY WITHHOLDING RATES (Interest, Dividends and Royalties)
RESIDENT OF INTEREST DIVIDENDS ROYALTIES
RECIPIENT
NON-TREATY RATES: 40% Entities Nil 20% Industrial
20% Individuals 10% Film,
literary etc.
TREATY RATES:
Austria 0/10 (b) (a) 0/10 (b)
Belgium 15 25 (j) 5
Bulgaria 10 (i) 40 (i) (j) 10 (i)
Cyprus 10 25 (j) 0/5 (c)
Czech Republic 10 (a) 10
Denmark 8 38 (j) 5
Finland 10 47 (j) 10
France 10 (a) 5
Germany 10 25 (j) 0
Hungary 10 45 (j) 10
India (a) (a) (a)
Italy 10 15 (j) 0/5 (e)
Luxembourg 8 (h) 38 (h) (j) 5/7 (d) (h)
Netherlands 8/10 (f) 35 (j) 5/7 (d)
Norway 10 40 (j) 10
Poland 10 (a) 10
Romania 10 (h) 45 (j) 5/7 (d) (h)
Slovakia 10 (a) 10
Sweden 10 (a) 5
Switzerland 10 35 (j) 5
United Kingdom 0 (g) (a) 0 (g)
United States 0 (k) (a) 0
Notes:
(a) Non-Treaty rates apply.
(b) 10% rate applies where corporations are inter-related, see tax treaty.
(c) 5% rate applies where royalties are for cinematography films other than films shown on television.
(d) 5% rate applies where royalties are for copyright of literary, artistic or scientific work including cinematography films.
(e) Nil rate applies where royalties are for artistic, scientific work and copyright.
(f) 8% withholding tax on interest applies if the beneficiary is a bank or financial institution.
(g) The domestic withholding tax rates apply to interest and royalty payments in excess of fair and reasonable compensation.
(h) For income earned from 1 January 1996.
(i) Not in force yet.
(j) Local rate of nil applies as it is less than treaty rate.
(k) Non-treaty rate applies to interest in excess of 9% annually and where recipient US Corporation has more than 50% interest in Greek paying company.
INTEREST
Except for interest from bank deposits or state bonds which is tax free or taxed in a special way, interest remitted to non-resident entities is subject to withholding tax at the rate of 40%, subject to the provisions of an applicable tax treaty for the avoidance of double taxation. When taxable interest is paid to a Greek resident, (interest other than tax free interest or interest taxed in a special way), it is subject to a withholding tax of 20%. Interest earned on government bonds issued by certain international institutions, treasury bills, deposits in foreign currency and for non-residents only, deposits in drachmae is tax exempt. A 15% tax is levied on interest earned from bank deposits in drachmae, from bonds and certain other interest-bearing securities, and for residents.
DIVIDENDS
Although the treaties indicate rates for withholding on dividends, the local rate is now 0% and thus, effectively, the withholding rate on dividends paid to all non-residents, whether or not a treaty applies, is 0%.
ROYALTIES
Royalties paid to non-resident companies and individuals with no permanent establishment in Greece are subject to a withholding tax of either 20% or 10% depending on the nature of the royalty payment. Where a tax treaty is applicable, the treaty rate will apply if the proper procedures are followed. There is no such withholding if the payment is made to a Greek resident.
TRANSFER PRICING RULES
Transfer pricing rules allow the adjustment of the profits of a local subsidiary in respect of its transactions with its foreign controlling parent where the tax authorities find that an arms-length price has not been charged.
OTHER WITHHOLDING TAXES AND SPECIAL TAXES
Service Fees
In general, service fees paid to foreign undertakings or individuals which have no permanent establishment in Greece are subject to 20% withholding tax unless a tax treaty provides otherwise. Fees incurred specifically for studies, designs, research and scientific advice, and supervision and consulting services on construction projects are subject to a 17.5% withholding tax. There is no such withholding if the payment is to a Greek resident. Where a double taxation treaty is applicable, its provisions apply.
Investment Income
Other than dividends paid to a foreign entity which are not subject to any withholding tax, investment income paid to a foreign entity with no permanent establishment in Greece, is subject to a withholding tax at the rate of 40%, subject to the provisions of an applicable tax treaty for the avoidance of double taxation.
Professional Fees
Professional Fees paid to most free professionals practising in Greece are generally subject to a withholding tax of 15%.
Construction/Engineering Contract Payments
Tax is withheld from payments to contractors at the rate of 3% and from payments to representatives, agents, etc., in connection with fees or commissions for the conclusion of the procurement of material contracts with foreigners at the rate of 15%.
The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be obtained before any action is taken.
For further information Contact Marios T. Kyriacou, KPMG Peat Marwick Kyriacou, Athens, Tel: +301 6062100, fax: +301 6062111 or enter text search "KPMG Peat Marwick Kyriacou".
