By Christos ILIOPOULOS,
Attorney at the Supreme Court of Greece, LL.M.
Specialist in International and Business Law
In this article, Mr Iliopoulos gives tax advice to British, Irish and other ex-patriates whether they are permanent residents or not, who work, and/or own property or immovable assets in Greece.
This is the second article prepared by Christos Iliopoulos that is written for, and commissioned by, Brits in Crete.
Essentially, foreign residents, that is people who permanently reside outside of Greece, pay taxes in Greece generally under the same tax rules that apply for permanent residents in Greece. Few exceptions only apply to foreign residents. It is important to understand that only properly and accurately informed foreign residents, who have business or property interests in Greece, will be able to submit the appropriate tax returns and avoid fines and inconvenience.
Foreign residents are obliged by law to submit a yearly tax return in Greece if they have a yearly income above 3,000 euros, either alone or with their spouse. However, if they obtain in Greece income from agricultural property, they must file a tax return every year, independently of their income (even if their income is less than €3,000). Someone may have taxable agricultural income in Greece even if he owns a land in the middle of nowhere, which happens to have 40 olive trees in it, which have been declared to the tax authority. In that case, even if he never cultivates the trees, his theoretical taxable income (prescribed by specific rules) may be a mere €100 or €200 euros, which will however make this foreign resident submit a yearly tax return.
Foreign residents must file every year a tax return if they rent out their immovable property in Greece and they earn income more than €600 a year. Very generally, since there are specific cases which call for specific advice, foreign residents must submit a tax return in Greece in the following cases:
• When they buy in Greece cars, bikes, ships, cruisers, yachts or aircraft. Also, a yearly tax return must be submitted by those who own and use (in Greece) a car with a “factory value” more than €50,000. (The “factory value” of cars is usually much less than their market price).
• When the foreign resident has a business in Greece or he/she is a self-employed professional.
• When the foreign resident participates in a personal or limited company.
• When the foreign resident earns more than €600 a year from renting out his immovable property.
• When the foreign resident is buying immovable property or constructing a building/home in Greece.
• When the foreign resident owns one or more “secondary homes” in Greece, one of which is more than 150 square meters.
NOTE: The foreign resident who does not fall into one of the above categories, must still file, at least once, a E1 and E9 tax return in Greece if he/she owns any type of right (100% or a percentage share) on immovable property located in Greece (land, lot, apartment, condominium, house, even an inheritance right which has not been settled yet, etc.). The E1 and E9 tax returns are submitted at least once and they must be filed again by the foreign resident the next year only if his/her immovable property situation has been altered, which means only if he/she either bought/acquired new real estate or sold/donated existing property.
|"Foreign residents must file every year a tax return if they rent out their immovable property in Greece and they earn income of more than 600 Euros a year."|
It must be underlined that the foreign resident who buys a car or immovable property or constructs property in Greece must be able to prove to the Greek tax authority the source of his/her presumed income for buying or constructing. The foreign resident may have brought the money to buy or to build from abroad (outside of Greece), but he/she must be able to prove it. This is done only by submitting to the tax authority the original (usually pink) bank slips from the Greek bank, which documented the transaction of importing money from abroad.
For instance, when you build a house in Greece, the tax authority prescribes the minimum value of that construction. The taxman, using objective mathematical criteria, may presume that the house that you built has cost you at least €80,000 (even if in reality it cost you €150,000).
In such a case, you, as a foreign resident, must submit to the tax authority these pink bank slips which prove that you have imported €80,000 from abroad. If you are not able to produce such evidence, the tax authority in Greece will determine that the €80,000 is previous undeclared income that you earned in Greece and it will make you pay tax and fines over that undeclared income of yours (let alone that you will not be able to sell or transfer such immovable property, unless you sort out the tax situation).
Taxpayers in Greece pay taxes along the following lines (fiscal year of 2007):
• Self employed persons (professionals etc.) and not employees, do not pay tax for income up to €9,500. From €10,500 to €13,000, the tax is 15% (€525). From €13,000 to €23,000, that tax is 30% and from €23,000 and above the tax is 40%.
• Employed persons and pensioners do not pay tax for the first €11,000 they earn. For the next €2,000, they pay a tax of 15% (€200), and from the €13,000 and more the same regime applies as for the self employed professionals as described in the previous paragraph.
One very important exception for the foreign residents is that they pay tax from the very first euro they earn in Greece. This means that the tax exemption for the first €9,500 (or €11,000, if you are an employee or a pensioner) does not apply to foreign residents.
For instance, when a foreign resident rents out his apartment in Greece for €500 a month, he has an income of (€500 X 12 months = ) €6,000 a year. He will pay 5% tax, which is (€6,000 X 5% = ) €300, while the resident of Greece who has the same income (€6,000) will not pay tax at all, since such an income is below the minimum taxable income for permanent residents of Greece.
Christos ILIOPOULOS, Attorney at the Supreme Court of Greece, LL.M.
© Copyright Christos ILIOPOULOS, Attorney at the Supreme Court of Greece, LL.M.
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