GREECE Law and Practice Contributed by: Maria Zoupa, Daphne Cozonis, Ioanna Tapeinou and Diana Tsourapa, Zepos & Yannopoulos
The place of effective management is determined on the basis of facts and circumstances, with particular consideration being given to the places where: • day-to-day business is undertaken; • strategic decisions are adopted; • annual shareholders’, board of directors’ and other executive meetings are held; The place of residence of the majority shareholders may potentially be considered. The rules on residence do not apply to certain types of entities such as those operating under special shipping regimes. 1.4 Applicable Corporate and Individual Tax Rates The ordinary income tax rate is 22% and is applicable to: • businesses incorporated in the form of an AE, ΕΠΕ or IKE; • partnerships in the form of an OE or EE; • other legal persons and legal entities specifically defined in the Income Tax Code such as founda - tions, cooperatives, civil law societies, consortia, etc; and • any other legal persons or entities keeping double- entry books. This does not apply to credit institutions that have opted to apply a scheme to enhance capital adequacy by converting deferred tax assets into deferred tax credits against the Greek state, which are taxed at a rate of 29% for the relevant years. • books and records are kept; and • the directors’ place of residence. Business income of individuals who are directly engaged in a business forms part of their taxable basis, including any salary and pension income, and is taxed at a progressive scale ranging from 9% to 44%. Individuals who transfer their tax residence in Greece for such purpose under tax incentive regimes may benefit from reduced tax rates or exemptions for seven years.
Reduced tax rates are available to companies formed as ΑΕs or ΕΠΕs on certain non-taxed profit reserves formed under growth incentive laws if converted into share capital. Prerequisites for this include, in certain cases, restrictions to ensure the continuity of the rel - evant company and the preservation of capital. Each year businesses are obliged to prepay a cer - tain percentage of their income tax due in the form of an income tax prepayment. The applicable percent - ages are 80% for legal persons and entities, 100% for banks and banking branches and 55% for business income earned by individuals. In the first three years of operations of the above legal persons and banks, relevant prepayment is reduced by 50%. On the other hand, for individuals, relevant prepayment is reduced by 50% only for the first year of operations. The taxable profits of businesses are based on accounting profits, subject to the special rules and classifications provided for in the income tax legisla - tion. In general, taxable profits equate to the aggre - gate of revenues after subtracting deductible business expenses, depreciation allowed for tax purposes, and certain provisions for bad debts. Certain special rules, such as exemptions in respect of certain dividends and capital gains and interest limitations apply spe - cifically as regards the determination of the taxable profits of legal persons and entities. In addition, in order to be deductible, all business expenses must have: • been actually incurred; • been incurred for business; and • been properly recorded in the books and support - ed by adequate documentation. As of 2023, a minimum level of imputed taxable prof - its, calculated in accordance with a combination of parameters set in the law, is applicable annually in respect of businesses conducted by individuals. 2. Corporate Tax Regime 2.1 Taxable Profits General Principles
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