GREECE Law and Practice Contributed by: Fotodotis Malamas, Bernitsas
In general, trusts are treated as either transparent or opaque legal entities for income tax purposes, while foundations are treated as opaque legal entities. In both cases, however, it appears that the Ministry of Finance has adopted the look-through approach, treating beneficiaries as being subject to inheritance, gift or donation tax. In practice, as trusts and private foundations are not recognised in Greece, high net worth individuals usually establish a trust or private foundation outside Greece. Any distributions effected by the respective trust or private foundation are sub - ject to income or capital tax in Greece, in accord - ance with the provisions of Ministerial Circular POL Although brief reference is made in Greek legislation to arrangements such as a trust or foundation, there are no provisions regulating the establishment and operation of these legal entities, and trusts are not recognised, creating impediments to family wealth planning. However, for tax purposes, specific provi - sions apply to income derived from trusts and founda - tions. To address this limitation on the use of trusts, high net worth individuals typically establish trusts in other jurisdictions and subsequently receive in Greece any proceeds distributed by those trusts. As Greek tax legislation provides guidance on the taxation of such proceeds, uncertainty regarding the applicable tax treatment is minimised. 3.3 Taxation of Trusts, Foundations and Similar Entities Located in Other Jurisdictions In accordance with the Circular, a trust constitutes a particular regime for property management and settle - ment, which lacks any legal personality and is estab - lished either by means of a statement of will of the property owner or with the transfer of such property, in life or at death, by means of a will. 1114/2017 (the “Circular”). 3.2 Recognition of Trusts The Circular does not provide a clear definition of a trust but describes its operation and the relationship between the settlor, the trustee and the trust. The Income Tax Code The Income Tax Code (ITC) makes numerous refer - ences to trust and foundation structures. It defines various terms for taxation purposes and provides, inter
alia, that any trust or foundation structure falls within the definition of the term legal entity ( nomiki ondotita ) and is therefore subject to taxation in Greece. Trusts Since the introduction of the ITC, trusts have been recognised for tax purposes as legal entities but not as legal persons. As a result, withholding tax applies for passive income, such as dividends, interest and royalties. Real estate income is considered business income subject to the corporate income tax rate (cur - rently 22%). The provisions of DTTs also apply to trusts and foun - dations, unless otherwise provided for by the respec - tive DTT. Furthermore, the Circular provides guidelines for the tax treatment of trusts and foundations from an inher - In particular, any income from dividends, interests and royalties acquired in Greece by foreign trusts is subject to withholding tax (at 5%, 15% or 20%, as the case may be), after which their tax obligation is exhausted, to the extent that they do not have a per - manent establishment in Greece. Income from immovable property acquired in Greece is taxed as income from business activity at the tax rate of 22%. Finally, capital gains acquired from the transfer of securities are not taxed in Greece, unless it is deemed that a foreign trust maintains a permanent establish - ment in Greece. Avoiding Double Taxation It should be noted that the foregoing provisions apply subject to the provisions of relevant DTTs. Conse - quently, where a trust is tax resident in a country with which Greece has concluded a DTT, the provisions of the respective DTT in force will apply; in any other case, the provisions of domestic legislation will apply. itance and donation tax perspective. Dividends, Interests and Royalties
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