GREECE Law and Practice Contributed by: John C. Dryllerakis, John Papadakis and Nikos Kalantzis, Dryllerakis Law Firm
2. Territoriality, Residence and Permanent Establishment 2.1 General Principle of Territorial Taxation General Principle The general principle governing the territorial scope of taxation in Greece is based on a combination of the residence and source principles, as codified in the Income Tax Code (Law 4172/2013). Under Greek law, tax residence is the primary determi - nant of unlimited tax liability. Individuals or legal enti - ties that are Greek tax residents are subject to taxation on their worldwide income. Non-residents are subject to taxation in Greece solely on income derived from Greek sources. Greek-source income includes business profits earned through a permanent establishment in Greece, employment exercised in Greece, income from immovable property located in Greece and certain passive income such as dividends, interest and royalties arising from Greek activities. The scope of Greek-source taxation may be limited by the provisions of applicable double taxation agree - ments, particularly regarding business profits, perma - nent establishments and withholding taxes. Special Territorial Considerations Greece does not operate a system of separate tax regimes comparable to those found in certain other jurisdictions. The Greek tax system applies uniformly throughout the national territory. However, certain specific territorial regimes exist with - in the constitutional and EU framework, as follows. • Mount Athos (Agion Oros): Under Article 105 of the Greek Constitution, the autonomous monastic community possesses administrative independ - ence. While Greek law generally applies, historical and administrative particularities may affect the application of certain taxes. • Aegean Islands and Insular Regions: Certain islands benefit from reduced VAT rates and excise exemptions, in line with EU law provisions and regional development policies. These regimes are
is governed by constitutional principles, EU obliga - tions and statutory rules. At the highest level, the Constitution establishes the framework for taxation, enshrining the principles of legality, equality and proportionality. Importantly, Arti - cle 28 (1) provides that ratified international treaties, including double taxation agreements (DTAs), become an integral part of domestic law and prevail over con - flicting domestic legislation, though they remain sub - ordinate to the Constitution itself. European Union law occupies a similarly elevated position. As an EU Member State, Greece is bound by EU Treaties, secondary legislation and the case law of the Court of Justice of the European Union. EU law takes precedence over conflicting domes - tic provisions and heavily influences the design and interpretation of Greek international tax rules, includ - ing the transposition of directives such as ATAD I & II, the Parent-Subsidiary Directive and the Interest and Royalties Directive. 1.3 OECD Model/United Nations Influence on Treaty Practice Greece’s double taxation treaty (DTT) network is large - ly aligned with the OECD Model Tax Convention, par - ticularly regarding permanent establishment, business profits, associated enterprises, dividends, interest, royalties and exchange of information. Greek treaties generally follow OECD standards, including reliance on the arm’s-length principle for intra-group trans - actions and the allocation of taxing rights between source and residence jurisdictions. Importantly, Greece does not use the UN Model Con - vention in any of its DTTs. 1.4 Multilateral Instrument 1.4 Multilateral Instrument Greece is a signatory to the Multilateral Instrument (MLI) and has fully ratified it. The country signed the MLI on 7 June 2017 and ratification was completed through Law 4768/2021. The instrument of ratification was deposited with the OECD on 30 March 2021 and the MLI entered into force for Greece on 1 July 2021.
171 CHAMBERS.COM
Powered by FlippingBook