GREECE Law and Practice Contributed by: John C. Dryllerakis, John Papadakis and Nikos Kalantzis, Dryllerakis Law Firm
• the entity has its registered (statutory) seat in Greece; or • the entity’s place of effective management is located in Greece at any time during the tax year. The place of effective management is determined in accordance with both domestic provisions and OECD principles, taking into account factual and substantive elements, such as: • the place where day-to-day management is exer - cised; • the place where strategic decisions are taken; • the place where the annual general meeting of shareholders or partners is held; • the place where the accounting books and records are kept; • the place where meetings of the board of directors or other executive management body are held; and • the residence of the members of the board of directors or other executive management body. In conjunction with the above, the residence of the majority of shareholders or partners may also be con - sidered. No single factor is conclusive; instead, the totality of facts and circumstances is assessed. Entities that qualify as Greek tax residents are liable for corporate income tax on their worldwide profits, including profits generated outside Greece. Con - versely, entities that are not tax residents in Greece are taxed only on income arising from Greek sources, as long as such profits are attributable to a Greek per - manent establishment. 2.6 Definition of Permanent Establishment Under the Greek Income Tax Code (Law 4172/2013), the concept of a permanent establishment (“PE”) is defined broadly and in line with internationally accept - ed principles. A permanent establishment is generally defined as a fixed place of business through which the business of an enterprise is wholly or partly carried on. The statu - tory definition expressly includes, inter alia, a place of management, branch, office, factory, workshop, ware - house, mine, oil or gas well, quarry or any other place of extraction of natural resources. A building site or a
construction, installation or assembly project consti - tutes a PE where it lasts for more than three months. The domestic definition also encompasses a depend - ent agent PE, arising where a person acting on behalf of an enterprise has and habitually exercises authority to conclude contracts in the name of that enterprise. Activities carried out by an independent agent acting in the ordinary course of its business do not give rise to a PE. The Greek domestic definition largely reflects the OECD Model Tax Convention; however, it has not formally incorporated the amendments introduced by BEPS Action 7 (in particular, the expanded depend - ent agent rule and the anti-fragmentation provisions). Notably, the domestic threshold for construction sites (three months) is shorter than the twelve-month threshold provided under Article 5 of the OECD Model Convention. In the event of a conflict between domestic law and the provisions of an applicable double taxation treaty, the treaty provisions prevail. 3. Taxation of Cross-Border Income 3.1 Income From Immovable Property Income derived from immovable property situated in Greece is subject to taxation irrespective of the tax - payer’s residence status. The applicable tax treatment depends on whether the recipient is an individual or a legal entity, as outlined below. • Individuals (tax residents): Greek tax resident individuals are taxed on their worldwide income, including rental income from immovable property. Rental income derived from immovable property is taxed separately from employment or business income at progressive rates. Certain expenses are deemed covered by a statutory deduction mecha - nism, whereas specific categories of income (eg, compensation for early lease termination) are treat - ed as rental income. Capital gains derived from the transfer of Greek real estate are, in principle, subject to capital gains tax, although the applica -
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