TAX LAW IN GREECE

At the beginning of 2010, the implementation of tax measures is the main subject of political discussion and strict measures are clearly about to be implemented. New ideas and measures are suggested on a daily basis and the government has opened a public dialogue on a series of measures.

In general, the situation is currently as follows:

Α1. INCOME TAXATION

Income taxation of natural persons generally escalates based on income level, with a maximum limit of 40%, whereas corporate entities are subject to fixed taxation rates, depending on their legal form, which may not exceed 25%.

In many cases specific income categories are subject to favorable taxation, with no reasonable excuse (e.g. members of the Parliament, jurists, football players etc.)!!!

Α.1.1. SUPPLEMENTARY CONTRIBUTION

Law 3758/2009 imposed an “extraordinary supplementary contribution” on natural persons for year 2007. Such contribution was levied on any tax payers who declared an income of over €60,000 in year 2008.

This measure caused serious reaction and many tax payers addressed the administrative courts claiming anti-constitutionality, as retroactive taxation (e.g. taxation of income of previous years) is prohibited under the Greek Constitution.

In the last days the first ruling was issued by a First Instance Court whereby the supplementary contribution was declared illegal and therefore cancelled. The case is now referred to the Supreme Court. If the Supreme Court upholds the decision of the first instance court, then the State will be liable to refund the tax payers with any amounts collected, which will seriously burden the state economics, which are already seriously problematic.

Α.2. INHERITANCE TAX

In 2008 (law 3634/2008) the government adopted a serious of measures to limit inheritance taxation. In particular, the following measures were adopted:

Α.2.1. Full exemption from the inheritance tax with regard to the acquisition of a residence up to 200 sq.m. or the acquisition of land by the deceased’s spouse or children, provided that they do not own a residence that meets their housing needs.

Α.2.2. Reduction of the taxation rates applicable to the deceased’s next of kin.

More specifically, first-degree relatives (as defined in the law) were exempted from taxation for any assets not exceeding in value €95,000 whereas second-degree relatives were exempted up to €20,000. Any assets exceeding in value the above limits were subject to taxation of 1% over the excessive value.

Α.3. PARENTAL GRANT TAXATION

Parental grant is any transfer of property from parents to children, in the form of a donation.

Α.3.1. Law 3634/2008 introduced a restructuring of the taxation of parental grants. The tax exemption limit was again set at €95,000. Any transfer of property from parents to children exceeding that limit in value was subject to taxation of 1%.

Α.3.2. The same law provides for full tax exemption of any parental grants consisting exclusively in the transfer of the beneficiary’s primary residence. Such exemption applies to any estates not exceeding 200 sq.m.

Α.3.3. Parental grants of movable property are subject to 10% taxation. Parental grants of holdings, shares or other movable securities are subject to independent taxation, ranging from 0.6% to 1.2%.

It should be noted that the applicable tax rates and tax exemption limits are particularly favorable compared to previous tax regulations.

As analyzed below, the government has already begun to replace the applicable tax rates with significantly higher ones.

Α.4. REAL ESTATE TAXATION

Α.4.1. Standard real estate tax.

Law 3634/2008 introduced standard real estate taxation, based on the value of the real estates and any real rights over them as at January 1st of the taxation year. The total value of the real estate property owned by natural persons in Greece, less the value of primary residence, is subject to a standard tax rate, subject to 0.1% graduated tax rate. The value of the real estate property owned by legal entities is subject to taxation of 0.6%.  (In most cases, such value is calculated  based on the values defined per district by special law).

Natural persons are exempted from tax with regard to their primary residence provided that it does not exceed two hundred (200) square meters and three hundred thousand euros (€300,000) in value.

The following entities are exempted from real estate tax with regard to any real estates used privately: (a) The Greek State, the municipal authorities and state enterprises; (b) The foreign countries for any real estates they own; (c) Any real estates not included in the city plan; (d) The social security organizations and funds; (e) All established religions and communions.

It should be noted that the Real Estate Tax has replaced the Large Property tax previously applied, which was much stricter on the large property owners; therefore, it is seen as great relief for the large property owners, however, at the same time it was also imposed on small property owners, who used to be fully exempted.

Α.5. EXCISE TAX

Among others, in 2009 the Greek Government adopted the following tax / collective measures:

Α.5.1. A raise in the Excise Tax levied on unleaded regular gasoline and super unleaded gasoline.
Α.5.2. A raise in mobile telephony charges, i.e. a raise in the charges imposed with regard to the use of mobile phones, which are collected through the telephone bills, and 12% taxation on card connections.
Α.5.3. An extraordinary contribution was imposed on the owners of leisure yachts exceeding 10 m. in length and sailing vessels exceeding 15 m.