How Dividends, Interest, and Royalties Are Taxed in Greece

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Table of Contents

• Introduction
• Overview of the Greek Tax System
• Taxation of Dividends in Greece
• Taxation of Interest Income in Greece
• Taxation of Royalties in Greece
• Double Taxation Treaties and Their Impact
• Recent Changes and Future Outlook
• Conclusion
• FAQs

Introduction

As we delve into the intricacies of the Greek tax system, particularly focusing on how dividends, interest, and royalties are taxed, it’s crucial to understand the broader economic context. Greece, a country with a rich history and a complex economic landscape, has undergone significant fiscal reforms in recent years, impacting its tax policies and economic outlook.

In this comprehensive analysis, we’ll explore the nuances of Greek taxation, providing data-driven insights and authoritative information to help investors, expatriates, and financial professionals navigate this intricate system. Our examination will encompass not only the current tax rates and regulations but also the historical context, recent changes, and potential future developments in Greek tax policy.

Overview of the Greek Tax System

Before we dive into the specific taxation of dividends, interest, and royalties, it’s essential to understand the broader Greek tax system. Greece operates a progressive tax system for individuals and a flat corporate tax rate for businesses. The country’s tax structure has evolved significantly over the past decade, largely in response to economic challenges and pressure from international creditors.

Key features of the Greek tax system include:

• Progressive income tax rates for individuals, ranging from 9% to 44%
• A flat corporate tax rate of 24% (as of 2021)
• Value Added Tax (VAT) rates of 24% (standard), 13% (reduced), and 6% (super-reduced)
• Various property taxes, including the Unified Property Tax (ENFIA)
• Social security contributions for both employers and employees

This framework provides the context for our more detailed examination of how specific types of income – dividends, interest, and royalties – are taxed in Greece.

Taxation of Dividends in Greece

Dividend income in Greece is subject to a specific tax regime that has seen several changes in recent years. Understanding these regulations is crucial for both domestic and foreign investors looking to capitalize on Greek corporate profits.

Current Dividend Tax Rates

As of 2021, dividends distributed by Greek companies are subject to a flat withholding tax rate of 5%. This rate applies to both resident and non-resident recipients, although the application may differ based on existing double taxation treaties.

Historical context: The current 5% rate represents a significant reduction from previous years. In 2018, the dividend tax rate was 15%, which was lowered to 10% in 2019, and further reduced to the current 5% rate in 2020. This progressive reduction in dividend taxation reflects Greece’s efforts to attract investment and stimulate economic growth.

Taxation Process for Dividends

The process of dividend taxation in Greece typically follows these steps:

1. The distributing company withholds the 5% tax at the source
2. For resident individuals, this withholding tax is considered a final tax, with no further tax obligations on the dividend income
3. For resident companies, dividend income is generally exempt from corporate income tax to avoid double taxation
4. Non-resident recipients may be subject to different rates based on applicable tax treaties

It’s worth noting that while the 5% rate is relatively low compared to many other European countries, investors should consider the overall tax implications, including potential taxes in their home country for foreign investors.

Taxation of Interest Income in Greece

Interest income taxation in Greece applies to various forms of interest-bearing investments, including bank deposits, government and corporate bonds, and other debt instruments. The tax treatment of interest income has also undergone changes in recent years, reflecting broader shifts in Greek fiscal policy.

Current Interest Income Tax Rates

As of 2021, interest income in Greece is subject to a flat withholding tax rate of 15%. This rate applies to both resident and non-resident recipients, although, as with dividends, the application may vary based on double taxation agreements.

Key points regarding interest income taxation:

• The 15% withholding tax is considered a final tax for individual residents
• For Greek companies, interest income is included in their overall taxable income
• Special provisions may apply to interest from Greek government bonds and Treasury bills
• Non-residents may benefit from reduced rates or exemptions under certain tax treaties

Historical Perspective on Interest Taxation

The current 15% rate has been in place since 2017. Prior to this, Greece had experimented with various rates, including a period with rates as high as 20% during the height of its financial crisis. The stabilization at 15% represents a balance between generating tax revenue and maintaining the attractiveness of Greek financial instruments to investors.

Taxation of Royalties in Greece

Royalty income in Greece is subject to specific tax regulations that are particularly relevant for intellectual property holders, artists, and companies involved in licensing arrangements. The taxation of royalties has remained relatively stable compared to dividends and interest, but it’s still an important area for many international businesses operating in or with Greece.

Current Royalty Tax Rates

As of 2021, royalties paid to both residents and non-residents are subject to a withholding tax rate of 20%. However, this rate can be significantly affected by double taxation treaties, especially for non-resident recipients.

Key aspects of royalty taxation in Greece:

• The 20% withholding tax is generally considered a final tax for individual residents
• For Greek companies, royalty income is included in their overall taxable income
• Non-residents may benefit from reduced rates under applicable tax treaties
• Certain types of royalties, such as those related to computer software or for the use of industrial, commercial, or scientific equipment, may be subject to special provisions

Royalty Definition and Scope

In the Greek tax context, royalties typically include payments for the use of:

• Copyrights on literary, artistic, or scientific work
• Patents, trademarks, designs or models, plans, secret formulas, or processes
• Industrial, commercial, or scientific equipment
• Information concerning industrial, commercial, or scientific experience (know-how)

Understanding the precise definition and scope of royalties is crucial for correct tax treatment, especially in complex international licensing arrangements.

Double Taxation Treaties and Their Impact

Greece has an extensive network of double taxation treaties (DTTs) with numerous countries, significantly impacting the taxation of dividends, interest, and royalties for non-residents. These treaties are designed to prevent double taxation and often provide for reduced withholding tax rates or even exemptions in certain cases.

Key Aspects of Greek DTTs

When considering the taxation of dividends, interest, and royalties in Greece, it’s crucial to examine the relevant DTT if one exists between Greece and the recipient’s country of residence. Some key points to consider:

• Many DTTs provide for reduced withholding tax rates on dividends, often ranging from 5% to 15%
• Interest payments may be subject to reduced rates, typically between 0% and 10%, under various DTTs
• Royalty withholding taxes are often reduced to rates between 5% and 10% under treaty provisions
• Some treaties may provide for complete exemption from withholding tax in certain circumstances

It’s important to note that the application of DTT benefits often requires specific documentation and may be subject to certain conditions or limitations.

Recent Changes and Future Outlook

The Greek tax landscape has been dynamic in recent years, with several changes implemented as part of broader economic reforms. Understanding these changes and potential future developments is crucial for anyone involved in Greek investments or business operations.

Recent Tax Policy Shifts

Key recent changes in Greek tax policy include:

• The gradual reduction of the dividend withholding tax rate from 15% to the current 5%
• Stabilization of the interest withholding tax at 15%
• Efforts to simplify the tax system and improve tax collection efficiency
• Introduction of various tax incentives to attract foreign investment

Future Outlook

Looking ahead, several factors may influence the future of Greek taxation on dividends, interest, and royalties:

• Ongoing economic recovery efforts post-COVID-19 pandemic
• Potential harmonization with broader EU tax initiatives
• Continued focus on attracting foreign investment and improving competitiveness
• Possible adjustments to address budget deficits and public debt concerns

Investors and businesses should stay informed about potential changes and consult with tax professionals to navigate this evolving landscape effectively.

Conclusion

The taxation of dividends, interest, and royalties in Greece represents a complex interplay of domestic policy goals, international agreements, and economic realities. While Greece has made significant strides in simplifying and reducing tax rates, particularly for dividends, the overall tax environment remains nuanced and subject to ongoing changes.

For investors and businesses operating in or with Greece, understanding these tax implications is crucial. The relatively low dividend tax rate of 5% presents an attractive proposition for equity investors, while the 15% rate on interest income and 20% on royalties require careful consideration in financial planning and cross-border transactions.

As Greece continues to navigate its economic recovery and seeks to enhance its competitiveness on the global stage, we can expect further evolution in its tax policies. Staying informed about these changes and their potential impacts will be key to making sound financial decisions in the Greek market.

Whether you’re considering investing in Greek stocks, bonds, or intellectual property, or if you’re looking to buy home in greece, a thorough understanding of the tax implications, coupled with professional advice, will be invaluable in maximizing your returns and ensuring compliance with Greek tax laws.

FAQs

1. Are there any exemptions to the 5% dividend withholding tax in Greece?

While the 5% rate is generally applicable, there are some exceptions. For instance, dividends paid to EU parent companies may be exempt under certain conditions as per the EU Parent-Subsidiary Directive. Always consult with a tax professional for specific cases.

2. How does Greece tax capital gains from the sale of shares?

Capital gains from the sale of shares listed on the Athens Stock Exchange are generally exempt from tax for both residents and non-residents. However, gains from unlisted shares may be subject to capital gains tax at 15%.

3. Can non-residents claim refunds for excess withholding tax under a tax treaty?

Yes, non-residents can typically claim refunds for excess withholding tax if the rate applied exceeds the rate specified in an applicable double taxation treaty. This process usually involves filing a claim with the Greek tax authorities.

4. Are there any special tax considerations for digital services or e-commerce royalties in Greece?

Greece has been aligning with EU directives on digital services taxation. While there’s no specific digital services tax yet, royalties from digital services are generally treated similarly to other royalties. However, this area is evolving, and it’s advisable to seek current professional advice.

5. How does Greece’s taxation of dividends, interest, and royalties compare to other EU countries?

Greece’s 5% dividend tax rate is among the lowest in the EU, making it competitive for equity investments. The 15% interest and 20% royalty rates are more in line with EU averages, though still competitive. However, the overall tax picture, including corporate and personal income taxes, should be considered for a comprehensive comparison.

Article reviewed by Alexandros Ioannidis, Senior Wealth Manager | Multi-Asset Portfolio Specialist | Building Customized Investment Solutions for High-Net-Worth Clients, on April 2, 2025