El_

2

Greece

Greece (1) A. Structure of revenues Indirect taxes VAT Excise duties and consumption taxes Other taxes on products (incl. import duties) Other taxes on production Direct taxes Personal income Corporate income Other Social contributions Employers Employees Self- and non-employed Less: amounts assessed but unlikely to be collected Total B.Structure by level of government Central government State government (3) Local government Social security funds EU institutions C. Structure by economic function Consumption Labour Employed Paid by employers Paid by employees Non-employed Capital Capital and business income Income of corporations Income of households Income of self-employed (incl. SSC) Stocks of capital wealth D. Environmental taxes Environmental taxes Energy of which transport fuel taxes Transport (excl. fuel) Pollution/resources E. Property taxes Property taxes Recurrent taxes on immovable property Other property taxes F. Implicit tax rates Consumption Labour employed Capital Capital and business income Corporations Households Real GDP growth (annual rate)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 14.2 7.2 3.1

13.8 7.5 3.1

13.3 7.6 2.9

12.4 7.0 2.8

12.0 6.8 2.6

% of GDP 12.1 12.7 13.0 6.9 7.1 7.4 2.6 2.5 2.6

12.7 7.3 2.3

11.6 6.5 2.6

12.5 7.3 3.3

13.0 7.2 3.7

12.7 7.1 3.6

2012 Ranking (2) 20 22 7

€ bn 24.6 13.7 7.0

3.3

2.7

2.4

2.3

2.2

2.2

2.7

2.6

2.7

2.1

1.6

1.5

1.3

10

2.6

0.6 10.0 5.0 4.1 0.8 10.5 4.9 4.1 1.5

0.5 8.8 4.5 3.4 1.0 10.6 4.9 4.2 1.5

0.3 8.8 4.5 3.4 0.9 11.6 5.5 4.5 1.6

0.3 8.0 4.3 2.9 0.7 11.7 5.4 4.7 1.6

0.3 8.2 4.4 3.0 0.7 11.2 5.1 4.4 1.6

0.3 8.8 4.7 3.3 0.8 11.3 5.1 4.5 1.7

0.4 8.3 4.6 2.7 0.9 10.7 4.9 4.2 1.7

0.4 8.3 4.8 2.6 0.9 11.2 5.2 4.2 1.8

0.4 8.3 4.8 2.5 0.9 11.1 5.2 4.2 1.7

0.4 8.5 5.0 2.5 1.1 10.5 4.8 3.8 1.8

0.3 8.0 4.4 2.5 1.1 11.1 5.2 4.2 1.8

0.6 8.8 4.8 2.1 1.9 10.6 4.8 4.1 1.8

0.7 10.2 6.9 1.1 2.1 10.8 4.8 4.6 1.5

22 16 14 28 3 18 23 9 11

1.3 19.8 13.4 2.2 4.2 21.0 9.3 8.8 2.9

0.0

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

34.6

33.2

33.7

32.1

31.3

32.1

30.5

31.7

32.4

33.7

17

65.3

67.8 n.a.

0.8 29.8 1.5

66.1 n.a.

0.9 31.6 1.4

63.9 n.a.

0.8 34.2 1.2

62.1 n.a.

0.8 36.1 1.1

63.2 n.a.

0.8 35.1 0.9

62.8 n.a.

0.8 35.4 0.9

63.7 n.a.

0.7 34.8 0.8

64.3 n.a.

0.8 34.1 0.8

66.9 n.a.

0.7 31.7 0.7

67.2 n.a.

0.7 31.5 0.6

10 n.a.

27 13 19

43.9 n.a.

0.5 20.6 0.4

12.5 12.2 11.3 4.9 6.4 0.9 10.1 7.7 4.1 1.2 2.4 2.4

12.7 12.0 11.1 4.9 6.2 0.9 8.6 6.6 3.4 1.0 2.3 1.9

12.4 12.9 12.0 5.5 6.5 0.9 8.4 6.8 3.4 1.0 2.4 1.6

11.4 12.7 12.0 5.4 6.6 0.7 7.9 6.4 2.9 0.9 2.6 1.5

11.3 12.5 11.6 5.1 6.5 0.8 7.6 6.2 3.0 0.8 2.4 1.3

11.6 12.7 11.7 5.2 6.5 1.0 7.9 6.0 2.5 0.9 2.5 2.0

10.8 12.1 11.0 4.8 6.2 1.1 7.6 5.9 2.5 0.9 2.6 1.7

12.3 12.4 11.4 5.2 6.3 1.0 6.9 5.7 2.5 0.9 2.4 1.2

12.5 11.8 10.9 4.8 6.1 0.9 8.1 5.8 2.1 1.2 2.5 2.3

12.3 14.1 12.6 4.8 7.8 1.6 7.3 4.9 1.1 1.4 2.4 2.4

12 17 20 23 16 10 11 13 28 2 6 10

23.8 27.4 24.3 9.3 15.1 3.0 14.2 9.5 2.2 2.8 4.6 4.7

2.3 1.6 : 0.8 0.00

2.5 1.5 : 1.0 0.00

2.3 1.4 : 0.9 0.00

2.2 1.3 1.2 0.8 0.00

2.2 1.3 1.2 0.9 0.00

2.0 1.1 1.1 0.8 0.00

2.0 1.2 1.1 0.8 0.00

2.5 1.8 1.7 0.7 0.00

2.8 2.1 1.8 0.7 0.00

2.9 2.2 1.9 0.7 0.00

8 8 7 10 27

5.5 4.2

32.2 31.7 32.5 % of total taxation 63.8 63.8 63.3 n.a. n.a. n.a.

0.8 0.8 0.8 34.5 34.5 35.0 0.9 0.9 0.9 % of GDP 11.3 11.6 11.9 12.9 12.3 12.7 12.0 11.3 11.7 5.1 4.9 5.2 6.8 6.4 6.6 0.9 1.0 1.0 8.0 7.8 8.0 6.6 6.0 6.1 3.3 2.7 2.6 0.9 0.9 0.9 2.4 2.3 2.6 1.4 1.9 1.9 % of GDP 2.1 2.0 2.1 1.2 1.2 1.2 1.1 1.1 1.1 0.9 0.8 0.8 0.00 0.00 0.00 % of GDP 1.3 1.8 1.8

1.3 0.0

2.1

1.7

1.5

1.5

1.4

1.7

1.4

1.0

1.9

2.1

7

4.0

0.3

0.3

0.3

0.3

0.3

0.2

0.4

0.4

0.4

0.4

0.4

1.2

1.4

5

2.8

1.8

1.5

1.3

1.2

1.1

1.1

1.4

1.3

1.0

0.6

0.7

0.7

10

1.3

16.5 33.9 : : : : 4.5

16.7 34.0 : : : : 4.2

16.1 34.0 : : : : 3.4

15.5 34.4 : : : : 5.9

15.3 33.3 : : : : 4.4

15.5 33.3 : : : : 2.3

1.3 % 16.0 32.3 : : : : 5.5

16.5 33.3 : : : : 3.5

15.4 32.9 : : : : -0.2

14.6 30.0 : : : : -3.1

16.4 31.5 : : : : -4.9

16.3 30.9 : : : : -7.1

16.2 38.0 : : : : -6.4

27 10

(1) Data is provisional for period 2003–11.

(2) The ranking is calculated in descending order. A ‘1’ indicates this is the highest value in the EU-28. No ranking is given if more than 10 % of data points are missing.

(3) This level refers to the Länder in AT and DE, the gewesten en gemeenschappen / régions et communautés in BE and comunidades autónomas in ES.

Source: DG Taxation and Customs Union and Eurostat (online data codes: gov_a_tax_ag, gov_a_tax_str and gov_a_tax_itr)

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Taxation trends in the European Union

Greece

Greece Overall trends in taxation Structure and development of tax revenues Greece’s total tax-to-GDP ratio amounted to 33.7 % in 2012 (Greece ranked 17 amongst the EU-28), well below the EU-28 average (39.4 %). This is among the lowest tax-to-GDP ratio for the countries in the euro area, where the average value stands at 40.4 %.

Revenue from indirect taxes accounts for 12.7 % of GDP, whereas social contributions supply 10.8 % of GDP in terms of revenue. Although their contribution is lower than the EU-28 average which stands at 13.6 % of GDP, in Greece indirect taxes play a more important role than direct taxes.

Expressed as a percentage of GDP, revenue from direct taxes is around three quarters of the EU-28 average (10.2 % compared with 13.2 %), with Greece ranked 16th in the EU-28. In particular, revenues from personal income taxes account for 6.9 % of GDP, compared with an EU-28 average of 9.4 % of GDP. Slightly more than two-thirds of revenues, roughly 67.2 % of the total, flow to the central government while social security funds receive almost all of the remainder. Local government levies only a limited share of overall taxation, amounting to 0.7 % of GDP. The overall tax burden increased rapidly from 1995 to 2000, when it reached a peak of 34.6 % of GDP, though in 2009 it reached a trough of 30.5 %. The rebound from that trough was the strongest in the EU-28: 3.2 percentage points. The 2012 rise is to be understood in relation to GDP, that is: overall revenues continued to decline in nominal terms but more taxes were collected ‘per unit of value added’ in 2012. The strongest rise came from personal income tax, real estate taxes, excise duties and VAT, while the share of corporate tax income remained declining.

Taxation of consumption, labour and capital; environmental taxation; property taxes In 2012 the implicit tax rate on consumption in Greece was 16.2 %, some 3.7 percentage points below the EU-28 average (19.9 %) and the second lowest value in the Euro area after Spain (14 %). The generalized increases in VAT rates and excises in the course of 2010 have reversed the declining trend of the Greek ITR on consumption since 2008. In 2012, the situation appears to have stabilised. After being on a downward trend from 2007 to 2009 (i.e. 30.0 % in 2009), the implicit tax rate on labour has increased by eight percentage points to 38 % in 2012, which is nearly two percentage points above the EU-28 weighted-average. This is due to the reduction of the number of tax reliefs and tax credits.

Taxation trends in the European Union

2

Reflecting increased taxes on energy products, including transportation fuel, but also due to the abolishment of the reduced excise duty rate for heating gas oil and kerosene during the winter season since 15 October 2012, environmental taxes continued their upward trend in 2012. This trend started in 2010 after a decline over previous years.

Their share of revenue in terms of GDP reached 2.9 % in 2012.

Property taxes are at 2.1 % of GDP slightly below the EU-28 average (2.3 %). Property taxes have increased significantly since 2010 (1.0 % of GDP).

Main recent reforms implemented, on-going or announced A number of measures have been adopted since 2010 as a part of the broader fiscal consolidation effort linked to the EU and IMF package of financial assistance. The most significant tax reform took place in summer 2013 when Parliament adopted laws which overhaul the Income Tax and Tax Procedures Codes (Laws 4172 and 4174 respectively). Major reforms, including the new tax brackets and tax rates for dividends, interest, royalties etc., as well as some changes to tax collection had already been enacted in January 2013. In addition, Law 4223 of December 2013 reformed the property taxation, by introducing the Joint Tax on the Ownership of Real Estate, i.e. a property tax of horizontal application, together with some other changes (interest limitation rule, photovoltaic panels).

As part of the amendments of the past years, personal allowances were abolished and many of the remaining tax credits curtailed. In July 2011 a new solidarity contribution was introduced for individuals, which applies to income earned in the years from 2010 to 2014. The rates range from 1 % for income above EUR 12 000 to 4 % for income above EUR 100 000. The contribution rate is 5 % for high-ranking state officers. Law 4110 enacted in January 2013 raised the CIT rate to 26 % for income earned as of 1 January 2013 after this had been reduced to 20 % in March 2011. It also aligned the tax regime for partnerships, civil societies, civil partnerships and joint ventures that maintain double-entry books with that of corporations. In addition to overhauling the main Greek Statutes in the field of taxation, the latest reform of July 2013 introduced a General Anti-Abuse Rule (GAAR), Controlled Foreign Company (CFC) legislation, an interest limitation rule, as well as rules on restricting the use of losses. Moreover, Law 4110 of January 2013 introduced rules on advanced pricing arrangements (APAs).

Main features of the tax system Personal income tax Greek law defines four categories of taxable income: income from (i) salaries and pensions; (ii) business activity; (iii)

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Greece

capital; and (iv) gains from capital transfers. For taxable income from salaries and pensions, there are now three tax brackets, with tax rates from 22 % to 42 % (applicable above EUR 42 000) (4). For taxable income up to EUR 21 000, a tax credit of EUR 2 100 exists, limited to the size of the liability.

For income above EUR 21 000, the credit is reduced by EUR 100 for each EUR 1 000 of income whilst no credit is granted for taxable income beyond EUR 42 000. In 2011, personal allowances were abolished and ever since, only tax credits have been available. Tax credits are still granted for medical expenses, disability over 67 % and certain gifts and donations.

Income earned by professionals and entrepreneurs (individuals’ ‘income from business activity’) is taxed at 26 % up to EUR 50 000 and at 33 % for the excess. Social contributions of the self-employed, which previously were partially deductible (10 %) from the tax, now qualify as expenses of the self-employed, which are fully deducted from the gross income. Real estate rental income is subject to 11 % tax up to EUR 12 000 and 33 % for the excess. Dividends are taxed at 10 %, interest at 15 % and royalties at 20 %. For individuals, these rates are final. In addition, a tax exemption applies to interest on Greek government bonds and Treasury Bills.

Transfers of real estate and other assets, such as shares, holdings in partnerships, bonds, treasury bills, derivatives or a business as a going concern, are subject to a withholding tax on capital gains at 15 %. In the case of transfers of real estate, the capital gain is gradually deflated based on coefficients depending on the years of holding. The reform law grants an exemption for capital gains up to EUR 25 000 generated from the transfer of a single property which has been held for at least 5 years.

Corporate taxation The current corporate tax rate is 26 %. This increase (as compared to the rates of 2011) has been accompanied by a reduction of the withholding tax rate on profit distributions and profit capitalisations from 25 % to 10 % with exhaustion of further tax liability (as of 1 January 2014). The reform of 2013 has aligned the tax regime of partnerships, civil law societies, civil law partnerships and joint ventures which maintain double-entry accounting books with that of corporations. This means that the entire amount of their net profits now becomes taxable at the level of the entity and the rate is fixed at 26 %. Entities with single-entry books shall be subject to tax at 26 % for taxable income up to EUR 50 000 and at 33 % for the excess. There is no group taxation, i.e. all entities are taxed separately. In general, tax losses may be carried forward for five years. No tax loss carry-backs are allowed. The overhaul of 2013 also introduced a restriction on the carry-forward of losses where there is a change of (4) For the period 2011–14, a solidarity contribution is applied on top of the headline rate.

92

more than 33 % in the direct or indirect holding of capital or of (the value or number of) voting rights.

To prevent eroding the tax base through earnings-stripping practices, net interest expenses are only deductible up to 30 % of the taxpayer’s tax-adjusted EBITDA. The scope of this rule does not capture credit institutions. There is also a safe harbour of EUR 3 000 000 net interest. Unrelieved interest expenses may be carried forward indefinitely.

The reform of 2013 cuts down on the complexity of depreciation rules by grouping categories. Intangibles, in particular, are depreciable at 10 % annually if the initial contract does not provide for an economic life span other than 10 years.

Finally, in line with the general trend, Greek tax law has now shifted the right to depreciate to the lessee in finance leases.

The reform of 2013 also touched upon the framework on bad debt deductions. Instead of using fixed coefficients, bad debts are now tax deductible at a rate ranging from 50 % to 100 % depending on the value of the receivable and the length of the default period. Yet, tax deductibility is subject to having undertaken all necessary legal action to ensure collection of the debt.

The follow up changes to the reform law of summer 2013 make Research & Development (R&D) costs deductible one-off (i.e. in the same year) at 130 %. Only the cost of R&D-related fixed assets is spread across 3 years.

On the anti-abuse front, the reform law introduced CFC legislation which provides that undistributed profits earned by a CFC are added to the taxable profits of the taxpayer under a number of conditions: (i) the taxpayer controls the CFC; (ii) the CFC is tax resident in a non-cooperative jurisdiction or in a jurisdiction with a preferential tax regime; and (iii) more than 30 % of the CFC’s net income involves passive income and more than 50 % of this (income) is derived from transactions with associated companies. With the exception of wholly artificial arrangements, CFCs which are tax resident in the EU fall outside the scope of this rule.

The GAAR targets artificial arrangements which a taxpayer has set up for the essential purpose of obtaining a tax benefit through avoiding tax. Such arrangements defeat the spirit and objective of the law, yet not the letter thereof. The taxpayer would not have obtained the tax benefit if it were not for the artificial arrangements. Economic substance is the guiding principle for re-characterising transactions after the artificial elements are ignored.

VAT and excise duties The standard rate is 23 % (up from 19 % in 2009). The reduced rate was raised to 13 % in January 2011 (up from 9 % in 2009). A 6.5 % rate (previously 4.5 and then 5.5 %) applies to hotel accommodation services, newspapers, periodicals, books, medicines and vaccines for human medicine. After an increase to 23 %, food offered by hotels moved back to the reduced rate of 13 % on 1 August 2013. For the region of

Taxation trends in the European Union

Greece

the Dodecanese, the Cyclades and Eastern Aegean islands the above rates are reduced by 30 %. Excises on electricity — with the exception of that produced by renewable resources — were introduced in early 2010.

Wealth and transaction taxes As of 1 January 2014, full ownership titles to real estate, including other property rights, such as usufruct, bare ownership etc., become subject to the newly enacted Joint Tax on the Ownership of Real Estate (Law 4223/2013).

Exemptions apply in favour of real estate owned by the Greek State or foreign States. The tax is computed based on an elaborate formula which, amongst other parameters, takes account of the geographic position of the property, its surface, use and age as well as the floor it is located at (where applicable). Accordingly, the law includes a social provision which grants discounts of 50 % or even 100 % on the tax assessed to taxpayers with low family income, families of 3 dependent kids or with members suffering serious disabilities.

Taxation trends in the European Union

2

The structure of the Joint Tax includes a supplementary charge which is levied on the overall value of a taxpayer’s real estate property as a whole. The supplementary tax applies for estates of a value beyond EUR 300 000. Compared to its previous form, the tax currently features a higher threshold for application (i.e. EUR 300 000 as compared to 200 000) and lower rates (i.e. first bracket at 0.1 % instead of 0.2 % previously). Finally, the rate of real estate transfer tax has been reduced to 3 % since 1 January 2014.

Social contributions Both employees and employers pay contributions to social insurance (IKA). Employees’ contributions are withheld by the employer. With effect from August 2011, the rate for white-collar employees is 16.5 % and that for blue-collar workers is 19.95 %. The employer pays social contributions at 28.46 % and 29.61 % respectively. The contributions are paid up to a maximum monthly wage of EUR 5 543.55.

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