Published December 2017
This country-specific Q&A provides an overview to private client law in Greece.
It will cover taxes, succession laws, wills, trusts and their structures.
This Q&A is part of the global guide to Private Client. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/private-client/
Which factors bring an individual within the scope of tax on income and capital gains?
The factors that bring an individual within the Greek scope of tax on income and capital gains are:
A. The Greek tax residency status, in which case worldwide income is taxed in Greece [in light of any applicable double taxation avoidance treaties as well as any foreign tax credits].
An individual is generally considered to be a Greek tax resident if:
(a) the individual maintains their permanent or principal or habitual residence or habitual abode [e.g. social, family, professional, economic links] in Greece or
(b) the individual’s physical presence in Greece exceeds 183 days [short stays outside Greece are included when calculating this period], while certain categories of individuals [related to tourist, medical and similar activities] are excluded [subject to conditions].
B. The income is generated within Greece, regardless of the individual’s tax residency jurisdiction [in light of any applicable double taxation avoidance treaties].
What are the taxes and rates of tax to which an individual is subject in respect of income and capital gains and, in relation to those taxes, when does the tax year start and end, and when must tax returns be submitted and tax paid?
The types of income are generally taxed as follows:
- Employment and pensions income [to be reduced from 1.1.2018 if Greece meets certain fiscal and monetary criteria]
0-20k: 22%, 20k-30k: 29%, 30k-40k: 37%, above 40k: 45, applied progressively.
- Investment income
(i) Dividends: 15% [usually withheld at source]
(ii) Interest: 15% [usually withheld at source]. Greek State bonds and other –related to the Greek sovereign debt restructuring scheme- type of securities are generally tax exempted.
(iii) Royalties: 20% [usually withheld at source]
(iv) Property leases: 0-12k: 15%, 12k-35k: 35%, above 35k: 45%, applied progressively.
- Business income: 29% [to be reduced from 1.1.2018 if Greece meets certain fiscal and monetary criteria]
- Capital gains
(i) Real estate [subject to conditions; it is also worth noting that at the time this paper was drafted, real estate capital gains tax was suspended until Dec 31st 2017]: 15%
(ii) Securities [shares, bonds etc]: 15%. It is worth noting that, subject to conditions, individuals holding listed shares constituting less than 0,5% of the entity’s share capital are tax exempted when selling, provided the individual has acquired these after January 1st 2009 [shares acquired earlier are generally exempted, subject to conditions].
Tax years’ start and end coincide with the calendar.
Tax returns are generally filed by the 30th of June of the year following the income’s generation year.
Non-withheld tax can be paid either in full -following clearance- or in equal installments [e.g. 31.7.2017, 29.9.2011 and 30.11.2017].
- Employment and pensions income [to be reduced from 1.1.2018 if Greece meets certain fiscal and monetary criteria]
Are withholding taxes relevant to individuals and, if so, how, in what circumstances and at what rates do they apply?
Employment, pension and investment [except property leases] income tax is generally withheld -and exhausted at the tax rates mentioned above- at source.
If, however, source does not withhold tax [usually applies to certain foreign sources of income], tax is withheld by Greek paying bank [or other Greek paying agency].
Is there a wealth tax and, if so, which factors bring an individual within the scope of that tax, at what rate or rates is it charged, and when must tax returns be submitted and tax paid?
There is no wealth tax in Greece.
However, the following taxes are applicable as follows:
(i) A progressive special solidarity tax is imposed on the annual individual income, as follows [to be reduced from 1.1.2018 if Greece meets certain fiscal and monetary criteria]:
exceeding 220K: 10%
(ii) A uniform tax on real estate property (EN.F.I.A.) is applied on real estate rights [ownership, usufruct etc] and imposed yearly.
EN.F.I.A.’s calculation takes into account co-efficiencies such as surface, year built and location. In general, the final tax amounts from 0,1% to 1% for individuals [and 0,55% for legal entities], computed automatically on the property’s value.
(iii) A luxury assets tax is also imposed upon the ownership of cars exceeding certain engine capacity [cars that are 10 years old and over are exempted], aircrafts, helicopters, swimming pools and leisure boats exceeding certain length.
Is tax charged on death or on gifts by individuals and, if so, which factors cause the tax to apply, when must a tax return be submitted, and at what rate, by whom and when must the tax be paid?
Greece charges tax both on inheritance as well as on gifts.
Inheritance tax and gift tax returns are generally filed within 6 months of death or will’s publishing [if deceased or heir is a foreign resident, filing is extended to 12 months] or of gift accepted respectively and tax is paid in 12 equal monthly installments.
The tax rates applied in both cases are affected (i)by the relevant relationship of the deceased/heir and donor/donee and (ii)by the value of the property accepted, while certain reliefs, subject to conditions [value and surface], apply particularly to primary dwellings.
Inheritance and gift tax is due and paid by the receiving party and imposed upon the receiving party’s wealth [not upon the estate or the donor].
Tax rates are indifferent in both cases [inheritance and gift], are calculated progressively and are split in 3 categories, as follows:
Category 1: Spouse [<5 yrs married], children [>18 yrs old], grandchildren, parents, cohabitation, cohabitation partnership
above 600k: 10%
[Spouses married over 5 yrs to the deceased and minor children under 18 years old are eligible to tax exemption up to 400k of property’s value while the higher rates are imposed accordingly].
Cash gifts are taxed at 10%, irrespective of amount.
Category 2: Siblings, uncles, aunts, great-grandchildren, grandparents, spouse’s prior marriage children and “in-laws”
above 300k: 20%
Cash gifts are taxed at 20%, irrespective of amount.
Category 3: All others
above 267k: 40%
Cash gifts are taxed at 40%, irrespective of amount.
Property donated or inherited is subject to tax, generally if:
(a) property is located in Greece regardless of donor’s/donee’s or deceased’s/heir’s residence or nationality or
(b) property is located abroad and owned by Greek national [regardless of residency] unless –in regards to inheritance tax only- the Greek national has been established abroad for more than 10 years [applies to movable property] or
(c) property is located abroad and owned by foreign national who is Greek resident.
Are tax reliefs available on gifts (either during the donor’s lifetime or on death) to a spouse, civil partner, or to any other relation, or of particular kinds of assets (eg business or agricultural assets), and how do any such reliefs apply?
Tax reliefs, further to above mentioned -under question 5- are also made available:
In regards to inheritance
(i) The acceptance of ships, shares or foreign ship-owning entities owning ships of a gross tonnage exceeding one thousand five hundred (1.500) tons.
(ii) Cash deposits to bank accounts with two or more beneficiaries (Joint Account) according to the provisions of Law 5638/1932 and subject to conditions [such as that the account opening contract makes reference to a clause whereby the deposits and account balance of the deceased shall automatically be conveyed to the surviving beneficiaries of the account].
(iii) Agricultural properties and establishments subject to conditions such as that the heirs are spouses/children/siblings/parents/grandchildren of the deceased and exercising personally and mainly agricultural occupation.
Do the tax laws encourage gifts (either during the donor’s lifetime or on death) to a charity, public foundation or similar entity, and how do the relevant tax rules apply?
Gifts [exceeding eur 100,00] to charitable foundations, educational and cultural non-profit associations, certain research institutions, Mount Athos monasteries and other relevant entities will reduce the individual’s income tax by 10%, computed on gifts amounts not exceeding 5% of the individual’s total yearly taxable income.
Furthermore, a large number of educational, religious, cultural, athletic, governmental, research, medical entities are subject to zero or minimal [0,5%] gift or inheritance tax.
How is real property situated in the jurisdiction taxed, in particular where it is owned by an individual who has no connection with the jurisdiction other than ownership of property there?
Foreign individuals without any connection to Greece other than owning property are subject to:
- The uniform tax on real estate property [EN.F.I.A.], as mentioned above [question nr. 4], which amounts generally from 0,1%-1% annually on the property’s automatically assessed value [“objective value”].
- Tax on income from real property leases [subject to the potential application of any double tax avoidance treaties].
- A low municipal property duty [TAP], amounting to app. 0,030% on the property’s automatically assessed [“objective”] value is also paid to the local authorities.
- Immovable property in Greece owned by legal entities, trusts and other legal structures residing in non cooperative or in preferential treatment regimes [for tax purposes], are subject to an annual special tax of 15% on the property’s automatically assessed objective value, unless such entities are, inter alia, listed or substantially operational or carry out shipping, charitable, educational, religious or cultural activities.
Are taxes other than those described above imposed on individuals and, if so, how do they apply?
No other taxes are imposed on individuals, other than the ones described, while an annual entrepreneurial levy of eur 650,00 is imposed on professionals such as lawyers, doctors, accountants etc.
Is there an advantageous tax regime for individuals who have recently arrived in or are only partially connected with the jurisdiction?
Individuals that are tax residents in a foreign jurisdiction are not subject to taxable presumed living expenses, provided certain criteria apply.
What steps might an individual be advised to consider before establishing residence in (or becoming otherwise connected for tax purposes with) the jurisdiction?
If the individual holds any kind of interest or connection in Foundation(s), Trust(s) or similar formations, a thorough analysis and assessment of inheritance and tax aspects will need to take place prior to establishing residence in Greece.
The individual would also be advised to consider the double taxation avoidance treaty that might be in place between Greece and their jurisdiction(s) as well as whether their jurisdiction(s) is listed as a non cooperative or preferential treatment regime for tax purposes, particularly if the individual intends to acquire property in Greece utilizing foreign entities residing in such regimes.
What are the main rules of succession, and what are the scope and effect of any rules of forced heirship?
Estates are inherited by Will or [in the absence of or if infringing statutory provisions] by Law [intestate succession].
Intestate succession is categorized in six classes, whereby the previous class excludes the next one.
Classes are consisted by the following persons:
First class: Descendants [nearest degree of descendant excludes others] and surviving spouse [whose estate’s portion is 25%].
Second class: Parents, siblings and their children/grandchildren [if siblings pre-deceased] and surviving spouse [whose estate’s portion is 50%].
Third class: Grandparents and surviving spouse [whose estate’s portion is 50%].
Fourth class: Great grandparents and surviving spouse [whose estate’s portion is 50%].
Fifth class: The surviving spouse.
Sixth class: the Greek State.
The above rules are subject to a potentially different applicable framework of rules in light of the EU Succession Regulation 650/2012 [also known as Brussels IV] which entered into force in August 17th 2015 [Ireland, Denmark and the UK are not signatories], whereby the succession rules of the jurisdiction that the deceased had their habitual residence might be overriding the Greek ones.
According to Greek law, the deceased may freely dispose of all their estate; however, Greece as many other civil-law jurisdictions alike, does not recognize total freedom of testation and as such any individual’s estate portion falling under 50% of intestate’s rules mentioned above, will be infringing obligatory rules of succession.
Is there a special regime for matrimonial property or the property of a civil partnership, and how does that regime affect succession?
A special regime is applicable both for matrimonial property as well as for civil partnerships if the marriage [lasting a minimum of 3 years] is dissolved and the spouse’s property has been increased by means of direct or indirect contributions of the other spouse.
It is assumed that such contribution amounts to 33% of the property’s increase, unless proven otherwise.
The increase in the spouse’s estate excludes what was obtained via donation, inheritance, legacy or disposal of the proceeds from such causes.
Apart from the notes made in question 12, there are no special matrimonial rules applicable in succession.
What factors cause succession laws to apply on the death of an individual?
The succession law of the deceased’s nationality is applicable upon death, regardless of the assets’ location.
How does the jurisdiction deal with conflict between its succession laws and those of another jurisdiction with which the deceased was connected or in which the deceased owned property?
The critical factor -when it comes to applying succession law- is the nationality of the deceased.
However, according to the EU Succession Regulation 650/2012 [also known as Brussels IV] which entered into force in August 17th 2015 [Ireland, Denmark and the UK are not signatories], succession law of the jurisdiction that the deceased had their habitual residence might override the relevant Greek law.
In what circumstances should an individual make a Will, what are the consequences of dying without having made a Will, and what are the formal requirements for making a Will?
A Will allows the individual to set his own rules, within the framework analyzed above, in succession, while possibly considering at the same time a reasonable and efficient tax structure of the property to be inherited.
An individual owning property in Greece and having no other connection to the jurisdiction, needs not make a Will in Greece, as the individual’s national law will apply [if not overridden by the EU Succession Regulation mentioned above].
In Greece, there are three types of ordinary Wills, all of equal legal effect:
- The holographic which is handwritten by the testator and stored privately;
- the public which is made before a notary public in the presence of witnesses and
- the secret which is drafted privately by the testator and handed to the notary public in a sealed envelope in the presence of witnesses.
Dying without a Will, triggers the intestate rules mentioned above in question 12.
How is the estate of a deceased individual administered and who is responsible for collecting in assets, paying debts, and distributing to beneficiaries?
Inheritors are individually in charge for administering their inherited portion in regards to collecting estate’s assets and paying estate’s debts on a pro rata basis [in accordance to their portion].
The testator may also appoint Executors to administer, on behalf of the inheritors, the estate including any business operations, collection of claims and distributions to beneficiaries.
Furthermore, the testator may set up an “inheritance trust” which should not be confused with trusts’ structures originating from the Anglo-Saxon model.
The Greek “inheritance trust” allows for a segment -or all- of the estate to be inherited by one individual [the inheritor] and thereafter -either at a certain moment in time or following a predetermined event- be passed on to the ultimate beneficiary-individual, the so-called “trustee”.
The Greek law “inheritance trust”, as such, serves the sole purpose of transferring certain property from the inheritor to the ultimate beneficiary-trustee, following which it seizes to exist.
Do the laws allow individuals to create trusts, private foundations, family companies, family partnerships or similar structures to hold, administer and regulate succession to private family wealth and, if so, which structures are most commonly or advantageously used?
Although the Greek set of legal rules recognizes trusts and private foundations established abroad, there is no legislation available for their establishment in Greece.
The most similar structure to the trust is the Greek law “inheritance trust”, presented in question 17 above.
In regards to foundations, an individual in Greece may establish a Greek law foundation which may only serve a public charitable purpose [or be of interest to the public].
As such, the “inheritance trust” serves towards holding, administering and regulating succession to private family wealth, within a limited –nevertheless- scope.
How is any such structure constituted, what are the main rules that govern it, is there any requirement for registration with or disclosure to any authority or regulator, and what information about the structure is available to the public?
The Greek law “inheritance trust” is constituted via the testator’s will.
There is no registry or provision for disclosure to any authority of the “inheritance trust” and no information about the structure is available to the public, apart from standard filing of the property’s rights [usufruct and bare ownership] before the publicly accessed land registry [listed and tracked by individuals’ names] or cadastre [listed and tracked by property’s location as well as by individuals’ names].
How are such structures and their settlors, founders, trustees, directors and beneficiaries treated for tax purposes?
From a tax perspective, the inheritor is classified as the individual holding usufruct rights on the property upon which the “inheritance trust” was established, while the trustee as the individual holding bare ownership rights upon that same property.
As such, any income generated by leasing the property upon which the “inheritance trust” is established will be taxed as income from leases [analyzed in question 2 above] in the inheritor’s name.
Are foreign trusts, private foundations, etc recognised?
Foreign trusts and private foundations, as analyzed in question 18 above, are recognized in Greece via primary [Laws] as well as secondary [Circulars etc] pieces of legislation.
It is worth noting, that the Greek set of tax rules on foreign trusts and private foundations is currently going through an active and dynamic process to become aligned to internationally approved tax practices.
How are such foreign structures and their settlors, founders, trustees, directors and beneficiaries treated for tax purposes?
- There is no tax imposed upon the assets held by foreign trust and private foundations. Generally, the Greek framework of tax rules applied in these structures is targeting the distributions, “fruits”, income and liquidation proceeds.
- Distributions made to beneficiaries, in their capacity as settlors/founders, are treated as income from dividends [see notes in question 2 above].
- Capital returned to settlor is not subject to tax.
- Non distributed income may, subject to CFC rules, be taxed upon beneficiaries.
- The dissolution and liquidation proceeds of such entities may be treated as scalable “other-sourced income” or as –usually lower cost- dividends, depending on whether the entity was dissolved and liquidated pre or post 1.1.2014 respectively and depending on whether the liquidated amount superseeded the contributed capital.
- Distributions made to beneficiaries are taxed as gifts [if settlor is alive] or inheritance [if settlor is deceased]; notes made in question 5 are applicable here.
To what extent can trusts, private foundations, etc be used to shelter assets from the creditors of a settlor or beneficiary of the structure?
Given that the Greek legal framework is currently going through its early stages in understanding, recognizing and analyzing foreign trusts and private foundations -with limited legislative material and even lesser case law available- it would be a highly risky exercise to predict the outcome of such judicial proceedings in Greece.
Nevertheless, interested parties [settlors, beneficiaries etc] may expect to utilize a few international practice tools in Greece when attempting to facilitate efficient asset protection schemes.
What provision can be made to hold and manage assets for minor children and grandchildren?
Kindly see notes in question 17 in regards to “inheritance trust” and executors. Furthermore, according to the Greek Civil Code, living parents may –solely during their lifetime- withhold the real property’s usufruct or bare ownership right.
Are individuals advised to create documents or take other steps in view of their possible mental incapacity and, if so, what are the main features of the advisable arrangements?
Individuals – in view of their possible mental incapacity – may create an irrevocable power of attorney, whereby they instruct someone else to act on their behalf, as long as at the time of granting this power they had the mental capacity to do so and also that the power vested does not influence solely the grantor’s interests.
What forms of charitable trust, charitable company, or philanthropic foundation are commonly established by individuals, and how is this done?
The following non-profit entities are the most commonly established by individuals in Greece:
- Foundations [see also notes in art. 18] of the Greek law: Due to their wider social impact/significance, a Presidential Decree is issued to ratify their substance and establishment, while they may established either during one’s lifetime or through their will.
- Non Profit Civil Partnerships: These may be established through a much simpler procedure by two or more individuals during their lifetime and can not pursue profit; their scope may be charitable, philanthropic, social, educational, research, religious, political etc.
- Cooperative social ventures: These are quasi non-profit and newly legislated entities that are supervised and regulated by the state; they and may distribute up to 35% of their profits solely to their employees. Their scope must be charitable or philanthropic while individuals from less privileged backgrounds are encouraged to participate actively.
- Fundraising Committees: These entities are established by at least 5 persons; they are ratified by virtue of Presidential Decree and may carry out solely fund raising activities to serve public or charitable purpose.
What important legislative changes do you anticipate so far as they affect your advice to private clients?
Greece plans to introduce in 2018-2019 the national wealth registry.
Although it is still early to make any forecasts as to the exact data and material that will be included therein, individuals could anticipate that the upcoming wealth registry might facilitate a general tax reformation.
As such, it is crucial that efficient wealth management practices are in place in advance to prevent “last minute” and “under pressure” decision making procedures in connection to holding and managing assets that are meant to be passed on from generation to generation.