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Overview
An important consideration when buying a home in Greece, even if you’re a non-resident, is taxation, which includes property tax, wealth tax, income tax (if you earn an income from a home) and inheritance tax. Note that there’s no capital gains tax in Greece. If you live permanently in Greece, you will also have to pay Greek income tax on all your earnings.
Like most people, the Greeks hate paying taxes and tax evasion is a national sport. Most Greeks don’t consider cheating the tax man a crime, and it’s estimated that many self-employed people don’t declare a substantial part of their income. However, the Greek authorities have tackled the problem of tax evasion by introducing compulsory tax returns on obvious signs of income or wealth, e.g. property, cars, motorbikes, boats and even swimming pools. As a result, all property owners in Greece must make an annual tax return.
If your tax affairs are investigated and you’re found to have made a false declaration, even as a result of an ‘innocent’ mistake, the authorities often take a hard line. The tax authorities maintain computer records of tax declarations, employers and bank accounts to help them expose fraud, and if your perceived standard of living is higher than would be expected on your declared income, you may be suspected of fraud.
On the other hand, tax avoidance (i.e. legally paying as little tax as possible, if necessary by finding and exploiting loopholes in the tax laws) is highly recommended! Residents have a number of opportunities to legally reduce their taxes, while non-residents have very few or none at all, and moving to Greece (or another country) often provides opportunities for legal ‘favourable tax planning’.
To make the most of your situation, it’s advisable to obtain income tax advice before moving to Greece, as there are usually a number of things you can do in advance to reduce your tax liability, both in Greece and abroad. Be sure to consult a tax adviser who’s familiar with both the Greek tax system and that of your present country of residence. For example, you may be able to avoid paying tax on a business abroad if you establish both residence and domicile in Greece before you sell it. On the other hand, if you sell a foreign home after establishing your principal residence in Greece, it becomes a second home and you may then be liable for capital gains tax abroad (this is a complicated subject and you should obtain expert advice). You should notify the tax authorities in your former country of residence that you’re going to live permanently in Greece.
The Greek tax system is extremely complicated (most Greeks don’t understand it), although most non-resident homeowners will find they have little contact with the system, particularly if they employ the services of a fiscal representative (see below). There’s little information available in English (although an English-language section of the tax authorities’ website: www.gsis.gr – is under construction), added to which, taxes change every year.
Disclaimer: Note that the tax rates referred to in this article are those available at the time of writing (January 2005) and are included for reference only. Rates in Greece are subject to frequent change (the new government has promised tax reform) and you’re advised to check the current rates with an expert before making any decisions based on Greek tax rates.
Tax File Number
All residents and non-resident foreigners with financial affairs in Greece must have a Tax File Number (Arithmo Forologiko Mitro/AFM – known as the ‘A-Fi-Mi’). An AFM is unique for each person and works as a form of identification for the Greek authorities. Without an AFM you won’t be able to purchase property, buy a car or boat, import a foreign-registered car or obtain any kind of tax certificate from the authorities. Your AFM must be used in all dealings with the Greek tax authorities (e.g. when filing an annual tax return), when paying property taxes and in various other transactions.
You can apply for an AFM at the local tax office in the area where you’re buying a property or living at the time. You need to present your passport and the number is usually issued within a few days of application. Your lawyer or representative can obtain an AFM on your behalf; to do this he needs a legalised copy of your passport plus written authorisation from you.
Fiscal Representative
The term fiscal representative refers to any person or agent who provides tax and other financial services; this may be a professional, such as an accountant or tax adviser, or it may be a non-professional who merely deals with your financial affairs on your behalf.
It’s highly recommended for non-resident property owners to have a fiscal representative in Greece who presents annual tax returns and receives communications from the tax authorities. A fiscal representative can also look after your financial affairs, e.g. receive your bank statements, make sure standing orders are being paid and that you have sufficient funds in your bank account to pay them. Your fiscal representative can also apply for a tax file number (AFM) on your behalf (see above). Most foreign residents employ a fiscal representative (usually an accountant) to manage their financial and/or taxation affairs.
Before employing a representative, you should obtain recommendations from friends, colleagues and acquaintances. Once you have appointed a fiscal representative, you should give him power of attorney to manage your financial affairs and he should inform the tax authorities that he’s acting on your behalf. Note that many accountants, particularly those based on the islands, are very busy and it may be difficult to find one willing to take on new clients.
Professional fiscal representation including the handling of your financial affairs plus tax returns usually costs around €180 per year. The completion and filing of a single tax return costs between €15 and €30. There may be additional charges for handling tax administration – the cost depends on the complexity of your tax affairs. For the relatively small cost involved, most people (both residents and non-residents) are usually better off employing a professional to handle their tax and other financial affairs than doing it themselves, particularly as the regulations change frequently. You can also often save more than the representative’s fee in avoided tax.
Value Added Tax
Value added tax (foros prostithemenis axias), was introduced in Greece on 1st January 1986, after the country joined the European Union. Most prices in stores are quoted inclusive of value added tax (VAT), although sometimes exclusive prices are quoted, e.g. for commercial goods. Certain goods and services are exempt from VAT, including medical services, legal and notarial services, post office services, building leases, agriculture and imports from other EU states. Exports are also exempt from VAT. On all other goods Greece levies three rates of VAT, as follows:
4% (low)
Books and other printed materials; theatre tickets.
8% (reduced)
Food products; pharmaceutical products; medical equipment and ancillary goods; public transport; food and drink in coffee shops, cafeterias and restaurants; products and services relating to agricultural production.
18% (standard)
All other goods and services including new homes built with licences issued after January 2005.
On some of the Greek island groups such the Dodecanese, North-Eastern Aegean and the Sporades, the 18 and 8 per cent rates are reduced by 30 per cent (to 12.6 per cent and 5.6 per cent respectively) on all goods with the exception of tobacco products and vehicles.
All businesses in Greece must register for VAT and returns are normally filed monthly and due within two months of the end of the month to which they relate. Smaller enterprises with annual sales below a certain amount can file quarterly returns, when any tax due is paid when the return is filed. If you´re self-employed, VAT returns must be filed via the internet.
VAT fraud is rife in Greece and payments are often paid in cash to avoid VAT. Note that it’s necessary to have legitimate bills showing registered names and VAT numbers in order to reclaim VAT. Furnished property lettings are exempt from VAT, although you may need to charge clients VAT if you provide certain services.
VAT is payable on goods imported from outside the EU, but not on goods purchased from another EU country where VAT has already been paid, although you may be asked to produce a VAT receipt. Companies located in other EU countries may obtain a refund of VAT paid on goods and services purchased in Greece, and VAT may also be refunded to companies in a non-EU country when Greece has a reciprocal agreement with that country.
Income Tax
Greek income tax (foros issodimatos) is near the EU average, particularly for large families. However, when income tax is added to the high social security contributions and other indirect taxes, Greek taxes are among the highest in Europe. Major tax reforms have been introduced over the last few years and more are expected. Paying income tax in Greece rather than in another country can be advantageous, as there are more allowances than there are in some other countries. Nevertheless, if you’re able to choose the country where you’re taxed, you should obtain advice from an international tax expert.
Employees’ income tax is deducted at source (i.e. pay-as-you-earn) by employers in Greece and employees aren’t responsible for paying their own income tax, although most must still file a tax return. Non-residents who receive income from a Greek source or own assets in Greece (e.g. property or a car) must file an annual return with the main non-residents’ tax office in Athens, which deals with Greeks and non-Greeks residing abroad with assets in Greece.
Liability
Your liability for Greek income tax (and certain other taxes) depends on where you’re domiciled. Your domicile is normally the country you regard as your permanent home and where you live most of the year. For example, a foreigner working in Greece for a Greek company who has taken up residence in Greece and has no income tax liability abroad, is considered to have his tax domicile in Greece. A person can be resident in more than one country at any given time, but can be domiciled only in one country. The domicile of a married woman isn’t necessarily the same as her husband’s, but is determined using the same criteria as an independent person. Your country of domicile is particularly important when it comes to inheritance tax. You’re considered to be a Greek resident and liable to Greek tax if any of the following apply:
You must complete an income tax return in Greece if your annual income is over €3,000. Even if you have no taxable income at all, you must file a tax return if you meet any of the following conditions:
These conditions were introduced by the tax authorities in an attempt to prevent tax fraud. When you declare your assets (including details such as the size of your home), the tax authorities apply a coefficient to each asset and from the resulting figure assume you have enough income to buy and maintain the asset. For example, if you declare a new car over 2,000cc, the authorities assume your annual income to be at least €21,000. Therefore you should declare at least this amount on your annual income tax return.
Non-resident Property Owners
To avoid paying income tax on funds from abroad used to buy property, non-residents must produce the official import certificate (the ‘pink slip’) from the bank. This proves that the funds for the purchase were imported into Greece and are therefore exempt from income tax.
Double Taxation
Greek residents are taxed on their world-wide income, subject to certain treaty exceptions, although citizens of most countries (the US is a rare exception) are exempt from paying taxes in their home country when they spend a minimum period abroad, e.g. one year. The Greek government has double taxation treaties with many countries (see below), which are designed to ensure that income that has already been taxed in one treaty country isn’t taxed again in another.
Treaties establish a tax credit or exemption on certain kinds of income, either in the country of residence or the country where the income is earned, and where applicable a double taxation treaty prevails over domestic law. Many people living abroad switch their investments to offshore holdings to circumvent often complicated double taxation agreements. If you’re in doubt about your tax liability in your home country or another country where you have assets or from where you receive income, contact the tax authorities there for a ruling. Note that if you aren’t living in Greece but have assets there, you’re obliged by law to file a tax return listing your assets and any income you receive from them (see Liability above).
Greece has double taxation treaties with many countries, including Argentina, Austria, Belgium, Canada, Cyprus, the Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, the Republic of Korea, Luxembourg, the Netherlands, Norway, Poland, Romania, the Slovak Republic, Sweden, Switzerland, the United Kingdom and the US.
Leaving Greece
Before leaving Greece, foreigners should pay any tax due for the previous year and the year of departure by applying for a tax clearance. A tax return should be filed prior to departure and includes your income and deductions from 1st January of the departure year up to the date of departure. Your local tax office will calculate the tax due and provide a written statement or certificate. When departure is made before 31st December, the previous year’s taxes are applied. If this results in overpayment, a claim must be made for a refund.
Taxable Income
Income tax is payable on both earned and unearned income. Taxable income includes salaries, pensions, property, ‘visible signs of wealth’ (e.g. a car), property and investment income (dividends and interest), and income from professional, artistic, business or agricultural activities.
Allowances & Deductions
Before you’re liable for income tax, you can deduct social security payments and certain costs from your gross income (allowances) and from the sum due after establishing your tax base (deductions). Most allowances and deductions apply only to residents and include the following:
Calculation
The tax year in Greece is the same as the calendar year, i.e. 1st January to 31st December. Income tax rates for residents are shown below.
Employees & Pensioners
(%) (€)
Taxable Income: Up – €10,000, Tax Rate: 0%, Cumulative Tax: 0
Taxable Income: €10,000 – €13,400, Tax Rate: 15%, Cumulative Tax: €510
Taxable Income: €13,400 – €23,400, Tax Rate: 30%, Cumulative Tax:€3,510
Cumulative Tax: Over €23,400, Tax Rate: 40%
Self-employed
Taxable Income: Up – €8,400, Tax Rate: 0%, Cumulative Tax: €0
Taxable Income: €8,400 – €13,400, Tax Rate:15%, Cumulative Tax: €750
Taxable Income: €13,400 – €23,400, Tax Rate: 30%, Cumulative Tax: €3,750
Taxable Income: Over €23,400, Tax Rate: 40%
Non-residents
Income tax for non-residents is levied at the same rates as above except for the first band which is 5 per cent (not 0 per cent), unless 90 per cent of their income is from a Greek-source.
Tax Return
Tax returns must be filed by 1st March for the previous tax year, e.g. the return filed in March 2005 is for the year 2004. The deadline is extended to 16th April if your declared income includes income from individual commercial enterprises, and to 2nd May for income including employment or pensions and foreign income. Non-residents also have until 2nd May to file a return. No extensions are usually permitted and late filing incurs a penalty.
Married couples file joint returns, although tax is calculated separately on the income of each spouse and a net loss by one cannot be offset against the income of the other. The husband is responsible for filing a family’s return and declaring his wife’s income.
Greek tax returns are complicated, despite attempts to simplify them in recent years. Internet filing (TAXISnet) is now available, although tax returns are in Greek only. In 2003, the tax authorities offered a €118 reduction in tax to individuals who filed online – the incentive was so popular the system crashed!
The language used in tax returns is difficult for foreigners (and many Greeks) to understand, but local tax offices will usually help you to complete your tax return. You can make an appointment for a free consultation with your local tax inspector at your town hall. (Unless your Greek is fluent, you should take a translator with you). Alternatively, you can employ a tax accountant to complete your return (see Fiscal Representative above).
Wealth Tax
A wealth tax on property was re-introduced in Greece in 1997 and applies to all individuals and legal entities owning property there valued at over €243,600 for a single person and over €487,200 for a couple. The value of a property is based on the ‘assessed tax value’. After the deduction of the above allowances, tax is payable on a progressive scale ranging from 0.3 per cent to 0.8 per cent, as shown in the table below:
Taxable Amount: Up to €146,750 - Tax Rate: 0.3%
Taxable Amount: €146,751 – €293,500 Tax Rate: - 0.4%
Taxable Amount: €293,501 – €440,250 - Tax Rate: 0.5%
Taxable Amount: €440,251 – €733,750 - Tax Rate: 0.6%
Taxable Amount: €733,751 – €1,027,250 - Tax Rate: 0.7%
Taxable Amount: Over €1,027,250 - Tax Rate: 0.8%
This means that a couple (with a total allowance of €487,200) owning a house worth €500,000 would pay tax on only €12,800 at 0.3 per cent, making a tax bill of €38.40. In practice, only owners of large and expensive properties are liable for this tax. There are plans to abolish the wealth tax at some point in the future.
Property Tax
All Greek property owners are liable for property taxes with the exception of Greek citizens and foreign residents buying their first home in Greece, who are exempt for a period. Otherwise, tax is levied at a rate of between 0.25 and 0.35 per cent of a property’s market value by local municipalities, who also levy other fees and taxes to pay for local services, either directly or indirectly.
Capital Gains Tax
Greece levies no capital gains tax on property.
Inheritance & Gift Tax
As in most countries, dying in Greece doesn’t free you (or more correctly, your beneficiaries) from the clutches of the tax man. Greece imposes inheritance and gift taxes, called estate tax or death duty in some countries. It’s important for both residents and non-residents with property in Greece to decide in advance how they wish to dispose of their property, which if possible should be decided before buying a property. Inheritance laws are complicated and professional advice should be sought from an experienced lawyer who understands both Greek inheritance law and the law of any other countries involved. Your will (see below) is also a vital component in reducing Greek inheritance and gift taxes to the minimum or delaying their payment.
Greece imposes inheritance tax on the world-wide assets of a deceased person who was domiciled in Greece. Similarly, property located in Greece and movable property situated abroad given by a Greek national or by a foreigner to a person domiciled in Greece is subject to gift tax. The tax rates for inheritance and gift tax are the same, although the amount of tax payable varies depending on the relationship of the beneficiary to the deceased or donor.
Relationships are categorised into the following four classes and three categories:
Each category is taxed according to a different scale of rates, the highest rate in each case applying to assets valued at over €220,000, and each category is entitled to a different allowance, as shown in the tables below:
Category A
Value of Estate: Up to €20,000, Tax Rate: 0%, Cumulative Tax: €0
Value of Estate: €20,001 – €60,000, Tax Rate: 5%, Cumulative Tax: €2,000
Value of Estate: €60,001 – €220,000, Tax Rate: 10%, Cumulative Tax:€18,000
Value of Estate: Over €220,000, Tax Rate: 20%
Category B
Value of Estate: Up to €15,000, Tax Rate: 0%, Cumulative Tax: €0
Value of Estate: €15,001 – €60,000, Tax Rate: 10%, Cumulative Tax: €4,500
Value of Estate: €60,001 – €220,000, Tax Rate: 20%, Cumulative Tax: €36,500
Value of Estate: Over €220,000, Tax Rate: 30%
Category C
Value of Estate: Up to €5,000, Tax Rate: 0%, Cumulative Tax: €0
Value of Estate: €5,001 – €60,000, Tax Rate: 20%, Cumulative Tax: €11,000
Value of Estate: €60,001 – €220,000, Tax Rate: 30%, Cumulative Tax: €59,000
Value of Estate: Over €220,000, Tax Rate: 40%
Wills
It’s an unfortunate fact of life that you’re unable to take your hard-earned money with you when you make your final exit. All adults should make a will, irrespective of how large or small their assets (each spouse should make a separate will). If a foreigner dies without a will (intestate) in Greece, his estate may be automatically disposed of under Greek law and the law regarding compulsory heirs (see below) applied.
A foreigner resident in Greece is usually permitted to dispose of his Greek assets according to the law of his home country, provided his will is valid under the law of that country. If you’ve lived in Greece for a long time, it may be necessary for you to create a legal domicile in your home country for the purpose of making a will.
A will made by a foreigner regarding Greek assets isn’t invalidated because it doesn’t bequeath property in accordance with Greek law. In practice, Greek law isn’t usually applied to foreigners and the disposal of property (buildings or land) in Greece is governed by the national law of the deceased’s home country unless there’s a dispute among the beneficiaries, in which case Greek law is applied.
Law of Obligatory Heirs
Under Greek law, assets must be disposed of under the law of ‘obligatory heirs’ and the share depends on the relationship of the surviving relatives with the deceased. Relatives are divided into four classes (see Inheritance & Gift Tax above).
When a person dies leaving a surviving spouse and no other relatives, the entire estate goes to the spouse. If there’s a surviving spouse and children, the estate is divided into four: a quarter for the spouse, with the remainder being divided equally between the children. If there are no children then the surviving spouse receives half the estate and the rest is divided between other relatives.
Types of Will
There are generally two kinds of Greek will, both of which are described below. Note that, where applicable, the rules regarding witnesses are strict and, if not followed precisely, can render a will null and void.
Although it isn’t compulsory to have a Greek will for Greek property, it’s advisable to have a separate will for any country in which you own property. When a person dies, assets can be dealt with immediately under local law without having to wait for the granting of probate in another country (and the administration of the estate is also cheaper). Having a Greek will for your Greek assets speeds up the will’s execution and saves the long and complicated process of having a foreign will executed in Greece. Note that, if you have two or more wills, you must ensure that they don’t contradict or invalidate one another. You should periodically review your will to ensure that it reflects your current financial and personal circumstances.
Open Will
An open will is normal in Greece and the most suitable kind of will for most people. It’s usually drawn up by a lawyer who gives legal guidance on how you can leave your assets. The notary must know the will’s contents in addition to three witnesses – who can be of any nationality – each of whom must sign the will. The notary is responsible for ensuring that the will is legal and correctly drawn up. He will give you a copy and retain the original. If you don’t understand Greek, you will need an official translation into a language that you speak fluently.
Holographic Will
A holographic will is a will made in your own handwriting. It must be signed and dated and must be clearly drafted in order to ensure that your wishes are absolutely clear. No witnesses or other formalities are required. It can be voluntarily registered with a notary. On the death of the testator it must be authenticated before a judge, which will delay the will’s execution.
Cost & Procedure
The cost of preparing a simple open will is from €200 to €300. Greek wills can be drawn up by Greek lawyers and notaries abroad, although it’s cheaper to do it in Greece. Note also that marriage in Greece doesn’t automatically revoke a will, as in some other countries.
Executors aren’t normal in Greece and if you appoint one it may increase the inheritance tax payable. However, if you do appoint an executor, you should inform your heirs so that they will know who to notify in the event of your death. It isn’t advisable to name a Greek bank or a lawyer who doesn’t speak Greek as the executor, as they must instruct a Greek lawyer, whose fees will be impossible to control.
Your beneficiaries in Greece must produce an original death certificate or an authorised copy. If you die abroad, a foreign death certificate must be legally translated and notarised for it to be valid in Greece. The inheritance tax declaration and the payment of inheritance tax duties must be made within six months of your death if you die in Greece and within a year if you die abroad (otherwise a surcharge may result). Inheritance tax must be paid in advance of the release of any assets to be inherited in Greece, and beneficiaries may therefore need to borrow funds to pay the tax before they receive their inheritance. Note that the winding-up of an estate can take a long time in Greece.
Keep a copy of your will(s) in a safe place and another copy with your lawyer or the executor of your estate. Don’t leave them in a bank safe deposit box, which in the event of your death is sealed for a period under Greek law. You should keep information regarding bank accounts and insurance policies with your will(s), but don’t forget to tell someone where they are!
© Survival Books Limited 2005
“Buying a Home in Greece” 3rd Edition, Joanna Styles.
Reproduced with the permission of Survival Books Limited.
Further information on buying a home in Greece can be found in “Buying a Home in Greece” 3rd edition, by Joanna Styles.
For extensive information about buying a property in Italy, you can purchase this book at www.survivalbooks.net
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