- Value Added Tax (VAT)
- VAT Exemptions
- Import Duties
- Turnover Tax on Insurance Companies
- Special Tax on Banking Transactions (EFTE)
- Capital Concentration Tax
- Stamp Duty
- Consumption Tax
- Circulation (Road) Taxes
- Real Estate Transfer Tax
INDIRECT TAXES
The following briefly outlines the various types of indirect tax. Indirect taxation provides over 50% of the State's indirect tax revenue.
VALUE ADDED TAX (VAT)
Value Added Tax (VAT) was introduced in Greece in 1987 and is the most important indirect tax. VAT legislation has been amended to conform with the EU Directive 91(680) which implements a transitional stage until the VAT regime will reach its final form in 1997.
Generally, all businesses must register for VAT before they start operations.
The tax is levied on the following:
- The value of goods and related invoiced costs (transport, insurance, duties etc.) supplied within Greece by entrepreneurs acting within the scope of their business objects;
- The invoice price and related costs (transport, insurance, duties etc.) of goods imported into Greece from non-EU countries;
- The invoice price of goods acquired from EU countries by entrepreneurs whose activities are subject to VAT and the invoice price of goods acquired by natural persons and VAT exempt entrepreneurs, if the supplier's sales in Greece exceed a certain threshold;
- The value of services supplied by Greek resident entrepreneurs acting within the scope of their business. (By exception the supply of certain services by Greek residents to non-residents is exempt and the supply of certain services by foreign residents to Greek residents, is subject to VAT);
The taking of goods from the business or use of the business' services by a taxpayer for his personal use or the personal use of his employees; and
The allocation to the business by the taxpayer of certain goods (e.g. alcohol, tobacco, passenger cars) produced by the business.
Exports to residents of non-EU countries and supplies to residents of EU countries who are subject to VAT are exempt from Greek VAT.
The tax is designed to be borne by the ultimate consumer of goods and services. The general principle is that the VAT incurred by an entrepreneur on his purchases can be offset against the VAT charged by this entrepreneur on his sales and the difference is payable to or recoverable from the tax authorities.
The basic rate of VAT applicable to all goods and services with the exception of those mentioned below, is 18%.
- 4% on sales of newspapers, periodicals, books, and theatre tickets.
- 8% on sales of goods and products deemed as necessities such as fresh food products, pharmaceuticals, transportation and certain professional services (such as those which are provided by hotels, restaurants, coffee shops, writers, composers, artists and the non-exempt services of doctors and dentists) etc.
VAT is further reduced by 30% if goods or services are supplied to or by taxpayers established in the Dodecannese Islands and other Aegean Islands.
Taxpayers must file monthly, bi-monthly or quarterly VAT returns depending on the type of books they are required to keep for accounting purposes and an annual return within 4 months and 10 days from the end of their financial year or 1 month and 25 days from their year end, again, depending on the type of books they are required to keep for accounting purposes.
VAT EXEMPTIONS
Certain deliveries of goods and services, although falling within the scope of the VAT principles mentioned above, are exempt. The exemptions provided by the VAT law can be classified into two broad categories:
- Exemptions which preclude the recovery of VAT on inputs.
- Exemptions which do not preclude the recovery of VAT on inputs.
Examples of the former category of exemptions are the provision of services of a social or cultural nature such as medical services, educational services, etc. and also insurance, financing and most banking activities provided to EU residents. Examples of the latter category include export transactions, international transit of goods, and transactions in relation to shipping.
IMPORT DUTIES
For a discussion on import duties, see Exporting to/from Greece in a future release.
TURNOVER TAX ON INSURANCE COMPANIES
Turnover tax is levied on the amount of premiums and related costs charged by insurance companies and is borne by the customer.
Tax rates vary depending on the type of insurance cover and range from 4% to 20%. However, premiums on life insurance policies exceeding 10 years are specifically exempt from the turnover tax.
SPECIAL TAX ON BANKING TRANSACTIONS (EFTE)
EFTE is imposed on gross revenues of banks established in Greece and derived from interest, commissions, brokerage, discounts, price differences and all other income or gains even if they are derived from ancillary activities, at the rate of 4% on the amount of such revenues.
Realised foreign exchange gains are exempt from EFTE but it is uncertain whether unrealised exchange gains enjoy this exemption.
Banks pass the EFTE on to their customers. Interest, commission and other banking income charged to exporters is exempt from the tax, as is interest income arising from loans concluded in foreign currency not obligatorily assignable to the Bank of Greece.
CAPITAL CONCENTRATION TAX
A tax of one per cent is imposed on the accumulation of capital by business enterprises including branches of non EU based foreign companies, joint ventures and profit-making associations of persons.
Amounts subject to this tax are those arising from:
- Establishment of an entity and any increase in its capital.
- Increase in the assets of an enterprise in exchange for rights similar to those of a partner, e.g. vote or profit participation.
- Loans where the lender has the right to a portion of the enterprises profit.
- Establishment of a Greek branch of a foreign entity, except for branches of entities resident in an EU member state, on what is considered fixed or working capital.
- Increase in capital resulting from conversion or merger of an entity not subject to this tax into or with an entity subject thereto.
Exemptions from this tax are granted to agricultural co-operatives, shipping companies, educational and philanthropic organisations. Exemptions are also granted to entities providing public utility services, but only when at least half of the capital of those entities is owned by the state or local authorities. Increases of capital by capitalisation of profits, retained earnings or reserves are not subject to the tax.
STAMP DUTY
Before the introduction of VAT, Special Tax on Banking Transactions and the Capital Concentration Tax, stamp duty was imposed on most business transactions and documents. Stamp duty is now payable only on a few transactions and documents and may take the form of a nominal fixed amount for each transaction or document, or a proportional duty based on the value of the transaction. Commonly encountered transactions which are subject to stamp duty and the applicable rates are:
Property rentals 3.6% Salaries (shared equally by the employer and the employee) 1.2% Business loan agreements 2.4% Private loan agreements 3.6% Bills of exchange up to 0.6%
CONSUMPTION TAX
Consumption tax is still levied on a few imported and locally produced goods, including certain agricultural products, alcohol, tobacco, petroleum products, motor cars, etc. The tax rates range from 10% to 150% and may be imposed on the basis of the product's CIF price or retail price. Taxes on motor cars, in particular, may exceed 200% in certain cases.
CIRCULATION (ROAD) TAXES
Cars, trucks and motorcycles are subject to an annual road tax, the tax burden being determined by the engine size of the vehicle.
REAL ESTATE TRANSFER TAX
Real estate transfer tax is levied on the transfer of title of real estate. The tax is computed on the higher of contract price or the objective value. The objective value system covers real estate situated in almost every town in Greece and is a method adopted for mitigating disputes between the tax authorities and the tax payer as to the fair value of real estate. Where no objective values exist, the value is determined by the tax authorities. The real estate transfer tax rates normally are 9% for the first Drs 4 million and 11% for the excess. The tax is increased to 11% and 13% respectively for real estate located in areas where a fire station exists. A local authority surcharge equal to 3% of the transfer tax is also levied. Under certain circumstances, full or partial exemption to this tax may be obtained (e.g. purchases of certain agricultural land and primary residences, purchases through importation of foreign currency by foreign nationals of Greek origin etc.).
The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be obtained before any action is taken.
For further information contact Marios T. Kyriacou, KPMG Peat Marwick Kyriacou, Athens, Tel: 00 301 77 52 001; Fax: 00 301 77 04 182 or enter text search "Peat Marwick Kyriacou" and "Business Monitor".
