Greece

Corporate - Income determination

Last reviewed - 28 January 2020

Inventory valuation

Inventories are stated at the lower of cost or market (replacement value). The Greek tax system recognises various valuation methods, such as first in first out (FIFO), weighted average, etc.

Capital gains

In general, capital gains are included in the taxable profits of Greek companies.

The income derived from the goodwill arising upon the transfer of Greek government bonds or Greek treasury bills that are acquired by legal entities that do not qualify as Greek tax residents and do not maintain a PE in Greece is tax exempt.

Capital gains tax on sale of listed shares

Capital gains derived from the sale of listed and non-listed shares are considered business income taxable at the standard CIT rate.

Capital gains derived from the sale of listed and non-listed shares by foreign legal entities that are tax resident abroad shall be taxable in Greece only if they maintain a PE in Greece.

The sale of listed shares is also subject to a transaction duty at a rate of 0.2%.

Participation exemption on capital gains

As of 1 July 2020, capital gains derived from the sale of shares in an EU subsidiary are tax exempt in case the participation is greater than 10% and has been maintained for at least 24 months. 

The above-mentioned income is not further taxed neither at the distribution nor at the capitalisation of these profits, while no possibility of deducting the business costs associated with this participation is provided. 

Exceptionally, any losses resulting from the above transfer of shares may be recognised for deduction after 1 January 2020, provided that they have been valuated by 31 December 2019 and recorded in the books or included in the audited financial statements of the company. However, the deduction of such losses will only be recognised if they become final by 31 December 2022 and will also be limited to either the amount of the evaluation or that of the definitive loss, whichever is smaller.

Dividend income

Dividend income is generally taxable. For subsidiaries established in third countries, any dividend WHT that may have been paid is credited against the Greek CIT payable (up to the amount of tax that would arise in Greece).

However, a tax exemption of intra-group dividends received by Greek tax resident legal entities or PEs of foreign legal entities in Greece applies, provided that:

  • the legal entity distributing the profits is included in the forms enumerated in Annex I, Part A of Directive 2011/96/EE, as in force
  • the legal entity distributing the profits is tax resident in an EU member state and is not considered as tax resident in a third country in application of the provisions of a DTT concluded with such third country
  • the legal entity distributing the profits is subject to one of the taxes listed in Annex I, Part II of Directive 2011/96/EE or any other tax substituting one of those taxes
  • the recipient taxpayer holds at least a minimum participation of 10% of the value or the quantity of the share or principal capital or voting rights of the distributing legal entity
  • the minimum participation percentage is held for at least 24 months (although the exemption may be provided prior to the completion of 24 months secured by a guarantee), and
  • the respective dividends have not been deducted at the level of the entity distributing the dividends.

In case of further distribution of the reserve formed by tax-exempt dividends received from Greek or foreign subsidiaries established in an EU member state, said amount shall not be included in the taxable income of the legal entity proceeding to said distribution, but may be subject to dividend WHT.

Based on the general anti-abuse rule introduced, the tax exemption in the case of collection and payment of dividends is alleviated in case it is considered that a ‘non-genuine arrangement’ exists (i.e. an arrangement that has not been put into place for valid commercial reasons reflecting the economic reality).

Should the aforementioned tax exemption of intra-group dividends not apply, any underlying CIT and dividend WHT that may have been paid by a Greek or foreign subsidiary established in an EU member state are credited against the Greek CIT payable (up to the amount of tax that would arise in Greece). In such a case, the tax corresponding, and not the tax paid, on such dividends can be deducted from the Greek tax due.

Stock dividends

Stock dividends are treated as cash dividends for CIT purposes.

Interest income

Interest income is generally taxable.

Partnership income

Both general partnerships (Omorrythmi Etairia or OE) and limited partnerships (Eterrorythmi Etairia or EE) are not tax transparent. They are subject to tax based on general rules (i.e. at a CIT rate of 24% plus a 5% WHT on distributions). Business income generated by partnerships that maintain single entry accounting books is taxed at a unified tax rate of 24%. In addition, any subsequent distribution of profits is not subject to dividend taxation.

Rents/royalties income

Income derived from rents and royalties is taxed as ordinary income.

Foreign income

Resident corporations are taxed on their worldwide income. Foreign income received by a domestic corporation is taxed together with other income. If related income tax is paid or withheld abroad, a tax credit is generally available up to the amount of the applicable Greek income tax.

Losses from foreign sources may not be set off against profits generated in Greece. Exceptionally, losses from EU and European Economic Area (EEA) member states may be set off with profits arising in those EU or EEA member states, provided that they are not exempt on the basis of the DTT concluded and applied by Greece.