Spring 2016 Tax Bulletin

May 30, 2016

This Spring 2016 Tax Bulletin presents key updates from Greece's 2016 tax and pension reforms, detailing changes in income taxation, social insurance contributions, and their impact on individuals and businesses.

Summary of Taxation and Social Insurance Provisions (2016 Reforms – Law on Insurance-Pension System)

With the adoption by the Parliament of the law reforming the insurance-pension system, the tax system was modified significantly. Many fiscal provisions deviate from the principle of taxing income from the same source under a uniform logic.

Notably, individual companies (with turnover up to €1.5 million) now bear a significantly lower tax burden—by up to 16 percentage points—compared to self-employed professionals for the same income.

Taxation for Fiscal Year 2016

1. Capital Companies (SA, Ltd., PC) and companies with double-entry bookkeeping:

• Overall tax burden (company + members): 39.65%

• Solidarity levy: 0–10%

• Advance tax on following year’s income: 100%

  
  

2. Partnerships (GP, LP), lawyers, notaries with single-entry bookkeeping (gross revenue up to €1.5 million):

• Overall tax burden: 29%

• Solidarity levy: 0–10%

• Advance tax: 100%

  
  

3. Self-employed and Freelancers:

• Tax on €40,000 income: 27.5% (€11,000)

• Tax rate above €40,000: 45%

• Solidarity levy: 0–10%

• Advance tax: 100%

  
  

Note: Those offering services via contracts to up to 3 clients, or earning 75%+ of income from one client, are considered as employees for tax purposes. If serving only 1 or 2 clients, employers must pay contributions.

4. Wage Labor & Board Members' Fees:

• Tax on €40,000 income: 27.5% (€11,000)

• Tax rate above €40,000: 45%

• Solidarity levy: 0–10%

• Stamp duty on board fees: 1.2%

  
  

5. Income from Property:

• Tax on €35,000 income: 28.15% (€9,850)

• Tax rate above €35,000: 45%

• Solidarity levy: 0–10%

  
  

Social Insurance Reform – From 1 January 2017

A new independent social insurance institution has been established. All current social security funds will be merged into this entity, which will handle pensions and all benefits/allowances.

Mandatory Participation

Applies to:

• Employees

• Self-employed & freelancers

• Members of GP, LP, and Ltd companies

• Operators and sole members of single-member companies

• Board members of SAs holding ≥3% share

  
  

Contribution Rates

• Employees: approx. 41% (shared by employee and employer)

• Others: approx. 38% (includes supplementary and lump-sum contributions)

• Without supplementary/lump-sum: 26.95%

  
  

Insurable Income Limits

• Maximum monthly base: €5,860

• Minimum base: €586/month

  
  

Even if there are no dividends or losses in a partnership, contributions are calculated based on the minimum base.

Self-Employed Contributions

Based on:

• Net taxable income from the previous year

• Within the minimum and maximum limits

  
  

SA Board Members with <3% Share

Only subject to employee tax/insurance if they receive remuneration.

Insurance for Freelancers Invoicing 1–2 Clients

• Treated like employees

• Client must pay employer contributions

  
  

New Insured (First 5 Years)

Reduced contributions only for main pension branch

• Treated as a liquidity facility

• Must repay the difference in later years