Taxation of legal entities
The profits of all Greek entities, irrespective of their legal form or where the profits are earned, are subject to corporate tax. Taxed profits distributed by such entities are not subject to further taxation in the hands of the recipients. By exception, in the case of a partnership, up to three individual general partners having the largest participation in the capital must have up to 50% of their share of the profits taxed in their hands as “business remuneration”. The amount of “business remuneration” is deducted from the partnership’s profits in arriving at taxable profits. If a general partner participates in more than one partnership, “business remuneration” is deducted only from one of the partnerships in which he/she declares the highest profits.
A foreign enterprise operating in Greece through a branch or a subsidiary company, or indeed having acquired a “permanent establishment” in Greece, is subject to corporate tax as well.
Residence – “Permanent Establishment” test
Entities established in Greece are resident in Greece for tax purposes and are taxable on their world-wide income. A foreign entity is subject to Greek corporate tax on income arising in Greece if it has, or is deemed to have, a “permanent establishment” in Greece. Foreign enterprises are generally regarded as having a permanent establishment in Greece if they:
- Maintain one or more branches, agencies, offices, warehouses, plants, laboratories or other facilities in Greece for the purpose of exploiting natural resources.
- Are engaged in manufacturing activities or the processing of agriculturalproducts.
- Transact business or offer services through a representative in Greece who is authorized to negotiate and conclude contracts on behalf of the foreign enterprise.
- Render services of a technical or scientific nature in Greece, even without a representative.
- Keep inventories of merchandise for their own account out of which they fill orders.
- Participate in a personal or limited liability company (partnership or EPE).
These criteria are superseded by the provisions of the Double Taxation Treaties concluded by Greece with other countries which include a narrower definition of a permanent establishment.