The Impact of Recent EU Tax Regulations on Greece’s Tax System

Table of Contents

• Introduction
• Overview of Greece’s Tax System
• Recent EU Tax Regulations
• Impact on Greece’s Personal Income Tax
• Changes in Corporate Taxation
• Value Added Tax (VAT) Modifications
• Property Tax Adjustments
• Digital Taxation and E-Commerce
• Tax Evasion and Compliance Measures
• Economic Implications for Greece
• Challenges and Opportunities
• Future Outlook
• Conclusion
• FAQs

Introduction

The European Union (EU) has been actively working towards harmonizing tax regulations across its member states, aiming to create a more unified and efficient economic environment. These recent tax regulations have had a significant impact on various EU countries, with Greece being no exception. As a country that has faced economic challenges in the past decade, Greece’s tax system has undergone substantial changes to align with EU directives and improve its fiscal position.

This article explores the intricate relationship between recent EU tax regulations and their impact on Greece’s tax system. We will delve into the various aspects of taxation affected by these changes, including personal income tax, corporate taxation, value-added tax (VAT), property tax, and digital taxation. Additionally, we will examine the economic implications, challenges, and opportunities that arise from these regulatory shifts.

Overview of Greece’s Tax System

Before delving into the impact of EU regulations, it is essential to understand the foundation of Greece’s tax system. Historically, Greece has struggled with issues such as tax evasion and a complex tax structure, which have contributed to its economic difficulties. The Greek tax system encompasses various types of taxes, including:

• Personal Income Tax
• Corporate Income Tax
• Value Added Tax (VAT)
• Property Tax
• Capital Gains Tax
• Solidarity Surcharge
• Social Security Contributions

Over the years, Greece has implemented numerous reforms to simplify its tax system, increase compliance, and boost revenue collection. These efforts have been further intensified by the country’s commitment to meeting EU standards and regulations.

Recent EU Tax Regulations

The European Union has introduced several tax regulations and directives in recent years, aimed at creating a more harmonized tax environment across member states. Some of the key EU tax initiatives that have impacted Greece include:

Anti-Tax Avoidance Directive (ATAD)

The ATAD, implemented in 2019, introduces measures to prevent tax avoidance practices commonly used by large companies. This directive has led to changes in Greece’s corporate tax laws, particularly in areas such as interest deductibility and controlled foreign company (CFC) rules.

VAT E-Commerce Package

This package, introduced in July 2021, aims to simplify VAT obligations for cross-border online sales. It has significant implications for Greek businesses engaged in e-commerce activities within the EU.

DAC6 Directive

The DAC6 Directive requires intermediaries and taxpayers to report certain cross-border arrangements that could potentially be used for aggressive tax planning. This has led to increased transparency requirements for Greek tax professionals and businesses.

Digital Services Tax

While not yet fully implemented at the EU level, discussions around a digital services tax have influenced Greece’s approach to taxing digital businesses operating within its borders.

Impact on Greece’s Personal Income Tax

The recent EU tax regulations have had both direct and indirect effects on Greece’s personal income tax system. While personal income tax remains largely under national jurisdiction, EU initiatives have influenced Greece’s approach to certain aspects of personal taxation.

Tax Rates and Brackets

Greece has adjusted its tax rates and brackets to align more closely with EU averages. The current personal income tax system in Greece consists of progressive tax rates ranging from 9% to 44%, with the highest rate applying to income over €40,000. These changes aim to create a more competitive tax environment while ensuring fair contribution from high-income earners.

Taxation of Cross-Border Workers

EU regulations on the taxation of cross-border workers have led Greece to adapt its policies for Greek residents working in other EU countries and non-residents working in Greece. This includes clearer rules on tax residency and the avoidance of double taxation.

Reporting Requirements

In line with EU efforts to increase transparency and combat tax evasion, Greece has implemented stricter reporting requirements for individuals. This includes the mandatory declaration of foreign bank accounts and assets, aligning with the Common Reporting Standard (CRS) adopted by EU member states.

Changes in Corporate Taxation

Corporate taxation in Greece has undergone significant changes in response to EU regulations, particularly the Anti-Tax Avoidance Directive (ATAD). These changes aim to create a more competitive business environment while ensuring fair taxation of corporate profits.

Corporate Tax Rate

Greece has gradually reduced its corporate tax rate from 29% in 2018 to 22% in 2022, aligning more closely with the EU average. This reduction aims to attract foreign investment and improve the competitiveness of Greek businesses in the European market.

Interest Deductibility Limitations

In accordance with the ATAD, Greece has introduced stricter rules on the deductibility of interest expenses. The new rules limit the deductibility of exceeding borrowing costs to 30% of a company’s earnings before interest, tax, depreciation, and amortization (EBITDA).

Controlled Foreign Company (CFC) Rules

Greece has implemented CFC rules to prevent profit shifting to low-tax jurisdictions. These rules require Greek parent companies to include in their taxable income certain types of income generated by their controlled foreign subsidiaries in low-tax countries.

Exit Taxation

In line with EU regulations, Greece has introduced exit taxation rules. These rules ensure that when a company transfers assets or its tax residence out of Greece, the country can tax the economic value of any capital gain created in its territory, even if that gain has not yet been realized at the time of exit.

Value Added Tax (VAT) Modifications

The EU’s efforts to harmonize VAT across member states have led to several changes in Greece’s VAT system. These modifications aim to simplify cross-border trade and reduce VAT fraud.

VAT Rates

Greece currently applies three VAT rates: a standard rate of 24%, a reduced rate of 13%, and a super-reduced rate of 6%. While these rates are set nationally, they are influenced by EU guidelines on VAT rate structures.

E-Commerce VAT Rules

The implementation of the EU VAT E-Commerce Package has significantly impacted Greek businesses engaged in cross-border online sales. Key changes include:

• The introduction of the Import One-Stop Shop (IOSS) for distance sales of imported goods up to €150
• The extension of the One-Stop Shop (OSS) to cover all B2C services and intra-EU distance sales of goods
• The removal of the €22 VAT exemption threshold for imported goods

VAT Reporting and Compliance

Greece has implemented electronic VAT reporting systems and real-time invoice reporting requirements to align with EU efforts to combat VAT fraud. These measures have improved tax compliance and revenue collection but have also increased the administrative burden on businesses.

Property Tax Adjustments

While property taxation remains largely a national competence, EU regulations and recommendations have influenced Greece’s approach to property taxation, particularly in the context of its overall tax reform efforts.

Unified Property Tax (ENFIA)

Greece has made several adjustments to its Unified Property Tax (ENFIA) system in recent years. These changes aim to create a fairer property tax system while maintaining a stable source of revenue for the government. Recent modifications include reductions in ENFIA rates for certain property categories and the introduction of more progressive rate structures.

Real Estate Transfer Tax

In line with EU recommendations to shift taxation away from labor and towards less distortive taxes, Greece has maintained its focus on property taxation. The real estate transfer tax, currently set at 3% of the property’s value, remains an important source of revenue for the Greek government.

Golden Visa Program

While not directly related to EU tax regulations, Greece’s Golden Visa program, which offers residence permits to non-EU nationals investing in Greek property, has been influenced by EU concerns about money laundering and tax evasion. As a result, Greece has implemented stricter due diligence procedures for applicants.

Digital Taxation and E-Commerce

The rapid growth of the digital economy has posed new challenges for tax systems worldwide, including in Greece. While the EU has not yet implemented a comprehensive digital tax framework, ongoing discussions have influenced Greece’s approach to taxing digital businesses.

Digital Services Tax

In anticipation of potential EU-wide digital taxation measures, Greece has been considering the implementation of a national digital services tax. This would target large tech companies with significant digital presence in Greece but limited physical presence.

E-Commerce Taxation

The implementation of the EU VAT E-Commerce Package has significantly impacted the taxation of e-commerce activities in Greece. Greek businesses engaged in cross-border online sales must now navigate new VAT rules and reporting requirements, including the use of the One-Stop Shop (OSS) system for certain transactions.

Cryptocurrency Taxation

As part of its efforts to align with EU standards on digital asset taxation, Greece has clarified its stance on cryptocurrency taxation. Gains from cryptocurrency transactions are now subject to income tax, with specific reporting requirements for individuals and businesses engaged in crypto activities.

Tax Evasion and Compliance Measures

Combating tax evasion has been a key priority for both the EU and Greece. Recent EU regulations have provided new tools and frameworks for Greece to enhance its tax compliance efforts.

Automatic Exchange of Information

Greece has implemented the Common Reporting Standard (CRS) and participates in the automatic exchange of financial account information with other countries. This has significantly enhanced the Greek tax authorities’ ability to detect undeclared foreign income and assets.

Enhanced Audit Procedures

In line with EU best practices, Greece has strengthened its tax audit procedures. This includes the use of data analytics and risk-based auditing techniques to identify high-risk taxpayers and transactions.

Voluntary Disclosure Programs

Greece has implemented voluntary disclosure programs that allow taxpayers to declare previously undisclosed income or assets with reduced penalties. These programs align with EU efforts to improve tax compliance and increase revenue collection.

Economic Implications for Greece

The implementation of EU tax regulations has had significant economic implications for Greece, affecting various aspects of the country’s fiscal and economic landscape.

Revenue Collection

The adoption of EU-aligned tax measures has generally led to improved revenue collection in Greece. Enhanced compliance measures, coupled with a more efficient tax administration system, have contributed to a more stable fiscal environment.

Investment Climate

The reduction in corporate tax rates and the implementation of more business-friendly tax policies have improved Greece’s attractiveness as an investment destination. This aligns with EU objectives of fostering economic growth and competitiveness across member states.

Economic Recovery

The tax reforms implemented in line with EU regulations have played a crucial role in Greece’s ongoing economic recovery. By creating a more transparent and efficient tax system, Greece has been able to regain credibility in international markets and attract foreign investment.

Challenges and Opportunities

The implementation of EU tax regulations in Greece has presented both challenges and opportunities for the country’s tax system and broader economy.

Challenges

• Administrative Burden: The implementation of new tax rules and reporting requirements has increased the administrative burden on businesses and tax authorities.
• Compliance Costs: Small and medium-sized enterprises (SMEs) in particular have faced increased compliance costs associated with new tax regulations.
• Balancing Competitiveness and Revenue: Greece must strike a balance between maintaining competitive tax rates and ensuring sufficient revenue collection to meet its fiscal obligations.

Opportunities

• Improved Tax Efficiency: The adoption of EU best practices has led to a more efficient and transparent tax system in Greece.
• Enhanced International Cooperation: Alignment with EU tax regulations has facilitated greater cooperation between Greek tax authorities and their counterparts in other EU member states.
• Digital Transformation: The push towards digital taxation and e-commerce regulations has accelerated the digital transformation of Greece’s tax administration.

Future Outlook

As the EU continues to evolve its tax regulations, Greece’s tax system is likely to undergo further changes in the coming years. Some key areas to watch include:

• Global Minimum Tax: The potential implementation of a global minimum tax rate, as proposed by the OECD and supported by the EU, could have significant implications for Greece’s corporate tax landscape.
• Further VAT Harmonization: Ongoing efforts to simplify and harmonize VAT across the EU may lead to additional changes in Greece’s VAT system.
• Green Taxation: As the EU pushes for more environmentally friendly policies, Greece may need to adapt its tax system to incorporate green tax measures.
• Digital Economy Taxation: The evolving landscape of digital taxation at the EU level will likely influence Greece’s approach to taxing digital businesses and transactions.

Conclusion

The impact of recent EU tax regulations on Greece’s tax system has been profound and multifaceted. From personal income tax to corporate taxation, VAT, and measures to combat tax evasion, Greece has made significant strides in aligning its tax system with EU standards and best practices.

While these changes have presented challenges, particularly in terms of administrative burden and compliance costs, they have also created opportunities for Greece to modernize its tax system, improve revenue collection, and enhance its competitiveness in the European market.

As Greece continues to navigate its economic recovery and fiscal consolidation efforts, the ongoing alignment with EU tax regulations will play a crucial role in shaping the country’s tax landscape and broader economic policy. The future outlook suggests a continued focus on harmonization, digitalization, and adaptation to emerging economic trends, all within the framework of EU tax policy objectives.

Ultimately, the success of Greece’s tax system in the context of EU regulations will depend on the country’s ability to balance compliance with competitiveness, leverage new technologies, and maintain flexibility in the face of evolving global tax challenges. As Greece moves forward, its tax system will undoubtedly continue to evolve, shaped by both national priorities and the broader European tax landscape.

FAQs

1. How have EU tax regulations affected Greece’s efforts to combat tax evasion?

EU tax regulations have provided Greece with new tools and frameworks to enhance its tax compliance efforts. These include the implementation of the Common Reporting Standard (CRS) for automatic exchange of financial information, enhanced audit procedures using data analytics, and voluntary disclosure programs. These measures have significantly improved Greece’s ability to detect and prevent tax evasion.

2. What impact has the reduction in corporate tax rates had on Greece’s economy?

The reduction in corporate tax rates, from 29% in 2018 to 22% in 2022, has improved Greece’s attractiveness as an investment destination. This change, aligned with EU objectives, has contributed to a more competitive business environment, potentially attracting foreign investment and stimulating economic growth.

3. How has the EU VAT E-Commerce Package affected Greek businesses?

The EU VAT E-Commerce Package has significantly impacted Greek businesses engaged in cross-border online sales. It has introduced new rules such as the One-Stop Shop (OSS) system for certain transactions, the Import One-Stop Shop (IOSS) for distance sales of imported goods, and the removal of the €22 VAT exemption threshold for imported goods. While these changes aim to simplify VAT compliance, they have also required businesses to adapt their processes and systems.

4. What are the main challenges Greece faces in implementing EU tax regulations?

The main challenges include managing the increased administrative burden on businesses and tax authorities, addressing the higher compliance costs particularly for SMEs, and balancing the need for competitive tax rates with sufficient revenue collection. Additionally, Greece must continually adapt its tax system to keep pace with evolving EU regulations and emerging economic trends.

5. How might future EU tax initiatives impact Greece’s tax system?

Future EU tax initiatives that could impact Greece’s tax system include the potential implementation of a global minimum tax rate, further VAT harmonization efforts, increased focus on green taxation, and evolving regulations for taxing the digital economy. Greece will need to remain flexible and proactive in adapting its tax system to these emerging EU-level changes while considering its national economic priorities.

Article reviewed by Georgi Ivanov, Corporate Lease Negotiator | Industrial Real Estate Strategist, on March 2, 2025