LIVING IN GREECE
Greece lies in South East Europe covering an area of 130,000km2 with a population of 11 million. It borders Turkey, Bulgaria, Albania and the Former Yugoslavian Republic of Macedonia and has close trade links with Italy and Cyprus (the latter a particularly close trading partner due not only to geography but also the shared historical and cultural links between the two countries).
Greece is a full member of the EU, the Eurozone, the OECD and NATO.
The country has a Mediterranean climate with temperatures ranging from 5C0-20C0 during winter and from 25C0-35C0 during the summer.
Greek is the official language but English is widely spoken and, as in other jurisdictions, the most common lingua franca of doing business.
Citizens of EU member-states which have ratified the Schengen treaty are free to move, live and work in Greece (subject to minimal requirements).
Nationals from non-EU countries must obtain an entry visa before arriving in Greece and a residence permit if also seeking employment.
Working days are Monday to Friday. Public sector buildings and banks are open from 08:00 to 14.30 while private sector businesses tend to work lengthier hours. The cost of living is just below the European Union average. In recent years opportunities for buying and renting high quality housing have increased. There are many English-speaking private schools for children of foreign parents alongside the normal free state schools.
Greece’s highly developed infrastructure (road networks, airports, ports, energy and telecommunication networks) is comparable (and, arguably in some instances, favorable) to that of any other developed Western European economy. It allows for easy implementation of almost any investment activity.
Greece is a presidential parliamentary democracy. The executive body is the Government headed by the Prime Minister. At time of writing left-wing and right-wing parties – SYRIZA and ANEL respectively – form a coalition government created after the general election of September 2015.
Legislative authority is vested in the unicameral Hellenic Parliament and the President of the Greek Republic. Laws are voted on by Parliament and require ratification by the President to be enacted. Judicial authority is independent of Parliament and the Government.
Greece is a full member of the European Monetary Union. Its currency is the Euro.
In 2016 the Greek economy stabilized remarkably following the much-reported turbulence of 2015 and is expected to achieve a modest recovery. Greece has hastened reform efforts in a number of key economic areas, such as the product and service markets, and is radically changing its pension and social security systems. A number of large-scale privatization projects are also under way. Current GDP growth is around 0.3% and in 2017 the Greek economy is expected to achieve increased growth to the tune of 2.3%. Under current conditions the country can reasonably expect to achieve growth rates of between 2% and 3.5% for the next two years. In 2016 unemployment stood at 23.4% which, though high and well above the EU average, represented a fall for the third consecutive year. However, from an investor’s perspective high unemployment is a driver for Greece’s well-known reputation for providing an exceptionally highly skilled workforce – particularly in areas such as engineering and technology – at affordable costs. Low OPEXs have led many multinationals to establish shared services and production hubs in recent years. The banking sector is in good shape with capital adequacy ratios above the EU average and expected to improve further due to a strengthened framework for NPL management and resolution. The capital controls imposed in July 2015 remain in place but have been gradually relaxed to create a more investment and business-friendly environment.
STARTING A NEW BUSINESS
Greece is undergoing a number of economic, institutional and social reforms to foster new direct investments and job opportunities. Starting a new business in Greece takes an average of 13 days.
A one stop-shop procedure has greatly streamlined the procedure for establishing a new company and registration costs have reduced significantly. The most common corporate entities in Greece are the Private Company (IKE) and the Societe Anonyme (SA) with the capital requirements for each being €1 and €24,000 respectively. Foreign entities, however, may establish a Greek office and conduct their business through that branch.
A Private Company requires a managing director while a Societe Anonyme requires a Board of Directors (with a minimum of 3 on the board). A branch requires a legal representative with a valid Greek Tax Identification Number.
The employment market in Greece was formerly one of the most regulated in Europe. However, reforms have led to significant de-regulation aimed at fostering a more employer-friendly environment for domestic and foreign business alike.
Severance payment on termination of an employment relationship has been reduced as have the minimum legal wage (currently at 586 euros per month), additional payment for overtime (currently an employee’s legal schedule of work is 40 hours work per week) and payment for working during night hours (22.00-06.00 a.m).
Probationary periods have been increased to 12 months during which the employer may dismiss the employee without the obligation to pay severance.
Greece’s legal system has been subject to vast reform in recent years to increase efficiency and speed. It has amended its civil procedure rules and introduced tighter deadlines. Parties may provide their evidence before a judge within 100 days of filing forms. This is expected to significantly shorten the average time taken to achieve first instance court decisions from two to three years to approximately 8 months. The complete judiciary procedure, including court of appeal cases, are expected to take an average of two years (down from the current average of five to six years).
Corporate Business Taxation
Greek companies are taxed on their profits before distribution with the current rate set at 29%. As of 1st January 2017, a 15% withholding tax on dividends also applies. The Greek Income Tax Code incorporates the EU Parent-Subsidiary Directive. According to this Directive, dividends distributed to a parent company established in another EU country are tax-free provided that the shareholding is at least 10% and the related shareholding has been maintained for a minimum of two years).
A Greek company can deduct all expenses that are actual and evidenced business expenses from its profits under certain criteria (e.g. they are incurred for the benefit of the business or are carried out in the course of its normal commercial transactions). The Income Tax Code provides a list of non-deductible expenses.
The VAT rate for supply of goods and services is currently 24%. Certain goods and services have a reduced rate of 13% (e.g. fresh food products, electricity and natural gas) while others are subject to a further reduced rate of 6% (e.g. newspapers, theatre tickets, human pharmaceuticals products and hotel accommodation).
Real Estate Taxes
As a general comment, the purchase and ownership of property in Greece is subject to different types of taxation regardless of whether the purchaser/owner of the property is an individual or a legal entity.
Taxes on Acquisition
Real Estate Transfer Tax
Real estate acquisition is subject either to VAT at a rate of 24% or to a real estate transfer tax (RETT). The RETT is analysed according to either the contract price or the objective value, whichever is higher, and calculated at a rate of 3%. The objective tax value is estimated as the minimum value at which a property will be transferred for tax purposes. In addition to RETT, a local authority surcharge, equal to 3% of the RETT, is also levied.
Furthermore, there are certain additional third party costs related to the acquisition of the property.
Taxes on Ownership – Unified Real Estate Ownership Tax (ENFIA)
Ownership of Greek real estate is subject to the Unified Real Estate Ownership Tax (ENFIA), which is calculated on the basis of property held as of 1st January each year. ENFIA consists of a main tax and a supplementary tax. The main tax ranges from EUR 2 to EUR 13 per square meter and depends on a number of factors. The supplementary tax is calculated at a rate of 0.1% to 1.15% (and for legal entities up to 5,5%) on the corresponding objective tax value.
Other additional taxes
Real estate ownership is also subject to a Real Estate Duty (RED) and other miscellaneous taxes and duties that may be levied by the Municipality in which the real estate is located.
Greece has (and continues to develop) several agreements for the avoidance of double taxation to ensure that income will not be taxed in more than one country. It currently has more than 55 signed treaties with other countries for this purpose.
Greece has several competitive advantages under international standards which make investment in certain sectors extremely attractive. More generally, significant investments (above €40m) attract substantial tax relief and are subject to a fast-track process which greatly reduces bureaucracy and streamlines the obtaiment of licenses.
In Greece, the tonnge tax regime is regulated by Law 27/1975. According to the relevant provisions, ship-owners (both individauls and companies) of Greek flagged vessels are subject to tonnage tax, according to the age of the vessel and the gross tonnage. The payment of the tonnage tax exhausts all income tax liability of the ship-owner with respect to income derived from the ship’s operation. Tax treatment differs between Category A and Category B vessels.
As to their tax treatment, Category A vessels are subject to tonnage tax, according to their age and gross tonnage. Regularly, tax rates are increased on an annual basis by 4%. Tax rates for Category B vessels are calculated annually according to the vessel’s gross tonnage and is paid in euros.
As long as tonnage tax is paid, shipping companies are exempted from any tax, duty, levy, contribution or deduction in respect of income obtained from the operation of ships.
The Incentive law currently in force in Greece has been voted on 16 June 2016 (‘Statutory framework for the establishment of Private Investments Aid Schemes for the regional and economic development of the country ‘.)
The key objectives of the law include the creation of new jobs, the increase of extroversion and innovativeness of businesses, the improvement of technological level and competitivensess, the creation of new extrovert national image, the attraction of foreign direct investments, the promotion of a balanced and sustainable development with emphasis on regional convergence.
The law provides for a threshold for the types of aid available to individuals’ investment projects, as well as to companies and groups of companies.
Special categories of aid are being determined, either (i) on the basis of the performance of the companies (extroversion, mergers, employment increase, sectors, high added value), or (ii) on geographical criteria (mountainous regions, border region, areas with reduction of population more than 30% etc).
The type of aid provided can be granted in the form of tax exemption, subsidy, wage subsidy (for jobs created), financing instruments, fixed corporate income tax rate and fast licensing procedures.
A major highlight of the investment incentives law is the fixed taxation policy for investments exceeding 20 million euros for a period of seven years as well as a speedy licensing procedure.
This would facilitate big investments in the field of tourism, energy, ICT sector etc.
Golden Visa Program
The government of Greece instituted a procedure for the obtainment of permanent residence permits, renewable every five years, for foreign owners of Greek real estate exceeding €250,000 in value.
Beneficiaries of this new right of entry and residence, for a period of five years, are:
- third country citizens who own Greek real estate property with a minimum value of €250,000;
- third country citizens who have signed a timeshare agreement (lease) for a minimum of 10 years where the value of the lease is at least €250,00;
- third country citizens who purchase a plot of land or acreage and erect a building where the cumulative value is at least €250,000;
- third country citizens who have signed a ten-year timeshare agreement (lease);
- family members of the third country citizens described above.