Sole Proprietorship Taxation 2026: Tax Bracket up to 44%, EFKA, Costs & Liabilities

A sole proprietorship is the fastest and cheapest way for someone to start working professionally in Greece. One visit to myAADE, an application to commence operations, and from the next day, you can legally issue invoices. However, this simplicity has a dark side that few discuss before starting: in a sole proprietorship, there is no legal distinction between you and your business. Every debt of the business is your personal debt, with all your assets.

In this guide, you will see in detail what a sole proprietorship is, how it is taxed (scale up to 44% and business levy), what EFKA contributions you pay, why it lacks legal protection, what it costs to maintain, and for which cases it is indeed the right choice. At the end, you will also see when it's worth looking into alternatives, such as an IKE or an offshore company.

What is a sole proprietorship

A sole proprietorship is not a company. It's simply you, your natural self, engaging in commercial or professional activity with your own Tax Identification Number (AFM). Its main characteristics:

• It does not have a separate legal personality. You and the business are the same person.
• It is established electronically via myAADE, usually within one day, without a notary and without GEMI (unless you engage in commercial activity with a physical establishment).
• No capital is required.
• Its profits are considered your income from business activity and are taxed according to the personal income tax scale.

It is the form chosen by most new freelancers, consultants, teachers, craftsmen, and small business owners in Greece, precisely because the startup cost is almost zero.

No legal protection: unlimited liability

This is the point you need to understand before anything else. In a sole proprietorship, you are unlimitedly liable with all your assets for every obligation of your activity:

• Debts to suppliers and partners: if the business owes money, you owe it. The creditor can pursue your home, your deposits, your car.
• Debts to the State: unpaid taxes, VAT, and contributions become your personal debt, with seizures on personal assets.
• Civil claims: if a client seeks compensation from you for damages, they sue you personally, not some "company."

Unlike an IKE or an LLC, where liability stops at the company's assets, here there is nothing to protect you. For low-risk activities with small turnovers, this may be acceptable. However, as revenues and contracts grow, the lack of legal protection becomes a serious disadvantage.

Sole proprietorship taxation: the scale up to 44%

The net profits of the sole proprietorship are added to your other incomes and taxed according to the progressive income tax scale:

• Up to 10,000 euros: 9%
• 10,000 to 20,000 euros: 22%
• 20,000 to 30,000 euros: 28%
• 30,000 to 40,000 euros: 36%
• Over 40,000 euros: 44%

Additionally, there is an advance tax payment for the next fiscal year, which is reduced for new professionals in the first few years but subsequently reaches 55% of the tax. This means that after the first profitable year, the actual amount you pay each year is significantly higher than the "net" tax for the year.

Business levy: you are charged 650 euros annually (or 325 euros if your registered office is in a settlement with fewer than 200,000 inhabitants or if you are a new professional in the first few years, where exemptions apply). For self-employed individuals, this levy has largely been replaced by other regulations, but for commercial activities, it remains.

Example: a freelancer with a net profit of 35,000 euros. Income tax comes out to approximately 7,300 euros, plus an advance payment of approximately 4,000 euros, plus EFKA. The total burden approaches or exceeds 40% of the profit in a typical year.

EFKA: mandatory insurance from day one

Unlike an IKE, where only the manager is insured, here you are always the insured person. From the first day of commencement, you register with EFKA as a non-salaried individual and pay contributions regardless of whether you have income:

• Minimum category: approximately 240 euros per month, i.e., approximately 2,900 euros per year.
• New insured individuals (first 5 years): discounted category of approximately 140 euros per month.
• Higher categories: up to over 650 euros per month, depending on income.

The crucial point: these contributions are due even in years with zero or negative income. If you forget to cease operations, the debt accumulates.

Accounting books and accountant costs

A sole proprietorship typically keeps single-entry books (second category, i.e., income-expense books), which are significantly simpler than the double-entry books of an IKE. However, if you exceed certain turnover limits or acquire a warehouse and inventory, you may have to switch to double-entry books.

The cost of an accountant is correspondingly lower:

• Simple professional activity without VAT implications: 40 to 70 euros per month.
• With regular invoices and VAT: 60 to 100 euros per month.
• Annual declaration: often included or charged an additional 100 to 250 euros.

On an annual basis, 700 to 1,500 euros for accounting is a realistic range.

Total annual cost of a sole proprietorship

Putting together the fixed costs for a freelancer without employees:

• EFKA (Social Security Contributions) minimum category: approximately 2,900 euros per year (or 1,700 for the first five years).
• Accountant: 700 to 1,500 euros per year.
• Business activity fee where applicable: up to 650 euros.
• Income tax: progressive rates from 9% to 44% on profits, plus advance tax payment.

This means that before you even make a euro of profit, your sole proprietorship costs you 3,500 to 5,000 euros per year in fixed expenses, and then it's taxed at rates that become heavy above 30,000 euros.

When is a sole proprietorship ideal?

Despite the disadvantages, there are cases where a sole proprietorship is the right choice:

• First steps and testing an idea: you want to see if the activity takes off before committing to a corporate structure.
• Low income: with net profits below 15,000 to 20,000 euros, the 9% to 22% tax bracket is favorable and the total manageable.
• Low-risk activities: consulting, teaching, writing, where the likelihood of a civil claim is small.
• Parallel employment: you work as an employee and want a legal way to invoice occasional work.

However, once profits consistently exceed 25,000 to 30,000 euros, or your contracts involve substantial risk, the sole proprietorship starts to cost you dearly: both in taxes and in exposure of your personal assets.

Sole Proprietorship vs. IKE vs. LLC

A sole proprietorship wins in simplicity and startup cost, but loses in three critical areas: it offers no legal protection, it's taxed on a progressive scale up to 44% plus advance payment, and it pays EFKA from day one regardless of income.

An IKE gives you limited liability and a professional image, but with 22% plus 5% double taxation, double-entry bookkeeping, and EFKA for the administrator, meaning 4,000 to 5,000 euros in annual fixed costs before taxes.

A Wyoming LLC combines the best of both: full legal protection, no social security contributions anywhere, and a total annual cost of approximately 1,200 euros including everything (accounting, taxes, license). We analyze the logic of this comparison in the article Bulgaria vs. Wyoming LLC, where European fixed costs are compared to the American model. If your activity is digital with clients outside Greece, also see the general guide for forming a company abroad.

Frequently Asked Questions

How much does it cost to open a sole proprietorship? The startup itself through myAADE is free. The only costs are the accountant for the process (50 to 150 euros) and possibly registration with the relevant chamber if you engage in commercial activity. From then on, the cost is in maintenance: EFKA, accountant, and taxes.

Am I liable with my home for the debts of my sole proprietorship? Yes. In a sole proprietorship, there is no distinction between personal and business assets. Any debt from the activity, to private individuals or the State, can be satisfied from any of your personal assets.

How is a sole proprietorship taxed? With the personal income tax scale: 9% up to 10,000 euros, 22% up to 20,000, 28% up to 30,000, 36% up to 40,000, and 44% over 40,000 euros of profit. Additionally, there is an advance tax payment of up to 55% for the next fiscal year and, where applicable, a business activity fee.

Do I pay EFKA if I have no income? Yes. Insurance with EFKA as a non-employee is mandatory from the day of commencement, and contributions are due regardless of income, until you cease operations. The minimum category is approximately 240 euros per month, with a discounted category for the first five years.

When is it beneficial to switch from a sole proprietorship to an IKE? When net profits consistently exceed 25,000 to 30,000 euros, when you undertake contracts with substantial risk, or when you need a professional corporate image for large clients. Then, limited liability and a stable tax rate of 22% plus 5% may be more economical than the progressive scale.

When is no Greek legal form beneficial? When your activity is purely digital with clients outside of Greece. In that case, both the sole proprietorship (tax bracket up to 44%, EFKA social security contributions, zero legal protection) and the IKE (manager's EFKA, double taxation, double-entry bookkeeping) charge you fixed fees and taxes for things you don't need, and a foreign company often turns out to be significantly more economical.

The Conclusion

A sole proprietorship is the ideal starting point: zero setup costs, simple accounting, favorable tax bracket for low incomes. For a new freelancer with turnover under 20,000 euros and low risk, it's hard to find anything more practical.

However, its limitations are specific: no protection for your personal assets, taxation that exceeds 40% with advance payment once income is over 30,000 euros, and EFKA social security contributions that run even in lean years. If you work online and invoice abroad, compare the numbers with a company in America using our formation form before committing.

If you're considering other options outside of Greece, check out our guide on forming a company abroad and our page on forming a company in Dubai.