How US LLC Income is Taxed for a Greek Member in Greece

The question reaches our office almost daily, usually in two forms. The first: "I opened an LLC in Wyoming, do I need to declare anything in Greece?" The second, more anxious: "They told me I'd be taxed at 44% as a freelancer, is that true?".

Both stem from the same misunderstanding. The tax treatment of a US LLC in Greece is not determined by how the IRS treats it, nor by what the Operating Agreement states. It is determined by how the entity is classified under Greek law and where it is actually managed.

The administrative practice of the tax authorities has accepted that profit distributions from a US LLC to a Greek tax resident are treated as dividends, regardless of whether the company is single-member or multi-member and regardless of its treatment as a pass-through entity in the US. Practically, we're talking about a 5% tax on distribution, not a business activity tax bracket. However, there's a serious prerequisite, and this is where most people get it wrong: if the company is managed from Greece, the LLC itself is considered a Greek tax resident, and the favorable outcome collapses.

Why distribution is considered a dividend and not business income

In the US, an LLC is generally a pass-through entity. The IRS does not tax it at the company level. Income passes through to the members and is declared by them.

Greece does not automatically follow this logic. Law 4172/2013 classifies foreign entities based on their own characteristics: legal personality, limited liability of members, distinct assets, corporate capital, and transferability of shares. An LLC possesses all of these. Therefore, it is treated as a legal entity, not as the exercise of individual business activity by the Greek owner.

The consequence is simple to state. The Greek partner is not taxed when the company earns profits. They are taxed when the company distributes profits to them. And the distribution is income from dividends, taxed at a rate of 5% according to Article 40 of the Income Tax Code.

Single-member and multi-member: the distinction that doesn't change the outcome

The most surprising point is the single-member LLC. In the US, it is usually characterized as a disregarded entity and "disappears" for tax purposes. In Greece, it does not disappear. The existence of only one member does not negate either the legal personality or the limited liability, which are the criteria that matter.

The reverse is true for multi-member LLCs. The fact that it files a partnership return with a K-1 in the US does not make it a partnership under Greek law. In both cases, the income received by the Greek partner after a distribution decision is a foreign-sourced dividend.

This treatment is confirmed by recent official rulings of the Dispute Resolution Directorate (ΔΕΔ). Specifically, Decision 1507/2026 of the Dispute Resolution Directorate (ΔΕΔ) concerns a Single Member LLC and Decision 90/2026 of the Dispute Resolution Directorate (ΔΕΔ) concerns a Multi Member LLC — in both rulings it was held that the distribution of profits to the Greek member constitutes a dividend and not income from business activity.

What it practically means for your tax declaration

The amount you receive is declared as a foreign-sourced dividend and taxed at 5%. It is not added to the salary or sole proprietorship tax bracket. Profits that remain in the company, provided there is a genuine business reason for them to remain there, are not taxed in Greece at the time they are generated.

Although an LLC is not subject to withholding tax in the US like a domestic corporation, the tax does not disappear. It is paid by you through your tax declaration. Failure to declare is not a gray area; it is simply undeclared income.

The place of effective management determines everything

This is where the entire structure hinges.

Article 4 of the Income Tax Code stipulates that a legal entity is a tax resident of Greece not only when it is established there, but also when the place of effective management is located in Greece for any period within the tax year. The law is not satisfied with formalities. It examines, among other things:

• where daily management decisions are made
• where corporate bodies meet and decisions are signed
• where books and records are kept
• where managers and key personnel reside
• where the majority of partners are located

If the sole manager of a Wyoming LLC lives permanently in Thessaloniki, works from there, signs contracts there, and makes every decision there, the argument that the company is managed from the US is extremely weak.

If it is determined that effective management is exercised in Greece, the LLC is treated as a Greek tax obligor on its worldwide income. This means a 22% corporate tax, obligation to register, bookkeeping, VAT where applicable, and then 5% on distribution. Because recognition usually occurs retroactively during an audit, surcharges and penalties are added. This is the fundamental difference between a structure that works and a structure that merely appears to work.

What a correct structure means in practice

There's no magic trick. It's about consistency between what you declare and what actually happens. In an audit, the following factors weigh heavily.

Where value is generated. An activity targeting the US or international market, with customers, platforms, and revenue outside of Greece, stands very differently from a company that exclusively invoices Greek clients from a Greek office.

Who manages and from where. A manager or co-management with an individual outside of Greece, with real responsibilities and documented activity. Names on paper without a substantive role don't help; they may even be detrimental.

US Substance. Registered agent, address, EIN, bank account in the company's name, contracts in the company's name, organized accounting.

Clear separation of funds. The corporate account is not a personal wallet. Gradual withdrawals without a distribution decision are among the first things identified and the most difficult to justify retroactively.

Documentation of distributions. Member resolution, date, amount, bank transfer path to the personal account. Without these, a dividend is difficult to support as a dividend.

You don't need a luxurious office in Cheyenne. What you need is a structure that can withstand the question, "who made the decision, when, and from where?"

Permanent Establishment and the Issue with Greek Clients

Beyond tax residency, there's a second risk: permanent establishment. Even if management is convincingly exercised outside of Greece, a stable base of business activity in the country can create a taxable presence for the portion of profits attributable to it.

The most common scenario is an LLC that primarily invoices Greek businesses for services physically performed in Greece. It's not forbidden to have Greek clients. However, it is a factor that, along with others, leads to a conclusion. The larger the percentage of turnover derived from Greece, the more carefully the rest of the structure must be set up.

Double Taxation and Obligations to the IRS

A double taxation avoidance agreement between Greece and the US was ratified by Legislative Decree 2548/1953. It's old and doesn't clearly cover modern hybrid structures like the LLC, which explains some of the confusion.

In practice, for an LLC without a physical presence, employees, or a dependent agent in the US, with income not connected to US trade or business, no federal income tax arises for the foreign owner. This doesn't mean there are no obligations. A foreign-controlled single-member LLC files Form 5472 along with a pro forma 1120, while a multi-member LLC files Form 1065 with the corresponding K-1s. Deadlines are observed regardless of whether tax is owed, and penalties for not filing Form 5472 start at $25,000 per year.

The rule worth remembering is that zero tax does not equal zero filing obligation, neither in the US nor in Greece.

When Controlled Foreign Corporation Rules Apply

The CFC mechanism in Article 66 of the Greek Income Tax Code exists to prevent the accumulation of passive income in low-tax foreign entities. Generally, it cumulatively requires a controlling interest of over 50%, actual foreign tax less than half of the Greek tax, and over 30% of net pre-tax profits to come from passive categories: interest, royalties, dividends, real estate income, or invoicing to related parties with low added value.

An LLC with real commercial activity, its own clients, and substantial economic function usually does not fall under these rules. An LLC that merely holds rights or invoices your Greek company for vague services is in a much more precarious position, regardless of whether it makes distributions.

A Realistic Example with Numbers

A programmer, tax resident of Greece, with clients in the US and Northern Europe. Establishes a Wyoming LLC with 100% ownership. Annual revenue €90,000, operating expenses €15,000, profit €75,000.

In the US, no federal income tax arises at the company level, provided there is no connection to US trade or business. However, Form 5472 is filed as normal. The company decides to distribute €50,000 and retains the remaining €25,000 as working capital.

In Greece, a dividend of €50,000 is declared, and €2,500 in tax is paid. The €25,000 remaining in the company is not taxed in Greece, provided the structure holds up—meaning, provided management is not exercised from Greece and the CFC conditions are not met.

The same profit through a Greek IKE (Private Company) would incur a 22% corporate tax before distribution, meaning 16,500 euros, and then 5% on the distributed remainder. The difference isn't luck; it's about structure. If the same LLC is deemed to be managed from Greece, the outcome becomes worse than with an IKE, because penalties are added for the years nothing was declared.

The Most Costly Mistakes

Withdrawals instead of distributions. Money gradually leaving the company account without documentation is not automatically treated as a dividend.

Management from Greece with an American facade. The most common and most expensive mistake, as it overturns the entire logic of the structure.

Invoicing exclusively Greek clients. This simultaneously raises questions about the place of management and permanent establishment.

Failure to file Form 5472. A penalty of $25,000 per year, even if no tax is owed.

No declaration in Greece. International information exchange and banking trails have made the "invisible company" a myth of the previous decade.

Frequently Asked Questions

The Conclusion

The US LLC is neither a magic tool nor a trap. It is a perfectly legal structure that, when set up correctly, results in distributions being taxed as dividends at 5% for the Greek partner, with no US corporate tax when there is no connection to US activity.

The critical factor is not the state of formation or how quickly the EIN is issued. It's where the company is actually managed, how clearly distributions are documented, and how consistent the image you present is. If these three stand, the structure withstands an audit. If one falters, the 5% becomes 22% plus surcharges, and usually several years later, when the cost of correction is multiplied.

If you want to see how all this applies to your specific case, book a short call with us, and we'll go through your numbers and structure step by step.

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