Taxation of Dividends in Greece: What You Need to Know

What are dividends?

Dividends are the monetary or other value distributed by a company to its shareholders or partners as a return for their participation in its share capital or profits. According to Greek law and tax authority guidelines, the Income Tax Code defines dividends as:

“The term 'dividends' means income derived from shares, founders' shares, or other rights to participate in profits that are not claims from debts, as well as income from other corporate rights, which include shares, portions including pre-dividends and mathematical reserves, participations in profits of personal businesses, distributions of profits from any type of legal person or legal entity, as well as any other related distributable amount.“

A correct understanding of what the concept of dividends includes is vital for compliance with tax legislation and avoiding errors in their declaration. In this article, we will analyze the taxation of dividends in Greece, focusing on the current 5% rate and other important details concerning both domestic and foreign companies, including LLCs.

The 5% dividend tax rate in Greece

In Greece, the tax rate for dividends is 5%, according to the tax legislation in force in recent years. This rate applies to all dividends distributed by companies registered in Greece or abroad, whether they are listed or unlisted companies.

This specific rate is one of the lowest in Europe, making Greece attractive to investors and entrepreneurs who wish to establish or maintain companies in the country. Especially for small and medium-sized enterprises, the low dividend tax can be a significant incentive for distributing profits to shareholders.

How it compares to other countries

Compared to other countries, the 5% rate in Greece is considered quite competitive. For example:

• Germany: Dividend taxes range from 25% to 28%.
• France: Dividend taxes can reach 30%.
• Cyprus: Similar to Greece, it has favorable taxation with a 17% dividend rate.

What it means for shareholders

The 5% rate is withheld by the company upon dividend distribution and paid to the tax authorities. Shareholders receive the net dividend amount, without further charges, unless there are other tax obligations applicable to the specific case (e.g., in cases of foreign beneficiaries).

How dividend tax is calculated

Calculating dividend tax in Greece is a relatively simple process, as it is based on the fixed rate of 5%. However, accurate recording and declaration are important to avoid errors and penalties.

Calculation process

1. Determine the dividend amount: The total amount to be distributed to shareholders before tax withholding.
2. Apply the 5% rate: The tax is calculated as 5% of the gross dividend amount.
3. Tax payment: The company withholds the tax amount and remits it to the competent tax authority.

Calculation example

Let's look at a simple example for better understanding:

• Total dividend amount: €10,000
• 5% tax: €10,000 x 0.05 = €500
• Net amount received by shareholder: €9,500

Company obligations

The responsibility for withholding and remitting the tax lies with the company distributing the dividends. The company must:

• Ensure the tax amount is correctly withheld.
• Submit the relevant declaration to the tax authorities.
• Pay the tax amount within the prescribed deadline.

Attention to detail

• The tax is calculated on the gross amount before any other deductions.
• In cases where dividends are paid to foreign shareholders, special agreements to avoid double taxation may apply and must be taken into account.
• Tax withholding is only done by Greek companies – in the case of foreign companies, the individual is responsible for paying the tax.

What applies to LLCs and dividends in Greece

LLCs (Limited Liability Companies) do not distribute typical dividends like corporations (S.A.) or EPEs (Limited Liability Partnerships), but rather make profit distributions to their owners. Nevertheless, the tax treatment of profit distributions from LLC companies in Greece is essentially the same as that of dividends according to the Greek Income Tax Code, as they are legal entities.

Taxation of LLC Profit Distributions

• Profits distributed by offshore LLCs are declared under code 295 of the tax return.
• The tax rate is 5%, exactly the same as for dividends originating from Greek or other foreign companies.
• The tax is paid by the individual to the Greek tax authorities.

Differences Between Dividends and Profit Distributions

• In the case of an LLC, the distributed amounts are not formally considered "dividends," but rather a profit distribution from a legal entity.
• However, profit distribution is considered taxable income, and Greek tax legislation treats it the same way as dividends, as explicitly stated in the Greek Income Tax Code.

Advantages and Obligations

• The flexibility of an LLC in managing profits makes it attractive to entrepreneurs who wish to benefit from low tax rates.
• At the same time, beneficiaries must declare this income on their tax return, include any supporting documents for offsetting taxes paid abroad (if a relevant agreement exists), and comply with Greek tax provisions.

Clarifying POL1114 for Trusts

POL. 1114 of 2017 specifically states that profit distributions from a Trust are taxed as dividends under the Greek Income Tax Code, as a Trust is a legal entity. With the same legal reasoning, the income of an LLC, which is a legal entity, formed with capital from its members, and making profit distributions to them, is also taxed.

Although an LLC does not distribute traditional dividends, its profit distributions are subject to the same tax requirements. This makes correct declaration and compliance with the law crucial, especially when dealing with offshore LLCs.

The Importance of Proper Dividend Tax Management

Dividend taxation in Greece is a fundamental part of tax compliance for businesses and individuals. With one of the lowest tax rates in Europe, at 5%, Greece offers a competitive framework for investors and entrepreneurs. However, accurate recording and declaration of dividends, whether they originate from Greek companies or foreign sources, is vital to avoid legal and financial penalties.

Special attention is required in specific cases, such as profit distribution from LLCs or the application of double taxation treaties, which demand knowledge and precision in managing tax obligations.

Consult specialized tax professionals to make the best possible use of the legislative framework and minimize your tax burden. With proper planning and transparency, you can ensure that taxation is not an obstacle but a tool for your business growth.

The above article is 100% for informational purposes only, and you should always consult a certified accountant.