Israel – Greece Tax Treaty

Business Activity in Greece

The economy of Greece is characterized by various developed sectors due to its strategic geographical location and fast-developing industries. The tourism industry is steadily growing, increasing the demand for modernizing facilities. Requirements are there for increasing the scale of investments in infrastructure and services about information technologies aimed at diversifying and enhancing the tourism product portfolio.

Shipping, one of the most prosperous industries in the world, is under the control of Greek ship owners and accounts for over 20% of the world fleet, contributing 7 % to Greece's GDP. Given the worldwide animation of the decarburization trend by deploying energy-efficient technologies, this sector appears to leverage that for its development. Greece’s strategic location within the Mediterranean merely gave it a natural advantage to serve as an energy hub and logistics and transport nerve center, thus opening avenues to the Balkans and other surrounding regions. These factors collectively highlight Greece's long-term growth expectations and its future development involving regional and global trade.

Bilateral Agreements between Greece and Israel

Convention on the Prevention of Double Taxation

The agreement between the Governments of Israel and Greece regarding the avoidance of double taxation was signed on October 23, 1995, and entered into force on the first of December 31, 1998.

To read the agreement in English click here.

Applicability of the MLI

Both Greece and the State of Israel have signed the Multilateral Convention, commonly known as the MLI. The MLI is a convention that is meant to fix double taxation treaties according to the BEPS framework.

Israel signed the agreement on June 7, 2017, and ratified it on September 13, 2018. Greece, on the other hand, affixed its signature to the MLI on June 7, 2017, and ratified it on March 30, 2021.

Residency for Tax Purposes in Greece

Residence of an Individual

An individual’s tax residence in Greece is primarily determined by their physical presence in the country during any 12 months. Beyond this, the "center of vital interests" is also considered, which includes factors like property ownership in Greece, citizenship, social security registration, children’s schooling, family location, and holiday habits.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A legal entity is considered a tax resident in Greece if it meets any of these conditions:

• It was created under Greek law.
• Its registered office is in Greece.
• Its main management activities take place in Greece.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Greece

Greece Tax Authority is called the Independent Authority for Public Revenue (IAPR)

Income taxation: 9% – 44%

Taxation of Companies and Branches: 22%

VAT: 24%

Capital Gains Tax: 15%

Withholding Tax

Inheritance Tax Greece

Greece is a country where the calculation of inheritance taxes is based on the current value of the inherited property, which includes all movable and immovable assets in Greece, independent of the nationality of the deceased. The taxable value of the real estate is deemed to have perennial age, and the "objective value" used to calculate this is established by the Ministry of Finance concerning the date assigned to the deceased. However, properties located abroad are exempt from the Greek inheritance tax.

Rates of taxation depend upon the closeness of the heir to the deceased, ranging in rates from 1% to 40%. Generally, spouses, children, and parents, being of Category A, are taxed at low rates (1%-10%) and accrue a tax-free threshold of up to €150,000. However, more distant relatives and unrelated individuals fall under higher tax categories (B and C) and thus are covered with much higher rates and lower exemptions.

Relocation to Greece

In 2023, Greece’s economy grew by 2.0%, with the Gross Domestic Product (GDP) reaching EUR 220.3 billion. This was also accompanied by positive developments in the labor market, while inflation also came down. Unemployment decreased from 12.4% in 2022 to 11.1% by 2023, meaning that more jobs were available. In addition to this, the inflation rate fell steeply from 9.6% in 2022 to 3.5% in 2023, which indicates that the general rise of prices in the economy was slowed down. All these qualify these developments as considerable economic progress for Greece in 2023.

The educated and qualified labor market in Greece records 46.4% with higher education degrees, while 7% with master's degrees or PhDs. Additionally, 69.5% of adults in Greece speak at least one foreign language, and 64.5% point to English, demonstrating the high availability of the labor force for international business.

Greece has experienced sharp growth in recent years in foreign direct investment-an influx from the United States. In 2022, the United States was the eighth-largest source of foreign direct investment in Greece, with massive companies, including Microsoft, Google, Pfizer, and Amazon Web Services.

Currently, about 4,100 Jews were living in Greece in 2023. This community has had a long-standing connection with Jews in Israel. They continue to enjoy an important position in Greece's social and political life and, generally as well, in the overall network of the Jewish diaspora.

Real Estate Taxation in Greece

The Uniform Real Estate Property Tax (ENFIA) in Greece is applied annually to real estate properties owned by individuals or legal entities, as of January 1st each year. It covers various property rights, including ownership, usufruct, and occupancy rights, as well as additional areas like parking spaces or swimming pools that are part of common property.

The ENFIA payable by individuals is reduced depending on the total value of their property subject to tax, as follows:

• For property with a total value of up to 100,000 euros — a reduction of 30 percent;
• For property with a total value of up to 150,000 euros — a reduction of 25 percent;
• For property with a total value of up to 250,000 euros — a reduction of 20 percent;
• For property with a total value of up to 300,000 euros — a reduction of 15 percent; and
• For property with a total value of up to 400,000 euros — reduction of 10 percent.

To calculate a property's total value, rights over plots of land outside town planning zones are not taken into account. ENFIA is paid either in one lump sum or in up to ten monthly installments. A property transfer requires proof that the ENFIA tax has been paid for the past five years, and the current owner is responsible for ensuring the tax is settled. If the property is transferred, both the original and new owners are liable for any unpaid tax.

Transfer of Funds from Israel to Greece

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met. Our firm handles withholding tax matters with the Israeli Tax Authority.

As mentioned above, the countries have signed a tax treaty, that allows taxpayers to submit a 2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax, to potentially transfer the payments without paying the withholding tax.

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant's approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more.

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Greece

General Partnership

A type of business agreement made by at least two individuals where all assets or profits are shared amongst each other.

Limited Partnership in Greece

Where one or more business partners are liable only up to the amount of money that a partner invested in the company in Greece.

Limited Liability Company

This form of business entity is the most commonly used in the Hellenic Republic, offering flexibility as shareholders or directors are not required to be residents of Greece for company setup. The minimum capital requirement is €4,500.00, and the registered capital is composed of contributions made by the shareholders. Shareholders bear responsibility for any unpaid portions of their contributions recorded in the Commercial Register.

The “Society Anonyme” Company

The Greece AE requires at least one shareholder and three directors, who can be either individuals or legal entities, to be incorporated. Directors and shareholders can be of any nationality and are not required to be residents of Greece. This business entity has a legal personality, meaning it is responsible for its debts with its assets, while a shareholder's liability is limited to the capital they have contributed. The minimum capital requirement for a Greece AE is €60,000.00.

The New Private Limited Company

Introduced in Greek law in 2012, this type of privately held business entity limits owner liability to their shares. It prohibits the public trading of shares and is restricted to a maximum of 50 shareholders.

Incentive Laws in Greece

Foreign Tax Credit: Taxes paid abroad can be credited against Greek taxes, but only up to the amount of Greek tax owed.

Deferred Taxation: For entities like banks and leasing companies, tax benefits can be converted into credits in exchange for shares to the Greek government.

Job Enhancement Incentives: Employers can get a 50% increase in tax deductions for certain employees under specific conditions, up to 14 times the minimum wage for workers over 25.

Research Expenses: Companies can deduct 100% of their scientific and tech research costs, including depreciation of equipment used. Losses from these deductions can be carried forward for up to five years.

Patent Incentives: Profits from exploiting internationally recognized patents are exempt from income tax for up to three years, based on the company's R&D expenses for the patent.

Strategic Investment Law: Supports large investments that benefit the economy and the environment. It offers incentives like tax exemptions, grants, and fast-track licensing for certain investments.

Investment Categories: Investments are classified by size, industry, and their impact. Some are eligible for special tax breaks, cash grants, or R&D funding.

These incentives are designed to encourage investment, research, and job creation in Greece.

Greece Double Tax Treaties