Taxes: The second thing no one can avoid.
So, you have planned a nice vacation to Greece, organized everything, got the tickets, planned all the days (meet the relatives, check out the old village, visit the olive grove, have a nice dinner at the taverna, relax at the beach…) and maybe do some chores, like take care of taxes, while you’re there. It’s not going to take long, you think, maybe half a morning. Yeah, right.
Reality hits you pretty hard, when you spend half of your vacation going from one office to the other, from one government employee to the next, from one floor to the other, from one queue to another longer queue, like a human pin-ball in a huge, government run, money collecting, inefficient, corrupt, tax authority pin-ball machine!
Different types of taxes
Taxes are the states’ income. They provide a way for any government, national, regional, or local, with the means to function and to provide for the benefit of their citizens. In the words of U.S. Supreme Court Justice Oliver Wendell Holmes “Taxes are the price we pay for a civilized society.”
There are many different types of taxes, but a core way to divide them is between direct taxes (property tax, income tax, business tax, etc.) and indirect taxes (levied upon commodities before they reach the end consumer, but ultimately paid by the end consumer). Another way to categorize them, could be:
- taxes on income (personal taxes, business taxes, taxes on rent collected, capital gains tax, estate taxes, etc.),
- taxes on property (property tax, real estate tax, automobiles’ tax, boat and/or plane ownership tax, even swimming pool tax, etc), and
- taxes on goods and services [sales tax, excise taxes, user fees, “sin” taxes (cigarettes and alcohol), luxury taxes (expensive cars, jewelry), etc.]
Let’s break it down
When in Greece, you will inadvertently pay some of these taxes, just by engaging in everyday life. For example, you will pay a sales tax for any goods you purchase, VAT for services you will receive, user fees for the car you will rent, or the “sin” tax for the cigarettes you shouldn’t really buy.
If you, the non-resident, want to purchase real estate property in Greece, there is no “sales tax” on that transaction. More specifically, in order to avoid paying income tax on any funds brought from abroad and used to buy the property, non-residents will have to show a bank issued official import certificate, which is commonly referred to as a pink slip. This bank record provides proof that the funds, used for the purchase, were imported into Greece and are therefore exempt from income tax.
More importantly, if you already own real estate property in Greece, you can’t avoid paying tax on it. The law makes no distinction between residents and non-residents. To add insult to injury, recently another “tax” has been imposed on property, the “Extraordinary Special Duty on Real Estate with Electric Service”. This is a hidden tax on every real property equipped with electricity installations.
Even more importantly, income taxation of non-residents is much trickier. If you have any sort of income in Greece, you must file a tax return. In fact, you must file a tax return if:
- you earn any amount of income from any source (renting property, interest on deposits, investments, etc.);
- you own real estate;
- you own a vehicle (car, mobile-home, motorhome, RV, tricycle, tractor, farming vehicle etc.), a motorcycle (over 500cc), a boat, or an aircraft;
- you are purchasing a building or constructing one;
- you are a partner in a Greek joint venture, a partnership, or an LLC;
- you own a swimming pool (over 25 square meters or about 270 sq feet)
What you need to do to prove that you are a non-resident
All of the Greeks, who have migrated, have been required to submit documentation to local tax authorities, so they can prove that they are living abroad permanently and thus avoid taxation as Greek citizens. And we have a good reason to do so, because, if we don’t, we will be taxed as Greek citizens living in Greece, with increased taxation. We are considered to be permanent residents of another country, as long as we spend more than 183 days abroad in any given calendar year. If we fall under this category and we inform the Greek tax authorities properly, then we will not be taxed in Greece for the income we earned in our country of main residence. So, the prudent thing to do is provide the following documentation:
- proof that we and our families (if that’s the case) are permanently living abroad,
- a residence certificate issued by the foreign tax authority, which clarifies that we are a tax resident of another country, (for example, in the US we must complete and file with the IRS the Form 8802, “Application for United States Residency Certification”, and thus obtain the 6166 Form “Certification of U.S. Tax Residency”)
- a certificate of employment, proving that we are employed by a foreign employer, or
- any insurance documents, or evidence of assets, in case the above-mentioned documents are not possible to obtain.
Unfortunately, when it comes to Greek taxation law, nothing is stable or predictable. On the contrary, everything is literally liquid. Statutes, laws, amendments, decrees, announcements, and interpretations keep coming out daily. It is extremely difficult to keep up with all the changes and to keep updated and informed. It takes a wide and reliable network of professionals, like my associates in Greece, to be on top of things and be able to provide reliable answers and solutions.
I encourage you to ask questions in the comments below.