As a general rule, the withholding tax is charged at a rate of 10%, and it is imposed to local businesses that pay dividends or remit profits to their foreign parent company abroad. However, this tax is not charged to branch offices. Special tax regimes can apply to foreign companies operating in the shipping industry, that will set up a branch in Greece.
What is the value of foreign investments in Greece?
Considering that the branch office
is a type of entity that is selected for incorporation by foreign companies
, we have decided to present a short list regarding foreign investments in this country, so that those who will open a Greek company
can have a better image on the country’s main investors and investment values:
- • the value of the foreign direct investment (FDI) inward flow increased from $3,973 million in 2017 to $4,631 million in 2018;
- • the FDI stock also increased from 2017 to 2018 from $34,853 million to $40,513 million respectively;
- • Greece was also the recipient of greenfield investments which, from 2017 to 2018 decreased on the total number (from 43 to 34), but which increased in value (from $981 million to $1,841 million);
- • the main foreign investors in Greece are all from EU countries, and the top 3 is represented by Germany (26,2%), Luxembourg (21,7%) and the Netherlands (15,6%);
- • foreign investors prefer to invest in the manufacturing sector in Greece (accounting for 26,2% of all foreign investments in 2018), and in the information and technology industry (17%).
What is a permanent establishment in Greece?
Those who want to open a branch office in Greece must know that this entity is included in the category of entities that define the permanent establishment. The permanent establishment is recognized under the Greek law as a unit that is set up by a foreign company in another country, created with the purpose of developing a commercial activity or another type of business activity.
Thus, those wishing to open a company in Greece as a branch office must know that this entity is considered a permanent establishment (PE). The PE in Greece is defined following the same principles that are established under the OECD Model Tax Convention.
In Greece, the PE is formally recognized under the Greek Corporate Income Tax Code, which stipulates that the PE is a place of business of a foreign company, where the foreign company develops all its commercial activities or a part of its commercial activities.
The PE takes into consideration a wide range of business places, such as a place of management, a branch office, an office (the representative office is also a PE, but which does not undertake commercial activities, instead, it carries research and marketing activities in the name of the foreign company), a factory, a workshop and others.
It is worth knowing that the PE also refers to other entities, such as those set up for the purpose of extracting various goods from the soil, such as a mine, oil wells, gas wells and other places designed for the extraction of natural resources. If you need further information on what other types of entities can constitute PEs, please address to our team of specialists in company registration in Greece.
According to the law in Greece, a business location of a foreign company can be considered a PE only if it will be established in Greece for a period of minimum three months. However, in the OECD Model, which is followed by most of the countries, a minimum period of 12 months is required for a location to be considered a PE, so please mind this rule that is applied here when opening a branch office.
What are the tax obligations for PEs in Greece?
The definition of a PE establishment is important in the context of the manner in which the unit will be taxed. This is why the PE is defined by the Greek Income Tax Code
. If you want to open a company in Greece
, you will definitely have tax obligations
pertaining to this Act, but with regards to PEs and branch offices,
Article 100 defines the manner in which the taxation is carried out. The following must take place:
- • the foreign company has one or more units that can are considered PEs under the Greek law (as mentioned above);
- • the unit of the foreign company develops activities related to the processing of raw materials;
- • the above mentioned condition can apply if the premises is owned by the foreign company or if the location is rented from a third party in Greece;
- • the unit develops activities in Greece through a representative;
- • the representative has received the right to act on behalf of the foreign company;
- • it maintains a stock of merchandise in a warehouse in Greece.
The Greek tax laws treat the PE as being a different entity that the parent company, which, in the case of a branch office as well as other dependent units, is not the case from a legal point of view, given that the parent company has full responsibility towards its units – especially in the case of a branch office.
However, when determining the taxes charged on the income of the PE, the principle of separate entity will apply, in accordance with the rules of the Article 105 of the Tax Code. This article imposes the arm’s length principle, through which the PE will be taxed as a separate entity.
This law imposes PEs to maintain very clear books of accounts and records as if they were Greek based entities. PEs must, thus, comply with the accounting obligations applicable under the Greek accounting law. Such entities must always have the necessary documentation regarding the commercial activities developed in Greece, as well as those related to the parent company abroad.
All these documents are necessary for the tax assessment that is done by the Greek financial authorities at the end of the financial year or whenever necessary. If you need tax assistance on tax advice, do not hesitate to address to our team of consultants in company registration in Greece, who have the legal right to provide both tax and accounting services. Our team can present the accounting obligations a PE has, including the ones of a Greek branch office, so please contact us for advice and consultancy services.
If you want to find out other key elements of the Greek economy,
you can always check the statistics publications issued by the Hellenic Statistical Authority
, where you can find information on economic sectors, foreign and local companies, the Greek economy
and society, immigration and others.