Non-residents: assumptions for the acquisition of income in Greece abolished as from 1-1-2011

4/5/2011

An amendment to the Greek Income Tax Code abolishes the application to non-residents of assumptions on the acquisition of income in Greece; the new regime applies as from 1-1-2011.

The Greek Income Tax Code contains provisions establishing certain assumptions for the acquisition of income, based on the expenses incurred by individuals and on their belongings. So for example if an individual owns or uses one or more of the items listed in the law, it is considered that he earns a certain amount of income in Greece. The courts have ruled that the use of assumptions for the determination of the income of an individual is lawful, as long as the assumptions do not result in creating fictitious income for the individual but they are used in order to reveal existing income that is not declared by the taxpayer. These provision were applied equally to residents and non-residents.
In practice, the application of the assumptions to a non-resident resulted in the attribution of income to non-residents that own or use a summer-house in Greece. The amount of the attributed income varied, depending on the location of the property, the size of the property, the existence of a swimming-pool, etc. Given the fact that there is no tax-free bracket for non-residents, an amount of tax was always imposed on the non-residents that owned real property in Greece. The problem with the application of the assumptions to non-residents is that in fact it attributed a FICTITIOUS income to non-residents.
The amendment corrects this problem. No income may be attributed to non-residents by way of application of the assumptions that apply to Greek tax residents.
The assumptions however continue to apply to non-residents that acquire in income in Greece.

25 Comments

Terry Cook

5/7/2011 08:03:29

What is the ref for the Law which enacted this change please ? My accountant in Lesvos doesn't seem to know about it !
Thanks, Terry Cook

Katerina

8/7/2011 03:46:47

Terry, I refer to the new provision of Article 18 letter "η" of Law 2238/1994 (Income Tax Code), introduced by Article 21 para.3a of Law 3943/2011.

Gillian

31/8/2011 13:34:55

What if you are classed as a resident but live on a private UK pension which is half the imputed income based on Greek property?

Katerina

3/9/2011 09:27:18

Gillian, the rules for imputed income apply equally to all residents (irrespective of nationality).
In case the reported income is less than the imputed income, the individual's tax liability is calculated on the basis of the imputed income.

Gill

10/10/2011 18:45:02

1.
Even if you are classed as a Greek tax resident, how can you be taxed on the notional or fictitious income? I would have thought this was illegal. Like Gillian (above) my pension, which we live on is half the fictitious income for our property.
2.
My pension is a UK Government pension. I believe I can only be taxed on this in the UK. Am I correct?

Katerina

11/10/2011 09:55:36

Hello Gill,
1. Greek tax residents who have TEKMERIA (items for which notional income is calculated) must declare income higher than the notional income (in other words: How can you maintain a house that its annual maintenance costs 100 euros when you earn only 50 euros?). If the declared income is less than the notional income, the taxpayer is taxed on the notional income.
The system has been tested by the Greek Courts and it has been found compatible with the Constitution.
2. Thats correct (unless, of course, you are a Greek citizen AND you are not a UK citizen).

Robert

11/10/2011 17:49:38

I am a UK citizen and tax resident in the UK, where I pay all my taxes on my UK sourced pensions. I own four holiday properties in Greece, and receive a modest rent of 330 euro per month on one property. I am taxed in Greece on my Greek sourced income but not on my UK sourced income (taxed in the UK) - which I am content with. However, I have just received a tax demand under law para 29, v.3986/2011 levying a "solidarity tax" of 1,800 euro on my global income (already fully taxed in the UK) that I was forced to declare on my E1 tax return (box 659) to cover my TEKMERIA. Is this outrageous demand on my UK taxed income legal under the double taxation treaty with the UK? Or is it a tax trap! Thanks!

gill

11/10/2011 19:28:05

Thankyou for your response Katerina. In response to your answer to my first question, we COULD manage our bills on half the fictitious income for our house by living frugally. We have done the sums. That would be our choice. What we can't do is pay tax on a NOTIONAL income because we haven't got the money! The obvious answer would be to sell the house BUT that would not be quick or easy. Putting 20% on the notional income because it is detached is not rational. Can you explain that please?

gill

11/10/2011 19:54:25

PS Re: Notional income - I also wanted to ask how an older car is cheaper to run than a newer car which might covered by a warranty (30% and 50% reduction for cars older than 5 and 10 years respectively)?
In my experience, the older the car, the more goes wrong.

Katerina

22/10/2011 04:34:02

Hello Robert,
the solidarity tax is levied (in principle) on the income you declare in Greece, both on the items that are taxable in Greece and on those that are tax exempt or are taxed at a special rate. There has no been no discussion here on the DTC issues, which you are right to point out!
As far as I know there is no guidance from the tax authorities on this particular issue: the conflict of the rules on solidarity tax and the tax exemption based on DTCs.

Katerina

22/10/2011 04:51:34

Hello Gill!
the rules about notional income can indeed be absurd and in my view, as with all rules on fictitious income, they are at the same time too high for the sincere taxpayer and too low for the insincere taxpayers (they penalize the sincere ones and they do not help combat tax avoidance). In many cases sincere taxpayers could attack notional income rules, however for individuals this would be a much bigger trouble (going to litigation) than the benefit they would gain.
About cars: I do not know the reason behind the Governments choice to calculate higher TEKMERIO for new cars, that in principle are less costly to maintain. I can only assume that this could be related to the culture of Greeks: at some point it was 'necessary' that one buys a new car every three or four years :) and such (irrational) consumption should be somehow 'penalized'? But this is really just a guess...

Eva Gionis

2/1/2012 19:51:55

Hello there
My husband and I live in the USA, and we also have a tax ID in Greece , because of an inheritence of a piece of land. I have nothing else in Greece, and also no income.
My sister, which is an antiklitos, filed income tax for us as allodapos with no income. We received an ekatharistilko
in the amount of 387 euros, which is $250.00 for 2011, and 1/2 of 2012. It shows that we had income in Greece of 5,000 euros.
We did pay the required amount for 2011. My accountant in Greece had no answer.
Do you have any knowledge of this particular law, if it is correct ?
We thank you very kindly.
Eva

Uschi Niemann

23/9/2012 05:43:57

Unfortunatelly it seems to be correct - although it is a very,very strange new law/tax. I also just payed that tax on a notional income, as I have no income in Greece, but a property. according to the size of my property, the expect my notional income on 2.500€/year. I had to pay 197€ for that, no way! And on top of that the greek tax administration asks for an apostille from my german tax admn. that I pay my tax in germany.

Katerina

3/1/2012 13:57:15

Hello Eva!
I am familiar with this provision in the Greek Income Tax Law. It was enacted in 2010 and, in my view, it is, to say the least, an example of bad legislation. It attributes a minimum fictitious income to all taxpayers: 5.000 euros for married couples, 3.000 euros for singles.
The Ministry said this will not apply in FY2012 (that is for the tax period of year 1/1-31-12/2011), I guess because of the provision that I refer to in this post (the fictitious income will not apply to non-residents who derive no income in Greece).

Katerina

Uschi Niemann

23/9/2012 05:46:43

So why did I have to pay??? I defenitely have no income in greece, but a property on which they measure the fictious income.

christine hall

2/4/2012 09:43:58

Until 2010 I lived in Greece with my husband,we returned to UK where he died,I live in UK, except for 2 weeks a year when I go to the property in Greece, which is for sale.Now they have given me a tax bill for the house and car and a second bill for the car,saying it was luxury.The car was sold when my husband died.I am a pensioner I do not get enough money to pay these taxes and rent a property here in UK .The amount is 11,000 euros imputed income.Am I not exempt because I am only in Greece for 2 weeks a year,,I thought it was for people who were there for 183 days or more.How do I prove to them I don't live there.

Maria Hassapi

24/5/2012 12:56:06

Hello Katerina
I am a non resident in Greece and I have no source of income in Greece. I just have a flat in Athens which I bought a few years ago and I use occasionally for personal reasons only. I wonder which Tax Forms do I have to submit this year and whether I am obliged to declare a notional income regarding the flat.

Gail

19/6/2012 06:47:32

Hello,
I wonder if you could clarify the current situation for the 2011 tax year please? I am trying to complete my tax return at the moment but my accountant tells me that they don't have a ruling on how to treat my tax situation. I am non-resident, I have a holiday home in Crete (113 sq m) and visited for 6 weeks in 2011. I do not let my property out and I received no income in Greece. What do you think my tax liability should be. Thank you.

Katerina

23/6/2012 15:35:42

Hello Gail,
non-residents that do not acquire any income in Greece are not subject to the notional income rules and therefore in principle no tax should be assessed.
Your accountant who has the full picture is in the best position to assess your overall tax liability (if any).

Michael

14/8/2012 12:13:23

Dear Katarina, Following on from your reply to Gail, I am in the same position as her: I own a holiday home which I visit for less than 183 days a year, I do not rent it out and I receive no income in Greece, therefore the imputed income rules do not apply. But my accountant says I must prove I can afford to maintain the house by transferring money every year to my Greek bank account. Can you advise me how much I must transfer?

Katerina

19/8/2012 14:21:26

Hi Michael,
since the imputed income rules do not apply in your case, I do not see to whom you have to prove that you can afford to maintain the house in Greece.
But maybe your accountant knows something else or he has something else in mind and that is why he gave you that advice (eg preparing for the future?).

Accountant London link

21/9/2012 12:08:33

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charles murrell link

21/11/2012 06:22:14

I am British and live on Crete and live in a rented house. I own a house in the UK which I rent out and have a personal UK pension. I would like to move the pension off shore but would like to know if I am libel to pay tax on this pension, I have been told that, for tax purposes, I am non resident and not libel for Greek tax. Is this correct as it is difficult to follow all the tax rules here.

Michael

21/11/2012 07:50:31

Charles -- since I made my post in August (above) I have changed accountants and I am now advised that the key issue is whether ex-pats spend more or less than six months a year in Greece. If you live in Greece for more than 183 days you ARE counted as resident for tax purposes, regardless of whether you are renting a property or living in your own house, and regardless of where your income is paid. The Greek tax authorities will demand a tax return in those circumstances and if you have already paid tax on your pension in the UK you will need to prove that by, for example, producing your P60. I agree with you that it is all very confusing and everyone I speak to about this has a different version of the rules (which seem to be made up as they go along!) Maybe Katerina will have better information for you, but I strongly advise that, if you are living in Crete full time, get a good accountant.

MaryPena link

24/12/2020 01:28:42

Great reaading your blog post

Non-residents: assumptions for the acquisition of income in Greece abolished as from 1-1-2011

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