This thread aims to provide information on how much tax someone would be liable to pay if their tax status has to change to Tax Resident in Greece after 31 December 2020. It follows on from three previous threads: Greek-UK Tax Status
, How Does Tax Residency Affect Tax Returns
and How Does Tax Residency Affect How Tax is Assessed?
It doesn’t cover all possible scenarios, since it is based on my own experience, so some people might need to do a bit more digging. It is also worth noting that tax codes tend to change more rapidly than other aspects of the legal system so its relevance may decline sooner rather than later.
There are undoubtedly some people who come to work in Greece on a self-employed basis. I have little knowledge of this, other than they are treated abysmally both by the tax rules and by the tax inspectorate, so I am not going to try to cover their tax situation. Carol does know this area well and she might decide to add some comments to the thread.
People who come to work for a company on a salaried basis (1) and people living here on pensions are treated the same with respect to tax so my comments apply to both. Basically the way taxation works in Greece is very similar to how it works in the UK and the differences are in the detail.
Anyone working here on a salaried basis has EFKA stopped from their salary, at a rate of around 16 %, before tax is assessed, in the same way that NI is stopped before income tax is assessed in the UK. People living on a pension will not need to pay EFKA(2).
As discussed in the earlier threads, some types of income remain liable for tax in the UK so they will not be assessed for tax in Greece. You can ignore them when calculating Greek tax. This is the main reason that becoming Tax Resident in Greece is often not as bad as people think it will be because the income left liable for tax in the UK benefits from the UK tax free Personal Allowance.
The Greek income tax system operates in bands in exactly the same way that the UK income tax system operates. While it is true that technically there is no tax free Personal Allowance in Greece, there is a tax rebate that acts in the same way as a Personal Allowance, i.e. it reduces your tax liability. In the UK you currently ignore the first £12,500 before starting to calculate income tax. In Greece you calculate income tax from the first Euro and then reduce the amount due by the rebate. For tax year 2019 the rebate is €1,900 (3), which is equivalent to a Tax Free Allowance of €8,636. The first tax band has a rate of 22 % so if your income was €8,636 your tax would be assessed as €8,636 x .22 = €1,900 - €1,900 Rebate = €0. Unfortunately the rebate is not fixed. If you have income over €20,000 then the rebate reduces by €10 for every €1,000 over €20,000. In the UK the Personal Allowance doesn’t start to reduce until you earn over £100,000, i.e. a much bigger threshold, but it then reduces at a rate of £1 for every £2 earned over £100,000, i.e. a much steeper rate of decline. In order to qualify for the full rebate in Greece you also have to spend a percentage of your income electronically (4), i.e. with Direct Debits, Standing Orders, Bank Transfers and Debit/Credit Cards. This is also calculated in bands. All the above are calculated as a percentage of salary or pension income and don’t take into account other income sources.
For 2019 the tax bands and tax rate in each band in Greece are as follows:
€0 to €20,000 22 %
€20,001 to €30,000 29 %
€30,001 to €40,000 37 %
Over €40,000 45 %
In order to qualify for the tax rebate the bands and the percentage required to be spent electronically in each band are as follows:
€0 to €10,000 15 %
€10,001 to €30,000 20 %
Over €30,000 25 %
Tax on bank interest is levied at 15 %. I think the same rate is applied to dividends but I am not certain. In the UK I think both bank interest and dividends are taxed at your marginal tax rate, i.e. they are taxed at the basic rate but if you are in a higher tax band you have to pay the extra. To offset that I think that there is now a savings allowance of £1,000 per year income from savings which is tax free and that does not exist in Greece nor do ISAs.
One area of Greek taxation is completely different from the UK and that is the solidarity tax that was introduced in response to the financial crisis. It is applied to all taxable income from whatever source, on top of whatever other tax is already deducted from that income but is not currently applied to income that is non-taxable in Greece. It was supposed to be a temporary tax but has proved quite persistent. It operates in bands, like income tax with the following bands and tax rates for 2019:
€0 to €12,000 0 %
€12,001 to €20,000 2.2 %
€20,001 to €30,000 5 %
€30,001 to €40,000 6.5 %
€40,001 to €65,000 7.5 %
€654,001 to €220,000 9.5 %
Over €220,000 10 %.
Hopefully that will allow most people to calculate what their tax liability would be if they were tax resident in Greece. From 1 January 2020 there are major changes to the tax code. They are all outlined in the link to a KPMG information page
posted elsewhere so I will not repeat them here. The general principles are the same as outlined above so people should be able to calculate their possible Greek tax liability after 1 January 2020 by simply changing the figures to those in the KPMG link.
1 I don’t think every job has now adopted EFKA but the vast majority have. It is possible that somebody might take up a job in Greece covered by different insurance rules.
2 A certain amount of EFKA is deducted from Greek pensions but people declaring UK pensions would not be subject to EFKA.
3 There may be other higher levels of rebate applicable to families with dependent children but I don’t currently have the details. For a couple who both have income they both qualify for the rebate independently.
4 People over 70 can opt out of the need to spend a percentage of their income electronically but they would then need to keep paper receipts.