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May 2013 Archives

New Greek Tax Laws Amended By Greek Parliament, 2013.Gotta raise the money somewhere!

The TROIKA has come calling again , with its auditing eye.  A major overall bill was enacted by the Greek Parliament this April 2013,including tax amendments("reforms"?)and new austerity measures (including extension of the hated real property tax,paid through the DEH bills /which has been reduced to 15%;and providing for more public employee layoffs of 15,000 people. ) I will adress the real property taxes in another installment of this blog soon-since we have hundreds of our US clients asking about these issues).However, in this installment I would like to focus on the income tax changes.    There is no question that the new tax law provisions are designed to raise revenues. However, there is also the general consensus that they raise the tax burden on the average Greek resident.  This is the price,it seems,for almost 9 Billion EUR of rescue loans/aid. Without these loans Greece cannot pay its TROIKA debts(particularly pressing ECB bonds) and cannot meet ,inter alia, public pension and entitlement obligations. All with a deep recession;stagnant growth and public demonstrations daily from a mix of union bosses;anarchists ;communists ;and ultra right wing nationalists.(Any takers for Samaras' job?). In any event, as they say, I digress, and now I will get to the point or summarizing the Greek income tax changes. For individuals-(ie your regular employee), a tax credit rising to 2100 EU is given to those making up to 21000 EU annually;with a lesser credit to those making more.  The tax rate for income up to 25000EU is 22%;and 32% for income above that to 42000EU.For income above 42000EU the rate is 42%.  And ,oh yes, many deductions are abolished including rental payments and loan interest paid. For small business (ex. like our US sole proprietors/ mom and pop operations) there is a tax rate of 26% for income up to 50000EU and a rate of 33% for income above that.  There are some rate deductions for the first 10000EU income for new businesses ,in the first three years of their formation. Business entities (AE, OE,EPE,EUCO)will see their income taxes raised from 20% to 26% on tthe first 50000EU and 33% on the excess.    For Greek Americans receiving income/dividents from Greek SA corporations, the withholding rate is reduced to 10%;and likewise the witholding rate on Greeks receiving dividents from US investments, is reduced from 25% to 10%. [There are multiple other changes including to the VAT tax;"luxury life tax"!!-and, like I said above, effecting those who own Greek real estate.] Why will i deal with those taxes in a sepertate blog? Well , it has gotten so bad that no Greek lawyer can give any foreign investor any tax opinion anymore--thats how many chabges there are. There are probably now six different taxes on Greek real estate ownership!!!!(See my article on the Greek legal system crippling business growth-found on our main site).  In any event, do these changes walk the narrow tightrope of increasing competitiveness and growth-while maintaining social order and cohesion-- ie. more riots and social turmoil? I conclude thet they do not primarily  aid growth and competitiveness-although I have written that the related issue of the innefficient and unpredictable Greek legal system is the worst culprit. What they are ,however, is a temporary band aid to get the loans,survive another year and keep some social order and political cohesion.  Stay tuned!

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