Introduction to the Greek / Israel Economic Relationship
Given the significant improvement in relations over the past thirty years, it is not surprising that the economic relationship between Israel and Greece has been growing consistently over the past few decades. On the 24th of October 1995, the relationship was given a significant economic boost by the signing of a double tax treaty between the two countries.
The treaty (DTT) was successful in promoting transactions, foreign direct investment and the transfer of know-how and the exchange of goods and services between the two countries. The DTT ensures the avoidance of double taxation for residents in both countries, has established a consistent tax framework and has eliminated any discrimination within the process.
For investors based in Israel who are investing in Greece, the DTT provides certainty on how dividends, capital gains, and other forms of income are taxed and where the tax is payable. As more and more Israeli individuals and companies have invested in Greece over recent years, the double tax treaty between Israel and Greece has become a critical instrument providing certainty to Israeli investors in Greece.
Tax coverage of the Greek Israeli Double Tax Treaty
The DTT covers both Greek individuals and companies that are actively doing business in Israel, as well as Israeli companies and individuals who are actively conducting business in Greece. This includes, among other activities, conducting trading business, purchasing real estate and making capital gains, purchasing and selling corporations and businesses and investing in real estate developments. The treaty sets out set criteria for the determination of tax liabilities including in which country.
The taxation of real estate capital gains and income in Greece for Israeli investors and residents
The treaty stipulates that real estate income regarding investments in real estate in Greece are taxed in Greece only. In addition, there is a law which dictates that there is 15% tax on any real estate capital gain made since 2013, however, this tax has not been activated. This in practice means that for any profits from real estate transactions (this applies to Greece and non-greeks) there is essentially no tax on the profit. However, if an individual trades more than three properties in two years, then they are taxed as a sole proprietorship. This is because they are essentially defined as carrying out a business.
With respect to income from rentals, which is classified as income, the tax rates are higher for individuals. It is a progressive scale of income applied. Where there is a company involved, the tax on income generally works of the corporate tax rate of 22%. Therefore, you need to give much thought and take advice from an accountant (or our team) about the optimal purchase structure for any property investment.
How our partner accountants and tax experts can help you adopt the best company structure
There are a variety of key points to consider when choosing the optimal method for purchasing property in Greece. For example, the dividend tax in Greece is 5% which is very low. You pay this amount in Greece, with the difference being paid in Israel. This assumes you are not considered a Greek resident for tax purposes.
The tax payable on the interest in case of a loan injection by a lender is 15%. The key point is that there is scope for tax planning given the difference between the 22% corporate tax and 15% interest tax, as well as the 0 applicable dividend tax on the loan injection.
It is also important to note that there is no capital gain tax for foreign individuals or companies. There is a capital gains tax on Greek individuals. There is therefore further opportunity if you explore the Double Tax Treaty further for efficient tax planning.
How we can help Israeli individuals and companies invest in Greece in a tax efficient manner
Whether you are purchasing properties or investing in Athens, Thessaloniki, Crete, Rhodes or other parts of Greece, investors and individuals from Israel have the comfort of knowing there is a Double Tax Treaty in place. If you keep your local tax citizenship, you won’t be unnecessarily taxed twice.
For small property purchases, the costs and administrative processes of operating a company often do not result in the formation of a company being the most efficient method. Speak with our team today to discuss your options. We work closely with our partner accountants and lawyers to deliver optimal solutions.
In addition, we have experience in helping organisations from across the globe establish a company in Greece as well as identify opportunities for government contracts as well as business opportunities in the private sector in Greece and across Europe. We also have experience advising on the Golden Visa Program as well as other Visa programs for residency purposes.
Speak to our team today to find our which of our accounting partners is best place to help you.
Client testimonials
We have a number of major projects and whilst we were happy with our existing accountants, we wanted to double check advice and make sure everything was structured correctly. We engaged Tsaks Consulting and had some initial discussion around the double tax treaty between Greece and Israel. We engaged on of Tsaks Consulting’s partner accountants to provide us advice on a specific question and structure. They were excellent. We have since used Tsaks Consulting and one of their partners lawyers to assist with some regulatory advice and an important approval process. They always act with integrity. The team at Tsaks Consulting is the team we trust in Greece.
Isaac C | Property Investor | Israel and Greece
My first encounter with Tsaks Consulting was over email. Everything flowed well and the team is very responsive and on the ball. We then arranged from our lawyer in Tel Aviv to speak with them and he was also impressed. We then requested for advice on our current structure. Our team spoke with the one of their accounting partners, and them briefed them on a project we needed which also required advice on the Double Tax Treaty.
Adam P | Private Company | Tel Aviv, Athens and Milos