The world of international taxation can be a labyrinth of regulations and complexities. For individuals and businesses with ties to both Greece and Canada, the Greek-Canadian Double Tax Treaty (DTT) serves as a vital navigational tool. This agreement, officially titled the “Convention Between Canada and the Hellenic Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital,” aims to streamline cross-border transactions and foster economic cooperation between the two countries.
Understanding the key provisions of this treaty is crucial for navigating the often-murky waters of double taxation. The contents of the Double Tax Treaty are freely available at through the official Canadian government (www.international.gc.ca) and the specific treaty itself is accessible through laws-lois.justice.gc.ca.
In this article, we will unpack the essential that impact individuals and businesses operating in both Greece and Canada.
Our accounting and legal partners specialise in helping:
- Greek Canadians in Canada with Tax and Accounting issues
- Canadians looking to move to Greece requiring assistance with tax and legal issues
- Clients with migration to Greece and with visa and investment options
- Canadians companies operating in Greece who are looking to open a company or comply with regulations.
- Dual national Greek and Canada nationals with inheritance, tax and other issues including purchasing and comply with property tax requirements.
Establishing Residency: The Cornerstone of Tax Liability
The first critical element addressed by the treaty is residency. Article 4 of the DTT outlines the concept of “resident” for tax purposes. Determining residency is paramount, as it dictates which country has the primary right to tax an individual’s income. The treaty provides clear definitions for residents based on factors like permanent home, habitual abode, and center of vital interests.
For individuals with dual residency, the treaty implements “tie-breaker” rules to resolve potential conflicts. These rules consider factors like nationality, permanent establishment (i.e. if you have a permanent home available), and habitual place of abode (which can apply if you have a permanent home available in both Greece and Canada), ultimately assigning residency to the country with the stronger claim.
Employment Income: Where the Work Gets Taxed
Earning an income through employment often involves working in one country while potentially having tax residency in another. To address this scenario, Article 15 of the DTT specifies that, in general, the country where the employment is exercised has the right to tax such income.
However, the treaty provides relief from double taxation for individuals in specific situations. These situations may involve exceeding a specific time threshold of employment in the non-resident country, or when the employer is not a resident of either country and the employee bears the expenses of the work. In such cases, the treaty allows for the potential exemption of employment income from taxation in the non-resident country.
Dividends and Interest: Mitigating Withholding Taxes
Income derived from investments in the form of dividends and interest often involves cross-border transactions. Articles 10 and 11 of the DTT address this situation by limiting the rate at which these passive income streams can be taxed at source. This means that the country where the dividends or interest originate can only impose a tax on these payments within the limits set by the treaty.
Furthermore, the treaty offers potential exemptions or reductions in withholding taxes at source in certain circumstances.
Capital Gains: Taxing the Disposal of Assets
The DTT also addresses the taxation of capital gains, which represents the profit earned from the disposal of an asset. In general, Article 13 outlines that capital gains are taxable in the country of residence of the taxpayer. However, specific provisions apply to gains from the disposal of immovable property (land and buildings), business assets and other assets.
For immovable property, the treaty stipulates that the country where the property is located holds the primary right to tax any capital gain from its disposal.
Other aspects of the treaty
The treaty covers a number of other areas which are not mentioned above and are often of interest to those with sophisticated cross-border interests. These include the definition of permanent establishment, income from business profits, international shipping and air transport, associated enterprises, dividends, interest, royalties, capital gains, directors fees, pensions, annuities and entertainers and sportspeople.
Eliminating Double Taxation: A Balancing Act
The core objective of the DTT is to prevent individuals and businesses from being taxed on the same income twice. The treaty achieves this through various methods outlined in Article 23. This is reassuring to Greek Canadians who live move from Canada to Greece and Vice Versa. It ensures that the prospects of paying tax twice are eliminated and that you can operate in both countries knowing there are set rules in place.
From a practical perspective, there is some cost to the process of complying with the law in Greece, including having documentation providing by the Canadian Government in English translated into Greek and apostle when required. It’s important to find out exactly what documentation is required by the Greek Tax Department to ensure the translation costs are minimised and that only the necessary documents are translated and apostled.
Client Testimonials
Tsaks Consulting assisted me with complex advice on the Canada and Greece Double Tax Treaty. My situation was somewhat complicated with multiple assets and sources of income in both countries. The team was able to provide initial advice on the optimal structure. They also referred us to a specialist tax lawyer who had the specialised knowledge to assist with a few key points. They are reliable and responsive and they also communicate well with our accounts in Canada. The team is expat-focused and they speak english fluently. They answer questions fairly quickly and respond in detail when you require. I have confidence in them.
Peter K | Private Individual | Canada and Greece
The team is particularly knowledgable about company establishment in Greece and has experience assisting Canadian companies. They answered all of our questions quickly and have well informed advice about expanding into Europe. They understand the regulatory landscape as well as can advise you on the optimal corporate structure. They understand the intricacies of the Canada Greece double-tax treaty and how it applies in a corporate context. They also speak fluent English of course. Overall, we were very happy with them.
Geoffrey P | Canadian based Corporation | Canada