Taxation in Agriculture

Chapter 18. Greece

Abstract

This chapter contains a description of tax provisions applied to agriculture in 2019, unless otherwise specified. They include taxes on income and profit, property, good and services, environmental taxes, and tax incentives for R&D and innovation.

18.1. Overview

Agriculture accounts for 11.7% of total employment in Greece (2016) and 31.9% of the population live in predominantly rural areas (2016). Farm sizes are small with the average farm size 6.8 hectares (2013).

Greece has a broad based tax system under which income from agriculture receives special concessions resulting in a reduced tax burden for the sector. Income from some of the Common Agricultural Policy subsidies is exempt from taxation, as is agricultural land from supplementary property taxes and transfer taxes. A flat rate compensation is applied by non-VAT registered farmers with income less than a certain threshold. Agricultural cooperatives and producer groups pay a corporate tax rate which is less than half of the usual rate.

18.2. Income taxation

Individuals are subject to national income tax. Every individual who derives income from sources in Greece is subject to tax irrespective of his nationality, place of domicile or residence. Moreover, every individual with domicile in Greece (more than 183 days) is taxed on their worldwide income irrespective of the individual’s nationality. Due consideration is given to bilateral conventions designed to preclude double taxation. Spouses file a joint tax return but each spouse is liable for the tax payable on his or her share of the joint income.

Taxable income is derived from the following sources:

• employment and pensions

• business activity (which includes income from agricultural activity although taxed differently)

• investment income (income from dividends and interests (taxed at a flat rate of 15%), royalties (taxed at a flat rate of 20%), and rental income from immovable property)

• income from capital gains (taxed at a flat rate of 15%), which includes income derived from transfer of real estate or securities.

Income from employment and pensions is pooled together with income from business activity (including agricultural activity) and is taxed at progressive rates starting at 22% and increasing to 45% under four income brackets.

Rental income from immovable property is taxed at 15% for income between EUR 0 and EUR 12 000, 35% for rental income between EUR 12 001 and EUR 35 000 and 45% for rental income above EUR 35 001. Since 1 January 2017, these tax rates also apply to income derived from short term rentals (under certain conditions).

A special solidarity contribution tax is imposed on total income above EUR 12 000. Tax rates for the special contribution tax are progressive with six income brackets and rates ranging from 2.2% applied to income between EUR 12 001 and EUR 20 000, through to 10% applied to income above EUR 220 000.

All employee and pensioner taxpayers with annual incomes under EUR 20 000 can claim the following tax deductions:

• EUR 1 900 with no dependent children

• EUR 1 950 with one dependent child

• EUR 2 000 with two dependent children

• EUR 2 100 with three dependent children or more.

Taxpayers with annual incomes exceeding EUR 20 000 can still claim these tax credits that are reduced by EUR 10 for every EUR 1 000 of taxable income above the threshold. To qualify for the tax deductions the taxpayer must spend a minimum amount, determined by law, in Greece or in Member States of the European Union or EEA. Spending must be paid via electronic payments.

Profits made by legal persons and legal entities are taxed at the corporate income tax rate of 28% for income earned in tax year 2019 (which will be reduced by 1% annually to reach 25% by 2022). Taxable business income is total business income after deducting business expenses, depreciation and provisions for doubtful receivables. Revenue from business transactions includes income from the sale of the assets by the enterprise and the proceeds of its liquidation. All compulsory social security contributions are fully tax deductible.

Agricultural activity has always been treated differently for tax purposes due to its significance to the Greek economy as well as for the protection of agricultural production. Income from agricultural business activities includes income from the production of agricultural, poultry, livestock, forestry, logging and fishery products.

For individual agricultural entrepreneurs not all Pillar I Common Agricultural Policy subsidies are included in the determination of profit. Profit from business activities includes: all basic aid payments and green payments and coupled aid above EUR 12 000. Investment subsides and other Pillar I subsidies are not taxed.

From 1 January 2020, any transfer of immovable property is subject to a special tax of 15% for individual taxpayers if the gain on the property is more than EUR 25 000 and the property was owned by the taxpayer for less than five years.

If a legal person transfers a property, revenue generated from the sale is added to profits from business activity and is taxed at 28%.

Since 2015, personal income from agricultural businesses is taxed separately but with the same progressive tax schedule as for income from employment and pensions. This has not always been the case. Farmers are eligible for the same tax credits as employees and pensioners. When a farmer is earning income from both employment and a pension, only one tax credit is given.

Over the period 2013 to 2015 the tax treatment of income from agricultural businesses underwent several changes. Up until 2013 personal net farming income from cash based agricultural activity was assessed through an objective method (based on average income for the number of hectares or livestock or other production units). Objective income was then added to the taxpayer’s other taxable income and was taxed at 26% for income below EUR 50 000 and 33% for income over EUR 50 000.

In the tax year 2014, personal farming income was calculated like any other business income (with some special treatment for subsidies) and it was taxed at a flat rate of 13%. From 2014 business profits earned by agricultural cooperatives and producer groups are taxed at a rate of 13%, less than half of the usual corporate tax rate. Until 2012, agricultural income derived by these entities was completely exempt from taxes and in 2013 all income generated by these entities was taxed at 26%.

18.3. Property taxation

Property tax is imposed on all kinds of immovable property (buildings and land). The tax is calculated based on the type of immovable property, region, surface, levels, and age of the building. When the total value of the immovable property exceeds EUR 200 000 a supplementary tax is charged as well. Agricultural land is excluded from the total value calculations for the supplementary tax.

Sale of a new property by a trader is subject to a 24% VAT on the sale price. For property that is not new or where the seller does not carry out an economic activity, the buyer is charged with a real estate transfer tax of 3% on the larger amount between the objective value and the value of the purchase contract. Purchases of first homes are exempt from the transfer of property tax under certain conditions.

Farmers are exempt from transfer tax when purchasing or exchanging agricultural or livestock areas, together with all the associated working capital. This exemption applies to all farmers (young, new entrants or over the age of 40), without any limitations on the value or size of the agricultural land.

Property acquired through inheritance or gift is subject to a tax calculated on the basis of three scales taking into account the degree of affinity between the donor and the heir or beneficiary. For all scales there is a tax-free amount. This is larger the closer the degree of kinship. The tax may amount to up to 40% of the value of the property and is borne by the heir or the donor. No exceptions on inheritance or gift taxes exist for the agricultural sector.

18.4. Tax on goods and services

A value added tax (VAT) is imposed on the sales of goods and services at the following rates: a standard rate of 24%; a reduced rate of 13% for certain goods and services including farm inputs and agricultural outputs; and a super reduced rate of 6% for human health care medicines, books and theatre tickets only.

Farmers with a turnover of below EUR 15 000 and total subsidies received below EUR 5 000 can use a special flat rate scheme. Under the flat rate scheme, farmers who are not VAT registered, are entitled to a refund by the State by applying an additional 6% to the value of sales of their agricultural or forest produce and their supply of agricultural services to other taxable persons. The provisions for VAT compensation do not apply to deliveries of agricultural products for processing and to agricultural services provided to other flat rate eligible farmers or to non-taxable persons.

Since 1 January 2016 there are no rebates for excise duties for fuels available to farmers in Greece. Greece has an excise tax exemption on the use of electricity in agriculture.

18.5. Environmental taxes

There are no environmental taxes in Greece.

18.6. Tax incentives for R&D and innovation

Expenditure on scientific and technological research are deducted from the gross business revenue at the time of their implementation at a rate of 130%. Equipment and instruments used for scientific and technological research purposes are depreciated over three years at a depreciation rate of 40%.

18.7. Other taxes

Greece does not provide any tax concessions to the agriculture sector through its social security system.