Company Tax Residence: When a Company Is Considered Greek

The Three Criteria for Tax Residence

Under the Income Tax Code, a company or legal entity is considered a tax resident of Greece for a tax year if at least one of the following criteria is met:

• It was incorporated or established under Greek law
• Its registered office is in Greece
• Its place of effective management is in Greece at any time during the tax year

The first and second criteria are relatively straightforward to establish formally. The third, however—the place of effective management—creates the most practical issues, because it is assessed substantively, on the basis of the actual circumstances, rather than simply where the company is registered on paper.

What Does “Place of Effective Management” Mean?

The place of effective management is not determined by a single indicator, but is assessed as a whole using criteria such as:

• The place where the business’s day-to-day management is exercised
• The place where strategic decisions are made
• The residence of the majority of shareholders or partners
• The place where the annual general meeting of shareholders or partners is held
• The place where books and accounting records are kept
• The place where meetings of the board of directors or another executive management body are held
• The residence of members of the board of directors or another executive management body

None of these indicators is decisive on its own; the tax authority considers the overall picture. The more of these elements point to Greece, the greater the risk that the company will be classified as a Greek tax resident, even if it has its official registered office abroad.

Why a Foreign Registered Office Alone Is Not Enough

A registered office abroad is not accepted where it is in fact merely a mailbox or a drawer in a local accounting or legal office, while the books are kept in Greece, the company’s governing bodies actually make their decisions from Greece, no real personnel are employed in the country of registration, and ultimately the substantive operations are in Greece. In such cases, the tax authority may look behind the formal structure and classify the company as a Greek tax resident.

What Classification as a Greek Tax Resident Means

If a company is classified as a tax resident of Greece, it is taxed in Greece on its worldwide income, just like a wholly Greek company—regardless of where its official registered office is located. This may entail retrospective taxation of income that the business believed was taxed elsewhere, with additional taxes, interest and penalties, as well as double-taxation issues if the other country also considers the company its own tax resident.

A Practical Example

Suppose a Greek entrepreneur incorporates a company in a country with lower taxation, intending to transfer the profits from their online activity there. The company has its official registered office abroad, but in practice the entrepreneur, a permanent resident of Greece, makes all decisions from their office in Athens, the foreign company’s accounting books are kept by a Greek accounting firm, and there are no actual staff or premises in the country of registration.

In a tax audit, the Greek tax authority could argue that the place of effective management is in Greece, based on almost all the criteria (day-to-day management, strategic decisions, bookkeeping and the manager’s residence), and classify the foreign company as a Greek tax resident, retrospectively taxing all its profits in Greece.

4 Questions Before Considering a Company Abroad

1. Who will actually make the company’s decisions, and from where? If the owner remains a permanent resident of Greece and manages the company from here, the risk of classification as a Greek company is high.
2. Will there be actual infrastructure in the country of registration (staff, offices and operations), or just an address?
3. Where will the accounting books be kept, and where will management meetings take place?
4. Have you assessed the possibility of double taxation if both countries claim the company’s tax residence?

An answer indicating that the “foreign” operations are more formal than substantive is a serious warning sign.