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Converting a Sole Proprietorship to an IKE: When Is It Really Worth It?
Published · 7 min read · NS Accounting & Tax Office
Many freelancers and sole proprietors eventually face the question: is it worth moving to an IKE? The answer is not the same for everyone — it depends on profit levels, the risk you assume and your business growth goals. NSTAX, an accounting firm in Athens, analyses when the conversion genuinely makes sense and how it works in practice.
Sole Proprietorship vs IKE: The Key Difference
In a sole proprietorship, income is taxed on a progressive scale that can reach 44%, while the entrepreneur has unlimited liability with their personal assets. In an IKE, the combined tax burden is around 27% (22% corporate tax and 5% tax on distributed dividends), while partners’ liability is limited to the company capital.
For a detailed comparison, read our guide to choosing between an IKE, OE, EE and sole proprietorship.
When the Conversion Is Worthwhile
- Annual profits above €20,000-25,000: Above this threshold, the IKE tax burden is usually lower than progressive taxation for a sole proprietorship.
- Need to protect personal assets: If your activity carries business risk, the limited liability of an IKE is a major advantage.
- Plans for partnership or expansion: An IKE makes it easier to admit new partners or investors, which is practically impossible in a sole proprietorship.
- Scope for salary-dividend tax planning: As an IKE manager, you can combine management remuneration and dividend distributions to optimise the overall tax burden.
When It Is NOT Worthwhile (Yet)
If your annual profits are significantly below €20,000, the additional accounting cost and administration of an IKE (double-entry books and annual financial statements) may not be offset by the tax benefit. In these cases, it is usually better to remain a sole proprietor temporarily.
How the Conversion Works in Practice
Technically, this is not a legal conversion of the existing business, but the incorporation of a new IKE with the contribution of the sole proprietor’s assets, alongside closing the sole proprietorship. The process includes:
- 1. A tax and accounting review of the existing sole proprietorship
- 2. Incorporation of the new IKE through the electronic One-Stop Service (e-YMS), usually within 2-4 working days
- 3. Contribution of the sole proprietor’s assets to the new IKE
- 4. Closure of the sole proprietorship, with final VAT, income tax and myDATA filings (5-10 working days)
Important: under certain conditions, current law provides an exemption from capital gains tax when assets are contributed to the new IKE — a condition is that the sole proprietorship must have operated for at least two years before the conversion.
After incorporation, see our myDATA and electronic invoicing guide for businesses, as well as NSTAX services for businesses.
Frequently asked questions
Can I directly ‘convert’ my sole proprietorship into an IKE?
Do I lose my tax number or GEMI registration number?
How long does the entire process take?
Are there tax incentives for the conversion?
Considering Converting to an IKE?
NSTAX, an accounting and tax firm in Athens, examines your business figures and shows you precisely whether and when converting to an IKE is worthwhile. Contact us for a personalised analysis.
Tax thresholds and incentives may change under newer legislation. Contact us for an accurate assessment of your own circumstances.