Maybe the personal income that is coming from a OE or EE, will be further taxed on personal level? Instead of it being declared as dividends, it must be declared as income from business and get taxed based on higher rates? Need to confirm all this with my Greek accountant, I will post the updates here when I have it more clear. 22% in total is pretty good for Greece
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Freelancer working from Greece via his own UK LTD. Tax Planning options
- Thread starter archer
- Start date
From the screenshot: "Business income generated by partnerships that maintain single entry accounting books is taxed at unified rate of 22%. In addition, any subsequent distribution of profits is not subject to dividend taxation"
It looks like it's the single entry accounting the discriminator between paying 5% upon dividend distribution but i could be wrong.
I was only referring to the fact a UK LTD with a UK director isn't immediately taxed in Greece while a UK LLP is since it's taxed at the partner level.
I am still struggling to understand if the dividends from my UK-LTD will be taxed in UK (with 8.75%) or in Greece (with 5%). My accountant says the first but I read plenty of articles and discussions stating the second.
If it's the first, then my current schema with the UK-LTD is a total fail.
19% of CIT
8.75% of dividends
1500 GBP annual accounting cost (3% of 50K)
This gives more than 30% and furthermore I am exposed to all the risks that are coming from dealing with HMRC and UK laws.
The original idea was to invoice my UK-LTD with my Greek personal company and also pay the dividend taxes in Greece. This could decrease the total taxes to somewhere below 25%, but it would keep all the risks of being accused for virtual invoices, etc
If it's the first, then my current schema with the UK-LTD is a total fail.
19% of CIT
8.75% of dividends
1500 GBP annual accounting cost (3% of 50K)
This gives more than 30% and furthermore I am exposed to all the risks that are coming from dealing with HMRC and UK laws.
The original idea was to invoice my UK-LTD with my Greek personal company and also pay the dividend taxes in Greece. This could decrease the total taxes to somewhere below 25%, but it would keep all the risks of being accused for virtual invoices, etc
I see. You said earlier that there are no transparent entities in Greece. UK LLP is taxed at the partner level in the UK but that concept does not exist in Greece. So I would argue both entities will be regarded in a similar way by the GR tax authorities: foreign companies. Of course I am just theorizing, I do not know of precedents.
Indeed the LLP will be taxed like a company in Greece but using the LLP could end up being more beneficial because with a LLP you have limited liability that you wouldn't have with a Greek partnership.
As mentioned earlier, why don't you forget about the UK Ltd and set up a partnership in Greece (OE or EE as you yourself stated, I'm not familiar with them). Both tax rate and maintenance costs will be lower, and it would be by the book. What is stopping you from doing that?
Remember you can combine the partnership with invoicing as a freelance and benefit from the lower tax rates for employment income that you posted earlier. Your effective tax rate should be lower than 22%
Because I have already been paid to my UK-LTD all the previous months. Even if I create an OE, EE, IKE now in Greece, I will need to invoice my UK-LTD, which may cause problems. If I can invoice my UK-LTD with my current personal Greek company, which was the original plan, then it's fine. If I can split the profits between UK and Greece, without problems, it's fine for me. Actually, my main problem for now is the invoicing and not the company schema. My Greek company is equal with my name and I don't know if and how much can I invoice myself without causing issues. Unfortunately I don't have experience with what is the common practices and what the reflections of the authorities are.
Also, as per your previous message, we need to clarify what will happen if for any reason, Greece will ask us to pay all the taxes as a Greek company. Will we have the options to do this by the optimal company schema, eg by creating an OE after this request, or we will be taxed with the current schema = personal company which will lead to lunatic tax rates of 44%?
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Regarding OE, EE, one needs to consider the below "slight" disadvantages:
1. You need to find a partner, who is obliged to pay EFKA contributions. Ideally find someone already registered in EFKA,
2. OE, EE, IKE has to pay "Teli epitideumatos" annualy, for 800-1000 EUR. Personal companies are free of it for first 5 years (its 650 after that)
3. Accounting cost is higher for OE, EE and especially for IKE, compared with personal company
For high net profits (I would say > 30K) OE, EE, IKE become more attractive. For profits <30K personal company is still a good option
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OE, EE accounting costs are 200 euro/month and below (for your needs since it seems you wont invoice much). "teli epiditeumatos sucks". I think that the partner doesn't need to pay social contributions. Finally, I am 100% that there is no dividend tax for such companies. For 100k annually this is maybe the type of company to go. For 30k personal company is fine.
1. Yes. That should be feasible. The other worry the other "silent" partner might have is that OO and EE come with unlimited liability so they might be on the hook withe their assets if the partnership gets sued (which I guess it's unlikely). Not sure if that liability is determined by their share on the partnership (i.e. if they hold 0.1% of the shares, they would only be liable 0.1% of the claim)
2. Doesn't this say the 5 year exemption applies to IKE too?
https://www.aade.gr/menoy/hristikoi...riotitas/pliromi-etisioy-teloys-epitideymatosI'm google-translating so not sure
3. Do you need accountants for this by law or can you do it yourself after perhaps getting help from an accountant the first year. If the whole operation is you and you have "normal" business expenses that should be possible
Regarding where you should pay tax. Your UK Ltd is likely tax resident in both the UK (by virtue of being formed there) and in Greece (place of effective management). That is when the tax treaty comes into play and the first tiebreaker is the PoEM, so Greek. If you have paid corporate tax in the UK you should be able to credit that against Greek CIT. Another option is getting a tax residence certificate from the Reek authorities and showing to HRMC so that they exempt your company from CIT there. I imagine they will do some checks to make sure it is so (no substance there, etc.). That procedure is likely to be a royal pain in the a*s.
I would invoice your UK Ltd from your GR company. It's between two high-tax jurisdictions with similar CITs, so I do not think there would be any problem. If they were to ask (perhaps HRMC suspicious of why your UK Ltd costs are so high as to bring your profit to 0) you can just show them the invoices and the concepts you are invoicing for. If it is the same amounts, you shouldn't have any transfer pricing problems either. Plus I believe transfer pricing is generally applicable to large enterprises
Finally, do you pay 3% of your income for accounting? What do they do?
@hungryPanda
really that high for OE, EE? Is the accounting so complicated if you are alone (with a "dormant" partner as said earlier) and invoice a few times a year? What do the accountants have to do? What about for IKE?
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1. A partner with 1% share of OE, EE, is eligible/liable for the 1% of the profits/losses of the company, however for legal issues, every partner is fully responsible for any liability of any amount that may occur. Even with 1% of a small company he will be liable to pay let's say 5 millions from his own property, in case of a lawsuit (eg an accident, a fraud, etc)
2. For I.K.E. the discount of 5 first years is not valid (95% sure for this, not 100%)
3. You don't need an accountant by law, but laws in Greece are pretty complex, it's good to have an accountant, to avoid issues. The same for the UK accountant, actually he has done nothing the last 4 months (just some questions for less than 1 hour of his time), I am thinking of firing him, because he asked me additional 20 GBP plus a 150 GBP fee just to add me to payroll (as the director of my LTD). I am sure I can do all this stuff myself
Actually I am out of contract at the moment, I am waiting for some updates for next weeks. If I go back to work soon, I will go with the OE, IKE solution, because my rate will put me on high bands both on UK and Greek personal company. Also, I want to make sure that if I choose any other option in the future (US LLC, etc), if I will be asked to pay everything as Greek company (PoEM, etc) this will be done on the 22% level and not on other lunatic bands (44%, etc)
I will focus on Greece, as I don't intend to move to any other country for tax reasons. I will check options like company investing to estate, assets, stocks, etc in order to make that 22% even lower in legal and by the book ways.
To be honest I am mostly attracted by the I.K.E. type of company which has also 22% CIT. It's true that it has a 5% dividend tax but in the long term, I could leave some serious money in the company (not get dividends) with other formats, eg property investments, etc and only get some money as living expenses (bills, etc) I need to see what happens in this scenario, eg if the company reaches some 100's of thousands in property, how can I eventually get these assets to my name and what are the taxes in that case. These will definitely need to discuss with accountant and lawyer
Are you sure about this? Is it valid in the case of I.K.E.?
Do you know if I can invoice my I.K.E. as a personal company and benefit from the low tax for the first 10K plus the lack of dividends for the second 10K? That would be nice. Actually I could invoice the first 25K (5K expenses) as personal company and leave the rest in the I.K.E. without getting dividends, in order for future investments to real estate or stocks. This sounds a very good schema. Is it ok/legal though or it can be challenged for "virtual invoicing"?
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Good points. Thanks for the info.
I don't know about the taxes, if any, associated with transferring assets from your IKE to you. If you find out more, please do share.
As for your last point, I mentioned invoicing as a freelancer but that actually would not be necessary. If you have an IKE, you set yourself as director and get paid director fees from the company. Company is yours only, you decide how much you pay your directors. You take that 20K out (or more, the optimal amount should be higher given the tax rates you posted earlier) in director fees and the rest is company profit. You keep all (business related) expenses in the company, pay personal income tax on your director fees. Simple.
Do check with a GR accountant but this is customary and completely legal in countries I know. Why wouldn't it be?
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Actually, the first point is not correct. The partner is not liable. Only "omorithmos" partner is liable. "Etterorithmos" partner is not liable in an EE. You can thus put a person you trust as "eteros" without worrying. What most people do though is that they are themselves "eteros" and they uses someone that has no personal property as the liable party. In my opinion all this is too much hassle and I would go with an IKE. I wanted though to mention this alternative since its simple, cheap and the taxation is fairly low.
This won't work I think since you will have to pay 24% VAT too.
@archer All your questions will be answered fairly easy by a reputed accountant btw, so you should definitely consult with one.
Hello, I am coming back with an update of my situation:
In 2022 I worked via my UK LTD. That tax year has ended, tax has been paid and I am pretty happy with the result, tax ratio/revenue, etc
In 2023 I started a new contract in the summer. This time I created a Greek personal company and I invoiced via this. As the contract started in the summer, the total revenue was not very high, so the tax was pretty logical and mostly taxed with the lower scales. I remind that the tax scales in Greece are:
1 - 10000 -> 9%
10001 - 20000 -> 22%
20001 - 30000 -> 28%
30001 - 40000 -> 36%
40001 - inf -> 44%
Now 2024 started and my problem is that my income will put a serious percentage of it on the higher scales of 36 and 44%. I spoke with my accountant and suggested to open a limited partnership, with me being the general partner and someone else as limited partner without any serious activity and responsibilities with the company.
The tax for limited partnerships in Greece is flat 22% from 1st eur
I am ok with this, however the whole schema generates some additional expenses, like increased accounting cost, registered address fee as I cannot declare my house as company address and also a tax-fee called "telos epitideumatos" which is an additional 1000 eur. Considering all the above the total cost of my company existence is approximately 25% Also in Greece you need to spend the 30% of your income via digital forms, otherwise the rest amount will be taxed with 22%. For example if your income is 40K you need to spend 12K via cards. If you spend 8K, the rest 4K will generate an additional penalty of 22% * 4K = 880 EUR
Given all the above, I am trying to optimize my tax planning. One move that I will do is to invoice the first 10K with my personal company. This way I will save a 13% * 10K = 1300 EUR (because first 10K will be taxed with 9% instead of 22%).
What I am now thinking is to invoice my Greek company with my UK LTD, for an amount of approximately another 10K. By doing this, that 10K will be almost tax free, because of my zero-taxed salary as director and also some expenses that I can declare on my UK-LTD. If this works, I will be OK with the final tax ratio/revenue which will be at the level of 20%
My question is: Is there any legal way to invoice my Greek company with my UK-LTD? For example using an excuse of "expansion to other market" or "advertising costs" or "subcontracting uk freelancers" etc? What would be the best approach in order to remain legal in both UK and Greece? Does the fact the I am the owner of the 2 companies mean that it's forbidden to invoice the one company via the other, even if practically it's pretty logical to have expenses in both countries and it makes sense to run the companies in this way?
Any opinion would be highly appreciated. For all the above calculations, please use a revenue between 60K-70K so that we will be on the same ground
Thanks
In 2022 I worked via my UK LTD. That tax year has ended, tax has been paid and I am pretty happy with the result, tax ratio/revenue, etc
In 2023 I started a new contract in the summer. This time I created a Greek personal company and I invoiced via this. As the contract started in the summer, the total revenue was not very high, so the tax was pretty logical and mostly taxed with the lower scales. I remind that the tax scales in Greece are:
1 - 10000 -> 9%
10001 - 20000 -> 22%
20001 - 30000 -> 28%
30001 - 40000 -> 36%
40001 - inf -> 44%
Now 2024 started and my problem is that my income will put a serious percentage of it on the higher scales of 36 and 44%. I spoke with my accountant and suggested to open a limited partnership, with me being the general partner and someone else as limited partner without any serious activity and responsibilities with the company.
The tax for limited partnerships in Greece is flat 22% from 1st eur
I am ok with this, however the whole schema generates some additional expenses, like increased accounting cost, registered address fee as I cannot declare my house as company address and also a tax-fee called "telos epitideumatos" which is an additional 1000 eur. Considering all the above the total cost of my company existence is approximately 25% Also in Greece you need to spend the 30% of your income via digital forms, otherwise the rest amount will be taxed with 22%. For example if your income is 40K you need to spend 12K via cards. If you spend 8K, the rest 4K will generate an additional penalty of 22% * 4K = 880 EUR
Given all the above, I am trying to optimize my tax planning. One move that I will do is to invoice the first 10K with my personal company. This way I will save a 13% * 10K = 1300 EUR (because first 10K will be taxed with 9% instead of 22%).
What I am now thinking is to invoice my Greek company with my UK LTD, for an amount of approximately another 10K. By doing this, that 10K will be almost tax free, because of my zero-taxed salary as director and also some expenses that I can declare on my UK-LTD. If this works, I will be OK with the final tax ratio/revenue which will be at the level of 20%
My question is: Is there any legal way to invoice my Greek company with my UK-LTD? For example using an excuse of "expansion to other market" or "advertising costs" or "subcontracting uk freelancers" etc? What would be the best approach in order to remain legal in both UK and Greece? Does the fact the I am the owner of the 2 companies mean that it's forbidden to invoice the one company via the other, even if practically it's pretty logical to have expenses in both countries and it makes sense to run the companies in this way?
Any opinion would be highly appreciated. For all the above calculations, please use a revenue between 60K-70K so that we will be on the same ground
Thanks
I own my UK-LTD as a non resident. I can give a salary to my self up to 519 GBP per month, without having to pay any NIN contributions. This 519 * 12 and taking the GBP/EUR currency in consideration, makes it 7.2K EUR per year. Plus some expenses that I can add to my UK LTD, I will be able to make the year with 10K income - 10K expenses (salary included) so 0 taxes. If I don't make it this way, this 10K will be taxed in Greece for 2.2K
My question is, is this legal? Seeing the greater picture, I have a business in Greece with let's say 60K income and I spend/invest 10K via my UK-LTD to expand to UK and/or pay some marketing-advertising etc costs to the new market. Is it legal to make it via my UK-LTD or it must be done directly from my Greek company?
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