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12.3.1. Main Rules

The controlled foreign company (CFC) rules were introduced in Greece in 2014 and amended effective 1 January 2019 in order to harmonize them with the EU Anti-Tax Avoidance Directive (ATAD). Under the amended rules, a foreign entity or permanent establishment (PE) is considered a CFC, and its non-distributed passive income is proportionally included in the taxable income of a Greek taxpayer if:

  • In the case of an entity, the Greek taxpayer, whether alone or together with associated enterprises (25% or more ownership), holds/owns a direct or indirect participation of more than 50% in the voting rights, capital, or entitlement to profits of the entity;
  • The actual corporate income tax paid by the foreign entity or PE is less than 50% of what would be payable in Greece; and
  • 30% or more of the foreign entity's or PE's net pre-tax income is derived from specified passive income sources, including dividends, interest, royalties, etc.

The CFC rules do not apply to the following taxpayers:

  • A foreign entity that is an EU or EEA tax resident (or a permanent establishment located in an EU or EEA Member State), provided that substantive economic activities are carried out by the entity and are evidenced, depending on the facts and circumstances, by adequate staff, equipment, assets, and premises. However, the burden of proof lies on the tax authority to prove that the CFC is not conducting substantial economic activity; and
  • Shipping companies operating under Greek tonnage tax regime or entities whose funds are generated from shipping activities or investments comprise shipping funds.

Prior to the 2019 changes, the CFC rules applied when a Greek resident held ownership in a foreign company, and the following conditions were met:

  • The resident person, whether alone or with related parties and directly or indirectly holds more than 50% of the foreign company's capital, voting rights, or entitlement to profits;
  • 30% or more of the foreign company’s income consists of dividends, interest, royalties, or income from movable assets, real estate, insurance, or other financial activities; and
  • The foreign company is subject to tax in a non-cooperative jurisdiction or one with a preferential tax regime (i.e., income subject to taxation at 60% or less of the Greek tax rate) (see Sec. 12.5. for details on non-cooperative jurisdictions and preferential tax regimes).

When the conditions were met, any undistributed income of the CFC was proportionally attributed to the Greek controlling company and subject to tax.