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Overtaxing Greeks: freelancers 42% tax; self-employed & businesses to pay 90% tax in advance!

On the way to the new taxation system, several details have been given to the press in order to do the usual of the last three bailout years: scare the people, test reactions and finally present the ‘worse’ as less bad than the ‘worst’. I mean, I hope it will work like that, because the new regulations are really out of this earth-world. How can Greece claim to combat tax evasion by pushing people to evade taxes? Will self-employed and freelancers issue receipts if they will cash just a bowl of peanuts out of two 500-euro banknotes?

According to daily Kathimerini:

1) Self-employed and businesses will be obliged to pay in advance 30% of the tax of the previous year in January, July and October. That it the tax office will collect 90% of the tax in advance -based on taxation of previous year – independently of the actual revenues of business and self-employed in the running year.

Currently down-payment of tax is at 55%.

Exceptions are considered in case the running revenues (and consequently tax payment) are lower than 20%. But then the tax payer has to prove this.

Collecting outer-space tax based on taxes of previous years, will certainly enable the Greek Finance Ministry to present nice balance sheets to the Troika lenders.

2) Each payment for freelance work will be taxed with 42% independently of the total annual income.

 Example: one web designer receives in March 1,000 euro for delivered work and issues a receipt 1000 euro (23% Value Added Tax included). 

After tax, V.A.T. and social insurance his profit could look like that:

Payment € 1,000 – €230 (23% Value Added Tax) = € 770 – €323  tax = € 447 – €200 social insurance at least = Profit € 247 euro!

Hopefully, he works from home and does not need to pay any rent or other stuff like that.

3) Compensation paid out to fired employee will be taxed from the very first euro. Currently compensation up to 60,000 euro is tax free.

Most probably this measure will affect the public sector as the private sector has fired all employees that could be potentially fired. Public servants lay-offs are due, and therefore the Greek finance ministry will cash back money the state will pay to fired public servants.

All these nice tax measures in times where recession prevails, unemployment is at 27% and the members of the parliamentary committee investigating the Lagarde List with 2,200 potential big scale tax evaders are verbally shooting at each other without having invited even one of these 2,200 bank account holders to give explanation about the source of money.

NOTE: while these taxation scenarios are in circulation since last week, the Greek Finance Ministry dismissed them on Thursday afternoon as “absolutely untrue”. However the FinMin refrained from disclosing what is true…

PS Is this the way development, growth and economic recovery will come to Greece? Yes. At the very end, Greece will be really competitive with employees and free-lancers earning no more than 400 euro per month. I wonder when the pensions will be ‘slaughtered’ down to this income levels as well. But here there is a small problem: they cannot ruin public servants still getting pensions of more than 2,000 euro and devoted voters, can they?

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  1. While I agree that it is plain stupid – what else can we expect from a government where competence is less relevant than who you know – to squeeze the life blood out of one of the few sectors that might effectively create some wealth for this country, there is a mistake in your calculation: if 1000€ is the brut amount, including 23% VAT, the net amount is 813€ and the 23% VAT on that is 187€, not 230€.

    Furthermore (but I’d need to check with my “logistis” to be sure) I believe that the social insurance contribution is deducted before taxes (not literally but that’s what it amounts to) and it would be less than 200€ for sure if our own last contributions of April 2012 are still an indication. I’d say more along the lines of 130€/month for a small time independent web developer. That makes a taxable net of 813€ – 130€ = 683€. Paying 42% taxes on that amount = 287€, which leaves our budding entrepreneur 396€.

    • keeptalkinggreece

      possibly my calculator got blind. But it shows again 1000-23% VAT 230 euro! But you maybe right on VAT.
      However wrong on OAEE contributions (also for freelancers “blokaki”) are at least 200 per month for the first 3 years, and increase after that. independantly from income.

      • Sure, if the net amount is € 1,000, then 23% VAT are € 230. But then the total bill runs € 1,230 and not € 1,000 like in KTG’s example. However, if the gross amount including VAT is € 1,000, then the net amount is € 813 and 23% of that make € 187. So oriste is absolutely right.

      • You should go and work for the Ministry of Finance, you’re double taxing 🙂
        If 1000 includes the 23% VAT as you say, then the VAT-free figure is (1000/123)*100 = € 813 and the VAT component is € 187. That difference of € 43 will soon be a month’s wages (before tax af course) if these boys are not stopped…

        • keeptalkinggreece

          you think the boys in FinMinistry work and calculate different than me? lol

          • At least you use a calculator and make an attempt to work something out. You could just declare any old figure as “deemed invoice value” and impose wildly ridiculous tax rates on that. That would be much more in line with the thinking of the boys and girls making up the tax rules…

  2. Ha! I need to reply to my own comment already, double-checked our income statement from last year and social insurance contribution where double of what I stated above. I had instinctively halved the amount I saw in my spreadsheet since they are bi-monthly payments, but I had already halved them. So you were right with the minimum of 200€ monthly contribution, ours was almost 260€ last year April when we shut down the business.

    I stand corrected.

    Carry on, soldier!

    • keeptalkinggreece

      shut down business? that would be excellent expat story 🙂 🙂 🙂

      • Shutting down the business is what every self-employed in Greece should do, immediately. Just like in Ireland, the self-employed sector is the only sector that may be able to generate some revenue for the country. And just like in Ireland, instead of nurturing and fostering that fragile end of the economy into a healthy, robust economy, the officials go in with the tax sledge hammer. A general self-employed strike would not have to last too long to trigger a change in government. Unless of course they issue mobilization papers to the self-employed….

        • keeptalkinggreece

          unfortunately with such taxation they give no other option than shut down business.

  3. Just a note on VAT calculations: The 23% is what you add to the amount you invoice for the customer (I guess theoretically it is the customer paying it, not the freelancer). In any case, as oriste mentioned you calulate it by adding 23% to the amount without VAT, in this case 813*1.23 = 1000 Euro (So, to go backwards with the calculator, 1000/1.23 = 813).

    The upside is of course if the Web designer invoices another VAT-registered company, then they can deduct those 187 from their VAT payments, or a company outside Greece and he doesnt have to add it at all.

    • keeptalkinggreece

      web designer does not add VAT for companies abroad?

      • We’ve been here before… Vat is a very complicated system. In very simple terms, any product that gets traded through the EU will incur a VAT charge (there are exceptions!)which is ultimately payable by the end user. When you trade in the EU, you pay vat. If you are vat registered, you also collect vat and report to your authority how much you pay and how much you collect. The difference is what you hand over to the local taxman, who in reality has got you working for them, free of charge…If both parties in a transaction are vat registered, EU based and operate in different jurisdictions within the EU, then in general VAT is neither charged nor paid. There are of course many, many exceptions and rules involved in this. Simple would simply not do…

  4. The greek people are finally getting what they deserve for decades of selling out to their leaders. KALA NA PATHETE!