Spring 2016 Tax Bulletin
With the adoption by the Parliament of the Law on the reform of the insurance-pension system, the tax system was modified as well. The recent legislation includes fiscal provisions, many of which follow a different logic from that of single taxation of income from the same source, such as the fact that the individual companies (with turnover of up to € 1,5 million.) have significantly lower tax burden reaching 16 percentage points on the same income in relation to self-employed professionals. The taxation of income for the fiscal year 2016 is summarized as follows:
Capital companies (SA, Ltd., PC ) and generally companies with double-entry books
39.65%, the overall tax burden of the company and members
0-10%: the percentage of individuals solidarity levy
100%: the advance corporation tax on the income of the following year.
Partnerships (GP, LP), lawyers, notaries with single-entry book keeping (gross revenue up to € 1.5 mil.)
29%: the overall tax burden of the company and members
0-10%: the percentage of individuals solidarity levy
100%: the advance corporation tax on income of the following year
Self-employed and freelancers
27,5% (€ 11.000): the tax on income of € 40.000
45%: the tax burden on income above € 40.000
0-10%: the percentage of individuals solidarity levy
100%: the advance tax on income of the following year
However, those who provide services under documents of contracts for the provision of services up to three persons or if 75% of their income which is derived from a person are assimilated to employees. For those who provide services for up to two persons, there is an obligation for the employer(s) to pay contributions.
Wage labor and Board Members’ fees
27,5% (€ 11.000): the tax on income of € 40.000
45%: the tax burden on income above € 40.000
0-10%: the percentage of individuals solidarity levy
1.2%, stamp duty on board members’ fees
Income from property
28,15% (€ 9.850): the tax on income of € 35.000
45%: the tax burden on income above € 35.000
0-10%: the percentage of individuals solidarity levy
From January 1st 2017 a new independent social insurance institution will begin to operate to which all the existing social security institutions will be automatically integrated. This institution will become henceforth responsible for granting pensions and all kinds of benefits and allowances.
The following categories of workers are required to join the new entity: employees, self-employed and freelancers, members of partnerships (GP, LP) and LTD, the operators and the sole member of a single-member company, SA Board members participating in the capital of SA with at least 3%.
The total amount of contributions for employees is approximately 41% (employee and employer) and for the rest approximately 38%, including supplementary and lump sum. For those who are not obliged to pay supplementary insurance contributions and lump the percentage is 26.95%.
It appears that insurance contributions will be measured with maximum monthly limit of € 5,860. The issue of government decrees that is expected will specify how to calculate the contributions of each category.
A minimum monthly insurable income is also provided for all those who are insured under the compulsory scheme (currently at € 586 per month). Thus, in case there is damage or no dividend distribution to members of partnerships, the insurance contributions are calculated on the above minimum monthly income.
For professionals – self-employed, the contributions are now calculated on their monthly income on the net taxable income from the exercise of their activity in the previous fiscal year (within the minimum and maximum prescribed limits).
Board members of a SA whose share is less than 3% have tax and insurance obligations of employees only if they receive remuneration.
The “employer” is also obliged to pay insurance contributions for self-employed professional who invoice with a receipt of provision of services up to two persons (natural or legal), in analogous application of the provisions for employees.
New insured benefit reduced rates only for the main pension branch and for the first five years of insurance as “liquidity facility”, taking into consideration that they are required to pay in the coming years any difference they benefit from this reduction.
