By Nick Tarlson, CPA


The Greek government has been under increasing pressure to collect more taxes, in order to balance its budget and mitigate its financial crisis. As part of this process, it is targeting nonresident individuals with Greek-source income or Greek property which could generate income (including nearly any real estate). A recent procedure which is intended to achieve greater compliance is Circular Pol. 1145, which requires non-residents of Greece to submit a certification of tax residency with their Greek income tax returns. If you fail to submit the documentation with your 2012 tax return, you will be deemed to be a Greek resident for tax purposes, and will be responsible for paying Greek income taxes on your worldwide income. According to the Greek government, this enforcement may be pursued even if the certificate is filed late. The certificate was to have been filed with the 2012 tax return, which reports taxes for the calendar year 2011, so it is already late for Greek taxpayers who failed to file it with that return.

 

For U.S. residents, there is a standard procedure for obtaining these certifications, but it usually requires a minimum 45 days to obtain the signed certification from the Internal Revenue Service. After you obtain this certificate, you must obtain an apostille of the Hague Convention from the Secretary of the state in which you reside and have both documents translated into Greek. So the whole process will probably take 60 to 90 days to complete. So it is no longer possible to comply with the law for 2011. At Tarlson & Associates, we are recommending that Greek-American taxpayers file the residency certification application as soon as possible, and provide a copy to the Greek government along with a certification by their tax preparer indicating that the tax returns in question were filed by the U.S. resident, that the residency certification application has been filed with the IRS, and that the response from the IRS is expected in approximately 45 days. If a Greek-American taxpayer would like to engage us to prepare these materials, we ask that they provide us with a copy of their 2011 income tax returns to facilitate this process. A $85 application fee is payable to the IRS in connection with the application, along with applicable charges for our professional fees.

 

Although the certification requirement seems onerous, it is merely one of many measures which the Greek government has taken to escalate tax compliance. The government is targeting individuals with overseas activities and bank accounts, including 2,000 suspected tax dodgers who hold overseas bank accounts and are suspected of failing to report overseas investment income on their Greek income tax returns. These individuals were identified by French finance minister and International Monetary Fund head Christine Lagarde. After the release of the Lagarde list, the Greek finance ministry began to investigate 54,000 individuals who are suspected of taking Greek profits abroad with the intention of avoiding Greek income tax.

 

The 2013 Greek budget forecasts 44 billion euros in tax revenue, the lowest figure since 2006, when it collected 42.3 billion euros. Tax collection is at the top of the list of austerity measures which are essential to the Greek financial bailout effort, which is currently seeking 31 billion euros from its creditors to avoid bankruptcy. Tax revenue is not enough to balance the Greek budget, which is expected to result in a 9.5 billion euro deficit in the next year. Economists believe that 120 billion euros in Greek assets lie outside the country. These assets represent 65 percent of the country’s total economic output, and are suspected to include bank deposits, real estate and untaxed business income. The cash portion is estimated at 100 billion euros. About three quarters of the offshore assets, or 90 billion euros, are suspected to reside in Europe, specifically Switzerland and Britain, and the other 30 billion euros is suspected to be in the U.S., Asia, and other offshore locations.

 

For more information, contact Nick Tarlson at This email address is being protected from spambots. You need JavaScript enabled to view it. or +1(415)956-5700.