THE NEW TAX BILL

THE NEW TAX BILL

 

THE NEW TAX BILL BRINGS FORTH SIGNIFICANT CHANGES

 

The new tax bill related to the 2014 income taxation that was published by the Ministry of Finances yesterday, has brought forth significant changes.

Read the text of the new tax bill here.

According to the proposed provisions, the 1,5% allowance on the monthly deductions on salaries is repealed, thus, any government will be able to determine the deduction rate as well as the method applied to calculate the annual income of each employee. This practically leaves the door open for the possibility of higher tax deductions in case that the income calculation method changes from monthly to annual, as it will be used to calculate the new deduction.

Furthermore, the receipt collecting method is repealed, which means that the tax payers are not required to collect receipts in order to be entitled to the 2.100,00 Euros allowance, if their annual income is up to 21.000,00 Euros. In addition, the tax rate on property rental is increased and for the first time the farmers are taxed at 13% rate.

The new taxation scale that will apply for employees and pensioners is limited to three categories, with tax rates of 22%, 32% and 42%. Tax exemptions are also severely reduced, while exemption from tax is provided for medical expenses and donations.

More specifically, employees and pensioners will be taxed according to the following scale:

TAXABLE INCOME (EUROS)

TAX RATE (%)

TAXATION SCALE (EUROS)

TOTAL

INCOME (EUROS)

TAX (EUROS)

≤ 25.000

22%

5.500

25.000

5.500

25.001 ≤ 42.000

32%

5.440

42.000

10.940

≥ 42.001

42%

 

 

 

 

Exceptions from the scale:

·        Merchant service naval officers, who are taxed at 15% and

·        Merchant service ship crew members of lower rank, who are taxed at 10%.

In relation to the tax free limit, according to the proposed provisions the tax is reduced by 2.100,00 Euros if the taxable income does not exceed the amount of 21.000,00 Euros. If the amount of the tax is less than 2.100,00 Euros, the amount of the reduction is limited to the amount of the corresponding tax.

In case that the taxable income exceeds the amount of 21.000,00 Euros, there is a reduction of 100,00 Euros for every 1.000,00 Euros of taxable income. If the taxable income exceeds the amount of 42.000,00 Euros, there is no tax reduction.

Moreover, any benefit in kind received by employees, the value of which exceeds the amount of 300,00 Euros, is added to the rest of the employee’s income and the tax is imposed on the total sum.

Severance payments remain free of tax up to the amount of 60.000,00 Euros; amounts of 60.001,00 Euros and more will be taxed at 10%, 25% and 30%.

More specifically, severance payments will be taxed according to the following scale:

SEVERANCE PAY SCALE

TAX RATE

0 – 60.000

0%

60.001 – 100.000

10%

100.001 – 150.000

25%

150.001 and more

35%

 

According to the new bill, the one-off retirement allowance will be taxed at 10% and 20%, and each periodic benefit at 15%.

More specifically, insurance payments paid within group insurance pension contracts are taxed separately:

a)      At 15% for each periodic benefit

b)      At 10% for one-off allowances up to 40.000,00 Euros and at 20% for one-off allowances exceeding the amount of 40.000,00 Euros.

The tax rates of the above categories are increased by 50% in case the beneficiary receives a sum for early refunding. Any payments made to an employee who has established pension rights or is more than 60 years of age, are not considered as early refunding.

Tax free limit or tax deduction

1.      The resulting tax is reduced by the amount of 2.100,00 Euros if the taxable income does not exceed the amount of 21.000,00 Euros. If the amount of the tax is less than 2.100,00 Euros, the amount of the reduction is limited to the amount of the corresponding tax.

2.      In case that the taxable income exceeds the amount of 21.000,00 Euros, there is a reduction of 100,00 Euros for every 1.000,00 Euros of taxable income.

3.      . If the taxable income exceeds the amount of 42.000,00 Euros, there is no tax reduction.

The revenues of enterprises and self-employed individuals are taxed according to the following scale:

TAXABLE INCOME (EUROS)

TAX RATE (%)

SCALE TAX (EUROS)

TOTAL

INCOME (EUROS)

TAX (EUROS)

50.000

26%

13.000

50.000

13.000

50.001

33%

 

 

 

 

·        For natural persons whose first declaration of commencement of trade/profession dates from January 1st 2013 onwards and for the first three years of their professional activity, the tax rate of the first category of the scale of paragraph 1 is reduced by fifty per cent (50%), if the annual gross income resulting from their professional activity does not exceed the amount of ten thousand Euros (10.000,00 Euros).

·        Income from farming enterprises are taxed at thirteen per cent (13%).

Tax rates for income from capital:

·        Dividends are taxed at ten per cent (10%)

·        Interest on capital is taxed at fifteen per cent (15%)

·        Rights on capital are taxed at twenty per cent (20%)

Property income is taxed according to the following scale:

INCOME FROM PROPERTY RENTALS (EUROS)

TAX RATE (%)

SCALE TAX (EUROS)

TOTAL

INCOME (EUROS)

TAX (EUROS)

≤ 12.000

11%

1.320

12.000

1.320

> 12.001

33%