New tax treaty between France and Greece

The new tax treaty concluded on May 11, 2022, between France and Greece was published by a decree on January 9, 2024; it entered into force on December 30, 2023.

It replaces the tax treaty of August 21, 1963.

This new tax treaty largely incorporates the provisions of the OECD model convention.

A few specific points should be highlighted:

1. A specific definition of fiscal residence for French partnerships or similar entities (additional protocol to the convention).

2. Dividends. The source state may tax dividends at a rate not exceeding 15% of their gross amount provided that the beneficial owner is a resident of the other state. Withholding tax is completely eliminated when the beneficial owner is a company that has directly held at least 5% of the capital of the distributing company for a period of twenty-four months including the day of payment of the dividends.

3. Capital gains. Capital gains from the sale of real estate are taxable in the state where the property is located. The same applies to capital gains from the sale of shares in real estate predominant companies in a state, this predominance being assessed over the period of 365 days preceding the sale in question. Other capital gains are, in principle, taxable only in the state of residence of the seller.

It should be noted that the principle of taxation in one state does not necessarily mean that the other state has no right to apply its own taxes. A case-by-case analysis is necessary, depending on the nature of the gain or income.

4. Elimination of double taxation. As far as France is concerned, the application of the generalized tax credit method, equal, depending on the nature of the income, either to the amount of tax paid in Greece up to the limit of the French tax corresponding to the income, or to the amount of the French tax.

Certain gains, which were not previously taxable in France, become taxable under the new convention. This is the case, for example, with real estate capital gains made by individuals domiciled in France when selling a property in Greece.

Flat tax credits imputable in France on certain Greek-source incomes, which were provided for by the old convention, are abolished by the tax treaty of May 11, 2022.

5. Applicability of specific French tax provisions. The additional protocol to the new convention grants France the right to apply a number of its domestic law provisions.

Thus, the following articles will remain applicable: 123 bis (holdings in financial structures established in a country with a privileged tax regime), 155 A (remunerations for certain services rendered abroad), 115 quinquies (withholding tax on profits made in France by foreign companies), 209 B (profits from companies established in a privileged tax regime country), 212 (limitation on the deduction of interest paid to partners and linked enterprises), 238 A (payments to foreign residents subject to a privileged tax regime), and 238-0 A (transactions conducted with non-cooperative states or territories) of the French General Tax Code.