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  • Writer's pictureLewis Grunfeld, CPA

Guide to the US Greece Tax Treaty

Updated: Dec 11, 2023

Understanding the US Greece Tax Treaty is crucial for U.S. expats living in Greece and to Greek residents who are non-US citizens with U.S. sourced income. This guide breaks down the treaty's provisions, offering clarity on how it affects personal taxation and helps avoid double taxation.

Executive Summary

  • ​The U.S. Greece  tax treaty offers mechanisms to prevent double taxation.

  • The treaty includes a "Savings Clause" that maintains the US right to tax its citizens as per its domestic laws and not per the treaty with just limited exceptions.

  • US-sourced passive income, such as interest, dividends, and pensions, may be taxed at reduced rates or exempted for Greek residents who are U.S. NRAs (non-resident aliens).

What is the U.S. Greece Tax Treaty?

The U.S. Greece tax treaty, signed in 1950, serves as an agreement between the two countries for determining the taxation of income where both nations may have the legal right to tax according to their respective laws. The treaty covers, among many topics, avoidance of double taxation, residency tie-breakers and taxation of various forms of income, including business profits, dividends, interest, pensions, and capital gains. This article will focus on some of the key aspects of the treaty that hold particular significance.


Relief of Double Taxation

The Greece U.S. tax treaty provides mechanisms for relief from double taxation, ensuring that income earned in one country by residents or citizens of the other is not taxed twice. To avoid double taxation, the treaty allows U.S. expats to claim a foreign tax credit for the income tax they pay on Geek sourced income to Greece against their U.S. tax liability. Conversely, Greece offers a credit for U.S. taxes paid on U.S. sourced income against its own tax liabilities.


Example

Dimitris Papadopoulos, a U.S. citizen living in Athens, Greece, earns an annual salary of $80,000 and pays $25,000 in taxes to Greece for the year. Dimitris's U.S. tax liability for this income amounts to $22,000. Thanks to the relief of double taxation provision of the tax treaty, he is entitled to claim a foreign tax credit on his US taxes. Dimitris applies the $25,000 he paid in Greek taxes against his U.S. tax obligation, effectively reducing his U.S. tax liability to zero and even generating a $3,000 credit surplus, which may be carried over to subsequent tax years.


What is the Savings Clause?

The Greek U.S. tax treaty contains a "savings clause" which preserves the right of the U.S. to impose taxes on its citizens according to its own laws, even if this contradicts the provisions of the treaty. As a result of this clause, the majority of the benefits and reductions offered by the treaty do not apply to U.S. citizens living in Greek.


Example

Elena Georgiou, a U.S. expat, resides in Athens, Greece, and works for an American bio-tech company. She performs all her work duties in Greece and has no physical presence in the U.S. Although the Greece U.S. tax treaty exempts such income from U.S. taxation on the basis that there is no permanent establishment in the U.S., the savings clause overrides this, requiring Elena to declare and possibly pay U.S. taxes on her income. Nevertheless, Elena can take advantage of the  foreign earned income exclusion or foreign tax credits for the taxes paid in Greece to avoid being taxed twice on the same income.

Expert Tip: It's crucial for U.S. citizens to familiarize themselves with the savings clause exclusions in the tax treaty to accurately determine which tax benefits they can utilize.

Taxation of US-Sourced Passive Income

Passive income from U.S. sources, which is not tied to a U.S. trade or business, is generally taxed at a flat rate of 30% if earned by a non-resident alien. However, the US Greece tax treaty lowers this rate and in some cases totally exempts it from US taxation for certain types of income. We've summarized some of the tax treaty rates in the table below. It's important to note that that these rates generally do not apply to U.S. citizens due to the savings clause mentioned earlier.


Tax Rate

Treat Article Citation

​Interest

0%

VI

​Dividends - Paid by U.S. Corporations

30%

IX

Dividends - Qualifying for Direct Dividend Rate

30%

IX

Pensions and Annuities

0%*

XI(2)

Social Security

30%**

XIV(1)

*The rate applies to both periodic and lump-sum payments.

**Tax rate applies to 85% of the social security payments.


Income Earned While Temporarily Present in the US

Generally, income earned from work performed in the US would be considered US source income and would be subject to US taxation. However, the US Greece tax treaty lists certain exemptions where such income is not subject to US taxes. It's important to note that these exceptions generally do not apply to U.S. expats because of the savings clause mentioned earlier. We've summarized some of these exceptions in the table below:

Income Type

Maximum Presence in U.S

Required Employer or Payer

Maximum Amount of Compensation

Treaty Article Citation

Employee

183 days

Greek resident*

No limit**

X

Employee

183 days

Other foreign or U.S resident

$10,000

X

Contractor

183 days

Greek resident contractor

No limit***

X

Contractor

183 days

Other foreign or U.S. resident contractor

$10,000

X

Teaching

3 years

U.S. educational institution

No limit

XII

​Full-time students - remittances or allowances

No limit***

Any foreign resident

No limit

XIII


Are Self-Employed U.S. Expats in Greece Subject to U.S. Social Security Taxes?

The United States and Greek have a totalization agreement in place, aimed at preventing the double taxation of income in relation to social security taxes. This agreement sets forth guidelines regarding which country's social security system a taxpayer is subject to. Consequently, employees or self-employed individuals are subject to social security taxation in only one country at a time.


State Taxes and Tax Treaties

Numerous states within the United States impose income taxes on their residents. The adherence to the Greek U.S. tax treaty varies by state, some may recognize them, while others may not.

​Expert Insight: Always check with a tax professional about how state tax laws interact with the treaty, as this can vary significantly from state to state.

Need Help Navigating the US Greek Tax Treaty?

At CPAs for Expats, we specialize in helping US expats stay compliant with their US taxes. Our low fees and 4.9/5 rating on independent review platforms attests to our commitment to excellence and client satisfaction. Contact us today, and let our tax experts simplify your life and taxes.




Frequently Asked Questions

Does Greece have a tax treaty with the US?

Does Greece have a totalization agreement with the US?

Do Greek citizens pay tax on US capital gains?



Article by Lewis Grunfeld, CPA

Lewis is a seasoned expert in international and U.S. expat taxation. With over 10 years of international tax experience, he specializes in applying tax treaties to benefit expats, handling complex tax scenarios and ensuring significant tax savings for his clients. Lewis's expertise in international compliance and U.S. expat tax returns has made him a trusted advisor in the expatriate community.

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