Hikes in security contributions and taxes, along with rumors that contributions for 2017 will be calculated on the basis of earnings in 2015, have led thousands businesses and professionals to change their tax status.
Security contributions have moved to 26.95% of income, while freelance professionals have to pay a 600-1,000 euro vocation fee annually. Their income is taxed 26% if they earn less than 50,000 euros per year and 33% if they earn over 50,000 euros. In addition, they have to pay 0.7-6% solidarity contribution for incomes above 12,000 euros.
Regarding medium-to-large businesses, it is estimated that there are 65,000-70,000 pending applications for relocation to other countries where taxes are lower. The Finance Ministry is considering bilateral agreements with neighbors Bulgaria and Cyprus for the potential to inspect Greek businesses operating there.
Some businesses that are affected by high contributions and taxation are changing their legal status to Private Capital Companies so that the they or the shareholders do not have to be insured, raising more concerns about the sustainability of the social security system.
Other companies or businesses consider changing their status to limited companies (Ltd) with the shareholders not participating on the board in order to avoid the high contributions.
The new Single Social Security Fund (EFKA), the fund where all contributions will be collected as of January 1st, 2017, is at risk even before it is established, economic analysts say. The new fund will open with a deficit as it is estimated that businesses and freelancers will not be able to meet the new, higher contributions.
At the same time, labor law experts estimate that the new contributions will lead many small businesses to resort to undeclared labor.
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