U.S. income tax treaty with Greece

The IRS lists Greece income tax treaty documents, and the convention has selected provisions. The convention's organization and its text address income and residence as well as information exchange.

Treaty documents and protocols

The IRS lists one document for Greece, an income tax treaty it labels 1950. The convention was signed at Athens on February 20, 1950. The convention has two protocols. Protocol 1, signed April 20, 1953, records Greece's acceptance of a U.S. Senate understanding that the mutual assistance article on collecting taxes is limited to ensuring that treaty exemptions and reduced rates are not enjoyed by persons not entitled to them. Protocol 2 is the protocol of exchange of ratifications signed December 30, 1953.^[1]^[2]

The convention entered into force on December 30, 1953 and operates from January 1, 1953, a date IRS Table 3 repeats. Neither protocol changes a rate. The IRS lists no technical explanation, which is common for treaties of this age.^[4]^[2]

Convention structure

The convention text organizes its provisions into twenty-one numbered articles, followed by two protocol entries. The listed titles begin with Taxes Covered and General Definitions, then address Permanent Establishment, Related Enterprises and Ships and Aircraft. Later articles cover Interest, Royalties, Income from Real Property and Natural Resources, Dividends and Personal Services. The remaining titles concern government compensation, education, credits, administration, claims, information exchange, assistance and the treaty's operation.^[2]

Articles X through XXI are Personal Services; Government Employees, Pensions and Annuities; Professors and Teachers; Students and Apprentices; Foreign Tax Credit; Regulations; Elimination of Double Taxation; Taxpayer Claims; Exchange of Information; Mutual Assistance; Limitation on Administrative Procedures; and Entry into Force, Termination. No separately titled residence article or limitation on benefits article appears in this article list.^[2]

Dividends, interest and royalties

Article IX addresses dividends paid by a Greek corporation. It states that dividends and interest paid by such a corporation are exempt from United States tax, except when the recipient is a U.S. citizen, resident or corporation. For a U.S. citizen receiving these payments, the stated exception applies by citizenship. Article IX gives no percentage rate for dividends.^[2]

Article VI addresses interest sourced in either country and sets different conditions for each direction. For interest from U.S. sources received by a Greek resident or corporation, the convention provides an exemption from U.S. tax when the recipient is not engaged in trade or business in the United States through a permanent establishment. That exemption does not apply to interest paid by a U.S. corporation to a Greek corporation that directly or indirectly controls more than 50 percent of the paying corporation's voting power.^[2]

For interest from Greek sources received by a U.S. resident or corporation, Article VI provides an exemption from Greek tax only to the extent the interest does not exceed 9 percent per annum. The recipient must not be engaged in trade or business in Greece through a permanent establishment. The text excludes interest paid by a Greek corporation to a U.S. corporation that directly or indirectly controls more than 50 percent of the payer's voting power.^[2]

Article VII covers royalties. A resident or corporation of one country that has no permanent establishment in the other country pays no tax in that other country on royalties for the use of copyrights, patents or designs, secret processes or formulae, and trademarks or similar property, or on royalties or rentals for industrial, commercial or scientific equipment. Royalties and rentals for motion picture films do not qualify for this exemption.^[2]

Residence and dual residence

The convention has no separate residence article. The convention provides no rule for resolving residence when a person is treated as resident in both countries. The interest and royalty provisions include conditions based on the source of income and the recipient's residence.^[2]

Limitation on benefits

The convention has no separate limitation on benefits article. General definitions and specific conditions within individual income provisions describe when particular articles apply. These conditions include recipient residence, permanent establishment and, for some interest payments, corporate voting control.^[2]

The saving clause and U.S. citizens

Article XIV, titled Foreign Tax Credit, contains the saving clause. Paragraph 1 says each country may, when determining taxes for its citizens, residents or corporations, include income taxable under its own revenue laws as though the convention had not taken effect. This reservation of taxing rights applies to U.S. citizens.^[2]

A saving clause generally preserves U.S. taxation of the worldwide income of a U.S. citizen or resident.

Questions and answers

Which Greece treaty document does the IRS list?

The IRS Greece page lists an Income Tax Treaty identified as 1950. The IRS lists no technical explanation, and the convention has two protocols.^[1]

What does the convention say about dividends paid by a Greek corporation?

Article IX states that dividends and interest paid by a Greek corporation are exempt from U.S. tax, except when the recipient is a U.S. citizen, resident or corporation. Article IX gives no dividend percentage rate.^[2]

What rate does the convention state for some interest from Greece?

Article VI states that the exemption from Greek tax for qualifying interest received by a U.S. resident or corporation is limited to interest not exceeding 9 percent per annum. The provision includes a permanent establishment condition and a corporate voting-control exception.^[2]

Does the convention have a residence tie-breaker article?

The convention has no dedicated rule for a person resident in both countries.^[2]

What does the saving clause say for U.S. citizens?

Article XIV says each country may include income taxable under its revenue laws when determining taxes for its citizens, residents or corporations. Under a saving clause, the United States generally continues to tax the worldwide income of U.S. citizens and residents.^[2]^[3]

What does Article VII say about royalties?

It exempts royalties for copyrights, patents or trademarks, and similar property, and for industrial, commercial or scientific equipment, from source-country tax when the recipient has no permanent establishment there. Motion picture film royalties are excluded.^[2]

Related glossary terms

Treaty rate table: A treaty rate table summarizes income categories and tax rates or exemptions under U.S. income tax treaties. The IRS explains the tables' scope and limits.
Recognition of a trust: The Hague Convention describes recognition of a trust, its minimum legal effects, and limits tied to applicable law. Jersey law also addresses recognition.