3 March 2026 External T.I. 2021-0917611E5 - Greece Special Solidarity Contribution

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: (1) Whether Greece's Special Solidarity Contribution (SSC) paid on the Director's Fees is an "income or profits tax" for purposes of section 126. (2) Whether the Director's Fees are considered to be from a source in Greece for purposes of applying section 126 to SSC if the board of directors' meetings occur virtually while the taxpayer is physically present in Canada.

Position: (1) Yes, in this case, the SSC is an "income or profits tax" for purposes of section 126; however, we do not comment on whether SSC computed by reference to imputed income, which is computed by reference to the acquisition of assets in Greece, is an income or profits tax. (2) Article 23 of the Treaty deems the Director's Fees to arise from a source in Greece for purposes of providing a foreign tax credit.

Reasons: (1) The scheme of the SSC was comparable to the scheme of the income tax imposed under the Income Tax Act (Canada). The SSC was compulsory, imposed by the enactment of legislation by the Greek parliament, enforceable by such legislation, and enacted to generate revenue for the Greek state. The base on which the SSC is imposed is the same as the base on which the Greek income tax is imposed. Such tax base is based on "net" income, after deduction for allowable expenditures. (2) The SSC is a covered tax under Article 2 of the Treaty as it is a tax on income. Furthermore, Greek tax authorities have also acknowledged that the SSC is a covered tax under double tax agreements entered into by Greece. Therefore, the provisions of Article 23 of the Treaty applies in providing a foreign tax credit in Canada and, pursuant to Article 23(3), the Director's Fees, which can be taxed by Greece under Article 16, are deemed to arise from sources in Greece. However, we do not comment on whether SSC computed by reference to imputed income is a covered tax under Article 2.

XXXXXXXXXX 2021-091761
Gina Yew

March 3, 2026

Dear XXXXXXXXXX:

Re: Greece Special Solidarity Contribution

This is in reply to your letter dated November 4, 2021, wherein you asked for our comments on whether the “special solidarity contribution” (the “SSC”) paid to the government of Greece by a Canadian resident individual (the “Taxpayer”) is eligible for a foreign tax credit pursuant to section 126 of the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1., as amended (the “Act”) (footnote 1).

Our response to your letter dated March 15, 2023, wherein you asked for our comments on whether the compulsory Greek social security contributions paid to the government of Greece by a Canadian resident individual are eligible for a foreign tax credit pursuant to section 126 is provided in a separate letter (document 2023-096753).

You have asked us to assume the following hypothetical facts:

1. The Taxpayer is a Canadian resident individual.

2. The Taxpayer serves as a member on the board of directors of a company (the “Company”) headquartered in Greece, and a resident of Greece for purposes of the Act and the Convention Between Canada and the Hellenic Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income and on Capital (the “Treaty”).

3. The Company pays a fee (the “Director’s Fee”) to the Taxpayer as compensation for serving as a member on the board of directors of the Company.

4. The Director’s Fees are subject to various mandatory withholdings in Greece, including income tax and the SSC.

5. All of the board of directors’ meetings in a year occur either physically in Greece or virtually, while the Taxpayer is physically present in Canada.

BACKGROUND

Based on the information you have provided, our understanding of the SSC is as follows:

1. The SSC was originally introduced by legislation separate from the Greek Income Tax Code as a temporary measure (footnote 2) to cope with the aggravated fiscal situation of Greece, and to restore the fiscal sustainability and reduce the fiscal debt of Greece. In 2016, the SSC was incorporated into the Greek Income Tax Code. As a result, the SSC became permanent without a termination date.

2. In an effort to remove the austerity measures adopted during the financial crisis, the SSC was abolished as of January 1, 2023, following gradual exemptions of certain types of income from 2020 onwards.

3. The SSC applies to individuals, both residents and non-residents of Greece, and is computed based on a progressive rate that ranged from 0% to 10%, depending on the level of the individual’s net annual income. The SSC is imposed in addition to the Greek income tax.

4. The income on which the SSC is levied is the net income of the individual as computed under the Greek Income Tax Code, subject to certain modifications discussed below. Under the Greek Income Tax Code, allowable expenses are deducted from gross income to reach net income of an individual, including, for example, social security contributions mandatory by law.

5. The manner of computation of the SSC differs from Greek income tax. For example, the SSC is computed at different rates at different income brackets and, in computing Greek income tax, certain credits and deductions may be available that are not available in computing the SSC.

6. An individual is liable to pay the SSC on net income, regardless of whether that income is taxable or exempt from Greek income tax. Certain income is exempt from SSC, such as income of persons who are blind, or with severe motor disabilities, compensation for the termination of employment, income of certain individuals receiving unemployment benefits, capital gains arising from the exchange of Greek Government bonds within the framework of the Greek State liabilities management program, interest income from government bonds and interest bearing bills of the Greek State and corporate bonds received by non-Greek residents, among others.

7. Greek income tax and SSC are levied on the directors’ (Greek and non-Greek residents) total remuneration for the services provided in their capacity as a director of a company resident in Greece, regardless of whether the services are performed in Greece or elsewhere.

8. The Greek tax authority publicly acknowledged that, for the years 2015 and beyond, the SSC fell within the scope of double tax agreements signed by Greece as an income tax, or an identical or substantially similar tax.

OUR COMMENTS

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

You have asked whether the SSC paid by the Taxpayer on the Director’s Fee received for serving as a member on the board of directors of the Company is eligible for a foreign tax credit pursuant to subsection 126(1) or 126(2) of the Act.

Pursuant to subsection 126(1) or subsection 126(2), a foreign tax credit in respect of income or profits tax paid to the government of a country other than Canada by a taxpayer resident in Canada may be deducted from Part I tax otherwise payable by the taxpayer. The Director’s Fee is income from an office or employment and is not included in computing income from business under the Act. Therefore, the relevant provision, in this particular case, is subsection 126(1).

Generally, a deduction would be available under subsection 126(1) for the SSC paid by the Taxpayer if, among other requirements, (i) the SSC is a “non-business income tax” paid by the Taxpayer to the government of Greece, as defined in subsection 126(7), and (ii) there is “qualifying income” from a source in Greece, as defined in subsection 126(7) and computed in accordance with subsection 126(9).

Whether the SSC is a non-business income tax

In general, for a government levy to be a “non-business income tax” as defined in subsection 126(7), among other requirements, the levy must be a “tax” that is an “income or profits tax”, the income or profits tax must not be deductible by virtue of subsection 20(11) and must not be deducted by virtue of subsection 20(12) in computing the taxpayer’s income for the year.

i. Whether the SSC is a “tax”

The Supreme Court of Canada set out the following essential characteristics of a “tax” (restated in paragraph 1.5 of the Income Tax Folio S5-F2-C1, Foreign Tax Credit (the “Folio”)):

1) compulsory and enforceable by law;

2) imposed under the authority of the legislature;

3) levied by a public body; and

4) made for a public purpose. (footnote 3)

A levy, to be a tax, must also be distinguished from a user fee and a regulatory charge. (footnote 4) As noted in paragraph 1.5 of the Folio:

“[…] A levy imposed by a governmental authority will not be considered a tax if it is a charge meant to recoup the costs for services directly rendered or to finance a specific regulatory scheme. Examples of payments to governmental authorities that do not qualify as a payment of tax include:

• user fees
• regulatory charges payments made to acquire a specific right or privilege
• voluntary contributions to governmental authorities”

Based on the information you have provided, in our view, the SSC is a “tax”. In particular, we understand that the SSC was compulsory, imposed by the enactment of legislation by the Greek parliament, enforceable by such legislation, levied by a public body (Hellenic Tax Authority of Greece) and enacted to generate revenue for the Greek state.

Furthermore, we understand that an individual that paid the SSC did not receive or acquire a right or privilege, a service, or other personal or financial benefit. The SSC was directly connected to the Greek Income Tax Code (by reference to the income on which it was computed and ultimately becoming part of the Greek Income Tax Code), and its sole purpose was revenue generation for the state of Greece in order to reduce its public deficit.

ii. Whether the SSC is an “income or profits tax”

As noted in paragraph 1.7 of the Folio:

“In determining whether a particular foreign tax is an “income or profits tax”, it is not the name given to the tax that is the deciding factor. Rather, the basic scheme of application of the foreign tax is compared to the scheme of application of income and profits tax imposed under the Act. Generally, if the basis of taxation is substantially similar, the foreign tax is accepted as an income or profits tax. To be substantially similar, the foreign tax must be levied on net income or profits (but not necessarily as would be computed for Canadian tax purposes) unless it is a tax similar to that imposed under Part XIII of the Act.”

Based on the information provided, in our view, the SSC is an “income or profits tax”. We understand that, although certain persons or certain types of income that are subject to Greek income tax may not be subject to the SSC (and vice versa), the income on which the SSC was levied was computed based on the same income computation principles as for Greek income tax purposes. The base on which Greek income tax is imposed is generally net income, after deduction for allowable expenditures.

iii. Non-business income tax and subsections 20(11) and 20(12)

For an income or profits tax paid to a government of a country other than Canada to qualify as a “non-business income tax”, the income or profits tax must not be deductible by virtue of subsection 20(11) and must not be deducted by virtue of subsection 20(12) in computing the taxpayer’s income for the year. Subsection 20(11) provides for a deduction in computing income from property and subsection 20(12) provides for a deduction in computing income from business or property. Director’s Fees are neither income from property nor income from a business; therefore, neither subsection 20(11) nor subsection 20(12) will provide for a deduction for income or profits tax paid in respect of the Director’s Fees.

Whether the Director’s Fee is income from a source in Greece

A foreign tax credit under subsection 126(1) would be available for the SSC paid by the Taxpayer only to the extent of Part I income tax otherwise payable on qualifying incomes from a source in Greece.

In this regard, you have asked us to consider two scenarios: (1) all of the board of directors’ meetings in the relevant taxation year occurred physically in Greece; and (2) all of the board of directors’ meetings in the year occurred virtually, while the Taxpayer was physically present in Canada.

Under the Canadian domestic law, the location of the source of an individual’s office or employment income is considered to be the physical place where he or she normally performs the related duties. Director fees are generally considered to be earned where the director meetings are held.(footnote 5)

If the article of an income tax treaty between Canada and a foreign country that eliminates double tax deems income that would otherwise be income from a source in Canada to be income from a source in that foreign country, that income is included in income from sources in that foreign country for purposes of calculating foreign tax credit under subsection 126(1).(footnote 6)

According to Article 23(3) of the Treaty, for purposes of Article 23 (Elimination of Double Taxation), profits, income or gains of a Canadian resident that may be taxed in Greece in accordance with the Treaty are deemed to arise from sources in Greece. Article 16(1) of the Treaty provides that directors’ fees derived by a Canadian resident in their capacity as a member of the board of directors of a company resident in Greece may be taxed in Greece. There is no requirement in Article 16(1) for the board of directors’ meetings to occur physically in Greece.

The SSC is a covered tax under Article 2 of the Treaty on the basis that it is an income tax on natural persons. We understand that this position is consistent with the position of the Greek tax authority which also considers that the SSC is a covered tax for purposes of double tax agreements signed by Greece. Therefore, pursuant to Articles 16 and 23 of the Treaty, the Director’s Fees may be taxed in Greece and are deemed to be income from a source in Greece for purposes of applying Article 23 to the SSC. As a result, in calculating the foreign tax credit under subsection 126(1) for the SSC, the Director’s Fees are considered to arise from a source in Greece.

Other comments

We understand that under the Greek Income Tax Code, income can be computed under an alternative income computation, which imputes income based on the individual taxpayer’s and their dependents’ living expenses and/or acquisition of certain assets. Non-Greek residents may be exempt from the alternative income computation in certain cases. You have not enquired as to whether SSC imposed on imputed income computed under the alternative income computation method is eligible for a foreign tax credit under section 126.

We trust that these comments will be of assistance to you.

Yours truly,

Ina Eroff
Section Manager
for Division Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1. Unless otherwise indicated, all statutory reference are to the Act.

2. The SSC, when first introduced, was to apply for five (5) years (from, and including, the tax years 2010 to 2014). It was later extended to apply for an additional two (2) years (tax years 2015 and 2016) before being incorporated into the Greek Income Tax Code.

3. Lawson v. Interior Tree Fruit and Vegetable Committee of Direction ([1931] S.C.R. 357) and Eurig Estates (Re) ([1998] 2 S.C.R. 565.

4. Westbank First Nation v. British Colombia Hydro and Power Authority, [1999] 3 S.C.R. 134, and 620 Connaught Ltd. v. Canada, 2008 SCC 7.

5. The Folio, at paragraph 1.57.

6. Ibid, at paragraph 1.49.