Greece: Foreign tax credit prioritized over domestic prepaid tax deductions (Council of State decision)
Foreign tax credits under the Greece-Cyprus income tax treaty must be applied prior to domestic prepaid tax deductions.
The Council of State issued Judgment No. 827/2025 (May 7, 2026) regarding the Greece-Cyprus income tax treaty.
The judgment states that tax paid in Cyprus by a Greek Société Anonyme (S.A.) is credited against the corresponding Greek tax liability for Cyprus-source income, with the credit capped at the amount of Greek tax attributable to that income. The court confirmed that this foreign tax credit must be applied as a priority before the deduction of any domestic prepaid taxes, ensuring alignment with Greece’s statutory framework for the avoidance of double taxation.
For more information, contact a KPMG tax professional in Greece:
Ariel Manika | amanika@cpalaw.gr