Greek Private Capital Company partners face fines of 10,500 euros per person if they perform daily operational work for their businesses without formal employment contracts.
The penalty for undeclared work is accompanied by retroactive social security contributions, salary differences, holiday bonuses, holiday allowances, and corresponding tax surcharges. Tax experts Giorgos Dalianis, Panagiotis Papastavrou, and Petros Papapetrou of ARTION Group stated in seminar material co-organized by TAXHEAVEN and ARTION that holding shares in a Private Capital Company does not automatically give a partner the right to engage in daily productive employment.
A Private Capital Company, known in Greece as an IKE under Law 4072/2012, is a flexible corporate entity designed to separate capital ownership from personal service obligations. Dalianis said that business owners often operate under the mistaken belief that owning a company permits them to work for it without legal restrictions or paperwork. Auditing authorities do not accept corporate ownership as a defense during labor inspections.
Example in Accounting Firms
To illustrate the scale of the issue, the tax advisors cited an example of an accounting IKE owned by three partners. One partner holds a 50 percent stake, serves as manager, and receives a monthly management fee of 1,500 euros. The remaining two partners hold 25 percent each and receive no payment, yet maintain books, submit tax returns, and serve clients every day.
The experts noted that despite their 25 percent ownership stakes, the two unpaid partners lacked employment contracts, were not registered in the ERGANI system, issued no invoices, and had no social security coverage. ERGANI is the digital labor registry managed by the Greek Ministry of Labor to monitor employment relationships and workforce compliance across the country. Dalianis said that while a 25 percent stake represents a genuine partnership, ownership alone does not explain why individuals work daily without an agreed legal basis.
The issue is particularly critical for accounting and tax consulting firms, which must correctly structure their own operations while advising clients on compliance. Auditing practice generally treats daily operational labor as dependent employment unless supported by specific statutory documentation.
Three Legal Options for Partner Work
Greek corporate and labor law defines clear boundaries between capital participation and personal service provision. Holding corporate shares grants voting rights in partner assemblies, management oversight, and dividend entitlement, but generates no right or obligation to provide labor. The advisors explained that companies must evaluate three legal mechanisms in sequential order to cover partner work.
First, companies must examine whether the articles of association include a non-capital service contribution mapped to corporate shares. Second, if no statutory service contribution exists, companies must check whether the partner operates a genuine independent professional activity. Third, if neither condition is met and daily operations demonstrate personal dependence, the relationship is classified as dependent labor regardless of ownership percentage.
Dependent employment requires formal hiring, notification via ERGANI, social security contributions processed through Detailed Periodic Statements (APD), and full compliance with labor law. This path offers the highest safety against audit penalties and allows the company to deduct payroll expenses. APD filings report employee earnings and social security deductions directly to national insurance authorities.
Independent professional collaboration requires an individual sole proprietorship issuing commercial invoices. In the accounting sector, steady integration into a company structure risks reclassification by labor inspectors as fake self-employment. Non-capital service contributions involve a statutory commitment in the articles of association to provide specific services in return for shares and profit participation without regular monetary pay.
Manager Rules and Social Security
The legal framework treats company managers and sole partners differently from simple partners by mandating non-salaried social security coverage based on their status. When a manager receives remuneration from profit distribution through a legal partner decision, the payment is classified as a dividend and taxed at the dividend rate of 5 percent. Management fees paid outside dividend distributions are subject to a Digital Transaction Duty of 1.20 percent.
Dalianis and his colleagues noted that while no explicit law forbids a manager from also being an employee, the dual role creates significant regulatory vulnerability. Local offices of e-EFKA, the National Social Security Fund of Greece, frequently take the stance in practice that an IKE manager cannot simultaneously serve as a salaried employee of their own company. The experts stressed that this position is not grounded in explicit statutory language or published circulars, creating operational uncertainty for business planning.
In a single-member IKE, a non-capital service contribution establishes the corporate basis for the sole partner's labor without altering their mandatory social security status, which applies automatically due to their position.
Service Contribution Rules and Valuation
Non-capital service contributions are governed by Article 78 of Law 4072/2012 and Circular E.2099/2020 of AADE as independent corporate relationships, provided they are genuine and not sham arrangements. AADE is the Independent Authority for Public Revenue, the state body overseeing tax compliance in Greece. Statutory service contributions can be established for fixed or indefinite terms by simple partners, managers, or sole partners of single-member companies.
The monetary value of the service contribution is set freely in the company articles of association without requiring an official independent appraiser. However, tax audits evaluate the proportion between the scope and duration of the work and the value of the shares issued. Symbolic shareholding relative to extensive daily labor makes proving a genuine corporate relationship difficult during inspections. The articles of association must explicitly state the bound partner, the scope of work, duration, valuation, and corresponding shares prior to the start of work, as retroactivity is prohibited.
From a tax and accounting perspective, non-capital service labor does not generate payroll expenses for the company or taxable income for the partner when performed, as partner income arises solely from profit distributions. Council for Accounting Harmonization and Standards (SLOT) Ruling 518/2025 confirmed that the value of service contributions does not appear as corporate share capital.
Personal Costs and Signing Regulations
The experts emphasized that non-capital service contributions carry personal costs for the participating partner. Service contributions do not build social security time, leaving partners without pension or health coverage unless insured through another activity or status. While the company saves on payroll costs, the partner personally absorbs the loss of social security accumulation.
Regarding signing authority in accounting firms, signing tax declarations and balance sheets is not restricted solely to company managers. Other authorized professionals with a legal relationship and required credentials can sign declarations provided the Economic Chamber of Greece (OEE) is notified. OEE is the statutory professional body governing economists and tax advisors in Greece. Assigning signature rights to a Class A licensed manager is an internal organizational choice that does not eliminate the need for proper labor documentation for other working partners.
The authors concluded that company statutory documents, partner decisions, tax filings, social security records, and daily business operations must present an aligned legal structure to withstand audit scrutiny.
