Accountant for Lawyers & Law Firms

VAT ON LEGAL SERVICES

Legal status as a lawyer does not automatically grant a general VAT exemption.

Legal services taxed in Greece are generally subject to the standard VAT rate, which is currently 24%.

However, the correct tax treatment does not depend solely on the service provider.

Particular attention is required when the client is:

• a private individual
• a Greek business
• a business based in another EU Member State
• a business based in a non-EU country
• a foreign resident

For cross-border services, one must consider the place of supply, the client's status, and the specific VAT rules applicable to the transaction in question.

Therefore, it is unsafe to automatically apply the 24% Greek VAT rate to every legal fee without first examining the specific facts of the service provided.

WHAT IS THE ADVANCE PAYMENT VOUCHER?

The payment voucher constitutes a distinct element of the financial and tax-related operations of the legal profession.

In cases stipulated by the Lawyers' Code, it is linked to the advance payment of relevant contributions and deductions via the respective Bar Association.

For proper accounting tracking, a clear distinction must be made between:

• the lawyer's actual fee
• the reference amount of the voucher
• the prescribed deductions
• the tax payable in advance
• any additional agreed-upon fee
• VAT
• and the amount actually collected

The voucher should not be viewed in isolation from the accounting document and the actual fee agreement with the client.

THE VOUCHER & ACTUAL LEGAL FEES

The value associated with a voucher does not necessarily correspond to the total amount agreed upon between the lawyer and the client.

Depending on the case and the applicable framework, a lawyer may have agreed upon a different or additional fee.

That is why the accounting picture must correctly link:.

Payment order/Bill

→ Agreed fee

→ Source document (invoice)

→ VAT

→ Tax paid in advance or withheld tax

→ Deductions

→ Actual collection

→ myDATA

If these are tracked as independent elements, the likelihood of discrepancies between the source document, the deductions, and the actual collection increases significantly.

15% TAX PREPAYMENT OR 20% WITHHOLDING TAX?

The 15% and 20% rates represent two different tax mechanisms and must not be confused.

A special regime involving a 15% tax prepayment applies to lawyers' fees, subject to the conditions of Article 69 of the Income Tax Code.

Separately, the provisions of Articles 62 and 64 of the Income Tax Code mandate a 20% withholding tax on specific categories of fees, provided the relevant conditions are met.

Therefore, the simplistic rule does not apply:

"Every lawyer's invoice is subject to 20% withholding tax."

Nor should it be considered that 15% and 20% always apply simultaneously..

Before issuing the relevant document, the following must be examined:

• the actual service provided
• the client
• the existence of a promissory note
• the method of remuneration
• the application of tax prepayment
• and any potential withholding obligation

The correct tax treatment depends on the specific transaction.

Fixed Remuneration and Salaried Mandate

A salaried mandate with fixed remuneration has different characteristics from the independent practice of law.

The current tax framework provides for special treatment regarding tax prepayment on the relevant remuneration.

For a lawyer who simultaneously holds:

• a salaried mandate

and

• an independent professional practice

it is important to track the two types of income separately.

An accurate tax profile requires knowing the relationship from which each fee arises and the regime applicable to it..

Lawyer Billing via Invoice (Freelance Status)

Issuing invoices to a limited number of clients does not, in itself, mean that a lawyer is taxed as a salaried employee.

The Income Tax Code provides for special treatment regarding specific cases of individuals deriving income from business activity, provided that the statutory conditions are cumulatively met.

Factors to be examined include:

• the number of contracting parties
• the percentage of revenue derived from the main client
• written contracts
• the existence of a business establishment
• commercial status
• and the other conditions set out in Article 12 of the Income Tax Code

This case differs from a salaried mandate involving fixed remuneration.

Therefore, the two concepts should not be treated as identical.

Recognized Expenses

The tax recognition of a business expense does not depend solely on the existence of an invoice.

The expense must be genuinely linked to the business activity and meet the general requirements of the Income Tax Code.

Depending on the office's operations, expenses such as the following may be considered:

• commercial premises rent
• communal charges and operating expenses
• electricity
• telephone and internet services
• computers
• printers and other equipment
• stationery and office supplies
• software
• legal databases
• professional subscriptions
• fees for associates/collaborators
• accounting and other professional services
• payroll
• professional insurance
• professional development and training, provided the relevant conditions are met

Personal expenses do not become business expenses simply because an invoice or receipt was issued against the lawyer's Tax Identification Number (TIN).

Professional Base of Operations

A lawyer may organize their practice in a dedicated professional office or, where permitted and provided the relevant conditions are met, use their residence as a professional facility.

From an economic perspective, the following must be considered:

• the actual lease cost
• operating expenses
• the space used for business purposes
• commuting costs
• the need to receive clients
• office requirements
• and the tax substantiation of the relevant expenses

The choice is not merely a tax-related one.

It is simultaneously an operational and financial decision.

myDATA & Electronic Invoicing

The proper issuance of a law firm's documents must now be linked to the transmission of the required data to the myDATA system.

For lawyers, there is an additional need for reconciliation between:

Fee vouchers (Grammatia)

→ Agreed fees

→ Invoices/Documents

→ VAT

→ Pre-paid or withheld taxes

→ Collections/Receipts

→ myDATA

The second implementation phase of mandatory electronic invoicing for other businesses begins on October 1, 2026.

For the period up to 31 December 2026, provision is made for the possibility of gradual adjustment, provided that the relevant conditions set by the AADE are met.

The issuance process must be organized in a timely manner, based on the actual transactions of the lawyer or law firm.

POS, IRIS & Collection Agreements

A law firm's financial position is not determined solely by the documents issued.

There must be reconciliation between:

• issued documents
• POS
• IRIS
• bank transfers
• client advances
• promissory notes/payment vouchers
• receivables
• and actual receipts

For transactions between businesses and private individuals, the applicable framework for accepting direct account-to-account payments—such as IRIS—applies.

Regular reconciliation of receipts helps identify:

• outstanding fees
• amounts collected without proper reconciliation
• client payment delays
• discrepancies between bank records and accounting records.
• and actual available liquidity.

Minimum Imputed Income

Use the following term throughout:

Minimum Imputed Income

Text:

A lawyer operating as a sole proprietor may, provided the relevant conditions are met, fall within the scope of the Minimum Imputed Income determination framework.

This means that the final tax base may, in certain cases, not be limited exclusively to the actual accounting profits of the business activity.

Consideration must be given to:

• actual results
• years of operation
• the data used by law for the calculation
• applicable reductions
• exemptions
• and the taxpayer's specific circumstances

Therefore, it is useful to carry out this assessment before the tax year concludes, rather than waiting until the time comes to file the tax return.

Dividends & Distribution Accounts

Lawyers may receive amounts from Bar Associations, cooperation funds, or distributive accounts.

These amounts require proper tax and accounting monitoring.

Reconciliation is required between:

• the amounts paid
• the relevant certificates
• the taxes withheld
• the accounting records
• and the data to be used in the annual tax return

This reconciliation is important to ensure that withholdings already made are correctly reflected in the final tax position.

Services to Overseas Clients

A law firm may provide legal services to individuals or businesses outside Greece.

For these transactions, the following must be considered before issuing the invoice:

• the client's country
• whether the client is a business or an individual
• the place of supply of the service for VAT purposes
• the potential application of the reverse charge mechanism
• VIES obligations, where applicable
• the currency
• and the correct reporting of the transaction

It is not safe to treat every foreign client in the same way.

The tax treatment must be examined based on the actual characteristics of the transaction.

Sole Practitioner Law Office or Law Firm?

As a law practice grows, the question may arise as to whether sole practice remains the appropriate form or whether the establishment of a law firm should be considered.

The answer is not derived solely from comparing tax rates.

The following must be considered:

• number of lawyers and associates
• actual profitability
• method of fee allocation
• operating costs
• insurance and tax obligations
• need for shared organization
• future growth
• method of profit distribution
• and the specific institutional framework of the Lawyers' Code

IMPORTANT:

Do not present the standard Private Company (P.C.C.) as a readily available form for providing legal services.

A law firm is governed by the specific framework of the Lawyers' Code.

Associates, Staff & Costs.

An organized law firm may collaborate with other lawyers while simultaneously employing administrative or other staff.

Financial monitoring must distinguish between:

• fees for associates/collaborators
• ongoing collaborations
• payroll
• employer-related costs
• external services
• and other operating costs

Firm management needs to know not only the total cost but also the additional productive capacity or economic value generated by each new collaboration.

In this way, expanding the team can also be evaluated as a business decision.

CLIENT RECEIVABLES & CASH FLOW

A law firm may show significant amounts billed without having yet collected the corresponding payments.

Therefore, the following must be monitored:

• total receivables
• outstanding invoices
• advances/retainers
• balances per client
• collection time
• large overdue amounts.

An increase in business volume does not necessarily mean a corresponding improvement in liquidity.

Actual cash flow is affected by when fees are collected and when payments are due for:

• taxes
• VAT
• social security contributions (EFKA)
• associates/partners
• payroll
• operating expenses
• and other obligations.

LAW FIRM PROFITABILITY

A law firm's turnover is not sufficient to indicate its true financial performance.

We need to know:

• actual receipts/collections
• operating costs
• fees for associates/collaborators
• personnel costs
• subscriptions and information systems
• office expenses
• time spent working
• outstanding receivables

In a more organized firm, financial performance may also be analyzed by:

• client
• case category
• associate/partner
• team
• service

A client generating high total fees is not necessarily the most profitable if they require a disproportionate amount of time or incur significant external costs.

TAX & FINANCIAL PLANNING

The tax burden should not be revealed for the first time when the tax filing period opens.

Before closing the fiscal year, it is useful to have an estimate based on:

• revenue
• actual receipts/collections
• recognized expenses
• promissory notes
• taxes paid in advance
• taxes withheld at source
• Minimum Imputed Income (where applicable)
• social security obligations
• and the expected tax liability

This way, the lawyer can know in advance what level of liquidity to maintain and avoid unpleasant surprises after the year-end.

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