Sole proprietorship taxation 2026: what you actually pay

A sole proprietorship has no tax rate of its own. Its profit is added to your income as an individual and taxed on the progressive scale, from 9% to 44%. On top of that come two further amounts that surprise people starting out: the tax prepayment and the social security contributions.

Below is exactly what applies for 2026, in what order the amounts are calculated, and where the traps are — chiefly in the minimum deemed income.

The 2026 tax scale

From 1 January 2026 a new scale applies to all individuals. Income from business activity is taxed on the same scale that applies to employees and pensioners:

There are three changes compared with 2025: a two-point cut in the middle rates, a new bracket 39% for 40,000–60,000 € (previously taxed at 44%), and retention of the 44% rate only above 60,000 €. Special reliefs are also provided for people under 25 and for families with children.

The scale is progressive. Not all income is taxed at the highest rate — each bracket is taxed separately. On a profit of 25,000 €, the 26% rate applies only to the last 5,000 €.

What is taxed: the profit, not the turnover

What is taxed is net profit: revenue minus deductible expenses. And here is a point many people miss — e-EFKA social security contributions are deductible as an expense. You do not pay tax on the money you paid in contributions.

In practice the order is: revenue → minus expenses and contributions → net profit → tax scale.

The trade levy has been abolished

The annual 650 euro trade levy no longer applies to individuals — sole proprietorships, freelancers and the self-employed. It was abolished from the 2024 tax year onwards.

Note, however: it remains for legal entities. If you are considering converting to an IKE or a partnership, the trade levy returns as a cost.

Minimum deemed income — the most misunderstood point

Since 2023 there has been minimum deemed profit (Article 28A of the Income Tax Code). It means the tax office assumes a sole proprietorship earns at least a minimum amount — even if you declared a loss.

The amount is not fixed. It is calculated on the basis of:

• the minimum wage, adjusted according to the years in operation of the business — the more years, the higher the deemed amount
• increase for staff, if you employ staff
• increase based on turnover, if your revenue falls below the average for businesses with the same activity code

Because the base is tied to the minimum wage, rises when the minimum wage rises. With the rise from 830 to 880 euro, the base amount went up from 11,620 euro (2024 income) to 12,320 euro (2025 income). Around 400,000 professionals saw their deemed income rise.

There is no deemed income for the first three years

If you started recently, no minimum deemed income applies for the first three years of activity. It is the biggest relief for a new business and the reason why the timing of the business start matters.

Who is fully exempt

• Mothers in the year of birth and the two following years
• Farmers
• Those paid on a service-invoice basis by up to three employers
• People with a disability of 80% or more
• Cafes in villages under 500 inhabitants or islands under 3,100
• Insurance advisers with up to two partnerships, working from home
• New businesses, for the first three years

Who gets a 50% reduction

• Professionals in areas with under 1,500 inhabitants
• People with a 67–79% disability
• Single-parent families with minor children
• Parents of a child with a disability of 67% or more
• Large families
• Taxi owners with a share of up to 25% of the vehicle

For 2026 AADE requires supporting documents for the exemptions and reductions — a large-family certificate, a disability assessment and so on. They are no longer accepted on a simple declaration.

You can challenge it — at a cost

The law allows you to challenge the deemed amount by proving with actual facts that you did not carry on business normally: illness, military service, imprisonment, natural disaster.

Challenging it, however, triggers an audit. It is not a box you tick; it is a request that opens your books. It is worth it when you have real circumstances and documentation — not simply because the amount seems unfair.

The tax prepayment

Along with the year’s tax you also pay 55% tax prepayment against next year’s tax. For new sole proprietorships the prepayment is halved in the first year, that is 27.5%.

The prepayment is not an extra tax — it is offset the following year. It is, however, a real cash outflow, and it is the reason the first “normal” year of a business is the heaviest: you pay the tax for the year just ended plus the prepayment for the next.

A worked example

A sole proprietorship with net profit of 25,000 € (that is, after deducting expenses and EFKA contributions), on the 2026 scale:

The effective tax on profit is 16,8%, not 26%. From that amount the prepayment paid the previous year is deducted, so the final sum payable differs case by case. The example is indicative and does not replace a calculation on your own figures.

The remaining obligations

Income tax is only one part. A sole proprietorship also has:

• e-EFKA social security contributions, monthly, based on the contribution class you choose — see details
• VAT, monthly or quarterly. Note: those keeping single-entry books who started on or after 1/1/2024 file monthly return, not quarterly
• myDATA and, from 1 October 2026, mandatory electronic invoicing for B2B transactions

All deadlines to the end of the year are in the tax calendar.

What is coming in 2027

The economic team is preparing a package of measures that includes a gradual abolition of deemed income for compliant taxpayers taxpayers, on criteria such as paying taxes and contributions on time and the use of electronic transactions, along with a lower tax prepayment.

These are announcements, not legislation in force. The first changes are slated for 2027. Until they are enacted, what is described above applies.

Frequently asked questions

Do I pay tax if my business made a loss?

Possibly, yes. Because of the minimum deemed income, the tax office assumes there is a minimum profit even where a loss is declared. An exception applies for the first three years of activity and for certain categories of professionals.

Do I still pay the trade levy?

No, not if you have a sole proprietorship. The trade levy was abolished for individuals from the 2024 tax year. It remains for legal entities.

What is the tax prepayment and why do I pay it?

It is a 55% prepayment against next year’s tax, which is offset then. For new sole proprietorships it is reduced to 27.5% in the first year.

Are social security contributions deductible?

Yes. Contributions paid to e-EFKA are deductible as an expense and reduce taxable profit.

Is it worth converting my sole proprietorship into a company?

It depends on the level of profit, whether you distribute profits and how much liability you want to take on. A company is taxed at a flat rate rather than on a progressive scale, but the trade levy returns and tax is added on profit distributions. It is a calculation done on your own numbers, not a general rule.

When must I file monthly and when quarterly VAT returns?

Those keeping double-entry books always file monthly. On single-entry books, those who started on or after 1/1/2024 file monthly; older businesses remain on quarterly.

Would you like a calculation on your own numbers?

At our office in Giannitsa we calculate the real tax burden on your business — tax, prepayment and contributions together — and tell you where there is room and where there is not. See the tax returns for individuals or get in touch with us.

This is for information only and does not replace individual advice. The rates, the deemed income amounts and the conditions change by law and by AADE decisions — always confirm the rule in force for your own case.