The US-Greece Treaty Has No Warehouse Exclusion

TL;DR

Almost every article about non-resident sellers and US inventory turns on one sentence: a stock of goods held solely for storage, display or delivery does not create a permanent establishment. That sentence is in the OECD Model, the 2016 US Model, and virtually every modern US treaty.

It is not in the US-Greece treaty. The operative treaty dates from 1950, and the words storage, display, delivery, preparatory, auxiliary and solely appear in it zero times. What it does contain is an agency clause that treats “a stock of merchandise from which he regularly fills orders” as creating a permanent establishment — the same rule that decided the one US case where a foreign seller was found taxable on this fact pattern.

If you are a Greek tax resident with a US LLC holding US inventory, the standard advice does not apply to you.

Why this is not a small point

Read almost any guide to US inventory and non-resident sellers and you will find some version of this: check whether your treaty’s Article 5(4) exclusion covers your warehouse. Our own longer analysis of FBA and US trade or business spends most of its length on exactly that question.

The advice assumes the exclusion exists. For most treaty partners it does. For Greece it does not exist at all, and the treaty’s drafting makes clear this was a choice rather than an oversight.

Everything below was verified against the authentic registered text of the treaty in the United Nations Treaty Series, 196 UNTS 291, cross-checked against the IRS’s copy. Citations are given so you can check them yourself.

Fact 1 — The treaty in force is from 1950

Convention signed at Athens 20 February 1950; protocol signed at Athens 20 April 1953; entered into force 30 December 1953; operative retroactively from 1 January 1953. Citation: 5 UST 47; TIAS 2902; 196 UNTS 291. Confirmed against the State Department’s Treaties in Force 2025 and IRS Table 3.

No later income tax treaty replaced it, and no protocol has amended its permanent establishment or business profits articles. Two protocols exist, both part of the original package and both dealing exclusively with Article XIX (mutual assistance in collection).

Two traps worth knowing, because both produce a confident wrong answer:

• UNTS No. 2629 is the estate tax convention — same two countries, same signing date of 20 February 1950, printed on the adjacent pages of the same volume. The income treaty is No. 2630. Searching the volume for “Greece 1950” can easily surface the wrong convention.
• Treaties in Force lists a protocol signed at Athens 12 February 1964 (18 UST 2853; TIAS 6375), in force 27 October 1967. That protocol amends the estate tax convention, not the income one. It is regularly miscited as evidence that the income treaty was modernised. It was not.

Fact 2 — The exclusion is absent, not narrow

Searching the complete text of the treaty for the terms that make up a modern Article 5(4):

Zero for all eight, in both the IRS text and the authentic UNTS text.

This is worth stating precisely. The usual treaty question is whether your facts fit inside the exclusion — whether inventory held for FBA is held “solely” for storage and delivery once Amazon also handles returns and customer service. Under the Greece treaty there is no exclusion to fit inside. The argument is not narrow. It is unavailable.

Fact 3 — The treaty carves out purchasing, and only purchasing

The strongest evidence that the omission was deliberate is that the treaty does contain carve-outs. It carves out the wrong activity for a modern seller.

Article II(1)(i), third sentence:

The fact that an enterprise of one of the Contracting States maintains in the other Contracting State a fixed place of business exclusively for the purchase of goods or merchandise shall not of itself constitute such fixed place of business a permanent establishment of such enterprise.

And Article III(3) excludes profits from “the mere purchase of goods or merchandise.”

So the drafters in 1950 understood the concept of an activity that is physically present but too passive to create a permanent establishment. They wrote that carve-out. They extended it to buying goods in the other country and not to storing or shipping them. A treaty that says nothing at all about negative carve-outs invites an argument from silence. This treaty forecloses it: it addressed the category and drew the line elsewhere.

Fact 4 — The agency clause runs the other way

Here is the operative definition. Article II, paragraph (1), subparagraph (i), quoted from the authentic UNTS text:

The term “permanent establishment” when used with respect to an enterprise of one of the Contracting States, means a branch, factory or other fixed place of business, but does not include an agency unless that agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of such enterprise or has a stock of merchandise from which he regularly fills orders on behalf of such enterprise.

Read the structure carefully. An agency is not a permanent establishment — unless one of two things is true. The second is a stock of merchandise used to fill orders. This is an affirmative test that creates a permanent establishment, and it describes third-party fulfilment almost exactly.

Anyone who has read about US taxation of foreign sellers will recognise the rule. It is the same clause, in substantially the same words, as the 1942 US-Canada Protocol provision through which the Tax Court reached its holding in Handfield v. Commissioner — the case invariably cited for the proposition that a foreign seller with US inventory can be taxable. The usual answer to Handfield is that it was decided under a treaty clause no modern treaty contains.

That answer is correct, and it does not help a Greek resident. The clause is still in force in the US-Greece treaty.

Fact 5 — The real counter-argument, and its limits

The very next sentence of Article II(1)(i) is where any serious defence has to live:

An enterprise of one of the Contracting States shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business dealings in such other Contracting State through a bona fide commission agent, broker or custodian acting in the ordinary course of his business as such.

The argument is that Amazon, or a third-party prep centre, is a custodian — or something close enough to one — acting in the ordinary course of its own business, and that this independent-agent carve-out defeats the stock-of-merchandise rule.

It is a real argument and it is not obviously wrong. But it should be understood for what it is:

• It is a position, not a rule. No US authority applies this 1950 clause to a modern fulfilment network. Nothing decides whether a marketplace that stores, picks, packs, ships, processes returns and handles customer contact is a “custodian… acting in the ordinary course of his business as such.”
• It cuts against the ordinary reading of “custodian.” In 1950 the word most naturally described a warehouseman holding goods, closer to a bailee than to an integrated commercial agent.
• It has to defeat a clause aimed at the same facts. The two sentences sit next to each other. Reading the carve-out broadly enough to cover a fulfilment provider risks reading the stock-of-merchandise rule out of the treaty entirely — the interpretation courts most resist.

The honest summary: a Greek resident with US inventory has a weaker treaty position than a resident of Belgium or Italy, not merely a differently-worded one.

Fact 6 — Once a permanent establishment exists, the tax base is wider than you expect

This is the second problem, and the one most likely to be missed even by someone who reads Article II carefully.

Article III(1), authentic text:

An enterprise of one of the Contracting States shall not be subject to taxation by the other Contracting State in respect of its industrial or commercial profits unless it is engaged in trade or business in the other Contracting State through a permanent establishment situated therein. If it is so engaged the other Contracting State may impose the tax only upon the income of such enterprise from sources within such other State.

Compare the OECD Model, Article 7(1): the source State may tax business profits “but only so much of them as is attributable to that permanent establishment.”

That attribution limit is absent here. The Greece treaty draws its limit on source, not attribution. Once a permanent establishment exists, what the US may tax is the enterprise’s US-source industrial and commercial profits — not merely the profits the permanent establishment earned. This is the classic older-treaty force of attraction pattern. Confirming it textually: the word attributable appears zero times in the treaty.

Article III(2) does use the language of attribution, and it is easy to mistake for a ceiling:

Where an enterprise of one of the Contracting States is engaged in trade or business in the other Contracting State through a permanent establishment situated therein, there shall be attributed to such permanent establishment the industrial or commercial profits which it might be expected to derive if it were an independent enterprise… and the profits so attributed shall, subject to the law of such other Contracting State, be deemed to be income from sources within such other Contracting State.

Read to its end, III(2) is a pricing-and-source-deeming rule that feeds into III(1) — it prices the permanent establishment at arm’s length and then deems that amount to be US-source income. It pushes income into the taxable base. It does not cap it.

The practical consequence: the two problems compound. A Greek resident is more likely to be found to have a permanent establishment, and if one is found, the amount exposed is broader.

Fact 7 — No limitation on benefits, and “resident” is undefined

Three structural features of a 1950 treaty that matter in practice:

• No limitation on benefits article. Nothing in the treaty conditions benefits on ownership, base erosion, or a principal purpose test. Modern treaties devote pages to this.
• “Resident” is never defined, and there is no dual-residence tie-breaker. Article II(2) refers any undefined term back to the domestic law of the State applying the treaty. If both countries consider you resident, this treaty gives you no mechanism to resolve it.
• A saving clause at Article XIV(1), which lets each State tax its own citizens, subjects, residents and corporations “as though this Convention had not come into effect.”

A caution about the IRS’s own copy

The treaty PDF published at irs.gov/pub/irs-trty/greece.pdf is the correct treaty — but it is a re-typeset transcription, not a facsimile, and it contains errors against the authentic registered text:

The first is material: the omission removes the main verb from Article III(2) and with it the attribution rule.

Note also that the parenthetical article captions in the IRS copy — “(General Definitions)”, “(Permanent Establishment)” — are IRS editorial additions and not part of the treaty. They mislead, because the definition of permanent establishment is in Article II, while the article the IRS captions “Permanent Establishment” is Article III, which contains the business profits rule.

If you or your adviser are quoting this treaty in a filing or a memorandum, quote 196 UNTS 291.

What a Greek resident should actually do

1. Do not rely on an Article 5(4) argument. It does not exist in your treaty. Any adviser who reaches for “solely for storage or delivery” has not read the 1950 text.
2. Win or lose on the domestic question first. Whether you are engaged in a US trade or business under US law is now doing nearly all the work, because the treaty offers a much thinner second line of defence than it would for most nationalities.
3. Price the downside honestly. Force of attraction means the exposure if you lose is not limited to a notional warehouse margin.
4. Consider whether US inventory is necessary at all. For a Greek resident specifically, shipping from outside the US removes the fact that drives the whole analysis. That trade-off is worth pricing rather than assuming.
5. File. Under IRC §874(a), a non-resident who does not file loses the right to deductions and is taxed on gross receipts. A protective return costs its preparation and preserves that right.
6. Disclose any treaty position on Form 8833. If you do rely on the independent-agent sentence, that is a treaty-based return position and it is disclosable.

Frequently Asked Questions

Q: My accountant told me the treaty protects my warehouse. Is he wrong? A: Ask which article he is relying on. If the answer is Article 5(4), he is describing a modern treaty — the Greece treaty is from 1950 and has no Article 5. The provisions are Articles II and III, and neither contains a storage or delivery exclusion.

Q: Is Greece unusual in this? A: Among treaty partners, yes. Most US treaties in force were signed or renegotiated after the OECD Model became standard. A handful of surviving mid-century treaties predate it. Greece is the clearest example among countries whose residents commonly form US LLCs. At the opposite end of the spectrum sits the 1996 US-Turkey treaty, whose storage exclusion is unconditional and whose agency test requires the IRS to prove both a tax-avoidance motive and near-total involvement in the sale.

Q: Does this mean I definitely owe US tax? A: No. It means the treaty is unlikely to save you if the domestic trade-or-business question goes against you. Many Greek residents with US LLCs have no US inventory and no US personnel, and for them the analysis does not begin.

Q: I hold inventory in the US and I am Greek. What is my realistic position? A: A documented one built on the domestic test, with the independent-agent sentence as a secondary argument, a protective return filed, and Form 8833 if the treaty position is relied on. What is not realistic is a confident assurance that a treaty exclusion protects you.

Q: Would forming in a different state help? A: No. This is a federal and treaty question. The formation state affects state filings and fees, and nothing here.

Next Steps

The problem with the Greece position is not that it is hopeless — it is that the standard advice circulating online is built on a treaty provision your treaty does not contain, so the usual reassurance is worthless to you. What is needed is a position built on the text that actually applies, documented at the time you take it, with the right protective filings behind it.

If you are a Greek tax resident with a US LLC, the country-by-country overview at US LLC tax by country shows where Greece sits relative to other treaty partners, and the FBA and US trade or business analysis covers the domestic question that now carries most of the weight.

This article is general information, not tax advice. It states what the treaty text says; how the IRS applies Article III in practice is a separate question on which we express no view here. Have your specific facts assessed before adopting any position.