Recent Greek Tax Changes

Paris, 27 avril 2011 - Visualiser l'eAlerte

La nouvelle loi fiscale grecque qui vient d'être publiée contient des mesures affectant de nombreux impôts et taxes. Elle contient notamment des clarifications et précisions relatives au régime d'imposition des profits des sociétés de capitaux grecques selon que ceux-ci sont distribués ou non.

In the course of the current economic situation in Greece, a new tax law L.3943/2011 has recently been published. It introduces a 20% corporate income tax rate plus a 25% withholding tax rate on dividends. The new legislation affects various areas of the Greek tax system, such as corporate income tax, individual tax, VAT, capital gains taxation, provisions to combat tax evasion, etc. Amongst such numerous and significant amendments, set out below are the most significant changes from an international tax perspective. In any case, additional amendments may well be expected later this year.

Taxation of Profits of Legal Entities

The taxation of legal entities has been significantly amended. Hence, the corporate income tax rate of legal entities has been set at 24% for income in the financial year 2011 and at 20% for income from the financial year 2012 onwards. Please note: Financial year 2012 in Greece would normally cover any financial year ending after but not including July 31. 2011.

In addition, 25% withholding tax is imposed on profits distributed by Greek Societe Anonymes and Limited Liability Companies in the form of dividends, Board and Directors fees, profits distributed to personnel, as well as interim dividend payments, made to individuals or legal entities, Greek or foreign. The tax is triggered independent of whether the payments are made in cash or in kind (shares/parts). For profits distributed within 2011, however, the withholding tax rate is 21%.

The withholding tax on dividends may be reduced or eliminated subject to Double Tax Treaties or EU Parent Subsidiary Directive conditions. Dividends distributed by a Greek subsidiary (company A) to a Greek parent entity (company B) are not exempt from such withholding but a credit is provided for the tax already withheld upon further distribution of such dividends by company B. Moreover, in case the parent of the Greek entity – company B receiving the dividend – is an EU entity, a refund can be requested for the dividend tax originally withheld by company A, if the conditions of the EU Parent Subsidiary directive are met (minimum participation of at least 10% for 2 years).

A participation exemption is introduced on dividends received by qualified EU subsidiaries (i.e. subsidiaries qualifying under the EU Parent Subsidiary directive conditions). Such dividends are not subject to tax at the Greek parent company level on the condition that such dividends are recorded in a special reserve.
Finally, dividends/profits distributed by foreign SAs or LLCs to a Greek individual shareholder will be, in principle, subject to a final dividend tax in Greece at a rate of 21% for 2011 and 25% for 2012 onwards.

Capital Gains from the Sale of Listed Shares

For shares acquired prior to December 31, 2011, the existing special stock exchange duty of 0.15% applicable on the sale of shares listed in the Athens Stock Exchange is increased to 0.2%.
For shares acquired after January 1, 2012, the taxation of capital gains arising from the sale of listed shares, introduced through previous legislation, has also been amended.
In particular, capital gains from the sale of shares listed on the Athens Stock Exchange, which are acquired from January 1, 2012 onwards, will be taxed based on the general income tax provisions. Any loss, arising within the same year and for the same reason, shall be set off against such capital gains. Any excess loss following is carried forward - reference is made to the provision on the carrying forward of tax losses (5 years carry forward period). The special stock exchange duty of 0.2% will not apply on the sale of shares originally acquired after January 1, 2012.

Taxation of Government and Corporate Bonds

The withholding tax of 10% on accrued interest upon the transfer of corporate bonds issued by Greek corporations by a Greek entity is abolished.
In any case, foreign bond holders continue to be exempt from withholding tax on Greek bond interest.

Deductibility of Expenses

With respect  to previous amendments which introduced limitations on the tax deductibility of payments made to non-cooperative states (based on criteria similar to those of the OECD) or jurisdictions with preferential tax regimes (in principle jurisdictions where such income may be taxed at an effective rate lower than 50% of the Greek tax rate), the new tax law has relaxed the conditions of such limitations.
In particular, in order for payments made to non-cooperative states to be recognized as tax deductible expenses, the taxpayers are now given the opportunity to prove that these payments are real and usual and do not have as a result the transfer of profits with the purpose of tax evasion or avoidance. The previous regime provided for an absolute non-deductibility in case of payments to non-cooperative states.

The definition of a preferential tax regime is also amended. From now on, a company shall be regarded as established in a preferential tax regime if the taxpayer of such state is subject to tax at a tax rate equal or lower than 60% compared to the tax rate applicable in Greece.  

Special Contribution

There is still a lack of clarity as to whether a special extraordinary contribution on corporate profits (already imposed for profits of 2008 and 2009) will also be imposed for income of 2010, in lack of a relevant legislative provision.

The government has in the past indicated that it will impose such a contribution (at rates up to 10%) on profits of 2010 and 2011 as well.

Individual Taxation

Amongst others, the said provisions effectively expanded the conditions under which a person will be regarded as a Greek tax resident. The law expressly mentions that any person who has its residence or habitual abode in Greece is taxed in Greece for his/her worldwide income.

A habitual abode is deemed to arise for any person staying in Greece for more than 183 days in total within the same calendar year. The abode is presumed as habitual, unless the taxpayer can prove otherwise.

Tax Certificates

Further to recent changes, companies must receive tax certificates from auditors regarding the company’s compliance with tax regulations.
The law amends the relevant provision on tax certificates issued by auditors and includes more specific reference to their content, to be further expanded through the issuance of Ministerial Circular(s). It also stipulates that, in case of “clean” certificates, no regular tax audit should follow, subject to the provisions on the selection of companies for tax audit based on a risk analysis (high risk companies).

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