Is there an advance payment requirement?
Greek SAs are required to pay an amount equal to 100% of current year’s income tax as an advance against the following year’s tax liability. Credit is given for the advance tax paid in the previous year. In case of newly established SAs, advance tax payment is reduced by 50% for the first three years starting from the entity’s registration in the tax authorities. Upon SAs request, in case of an over 25% decrease of its income, the advance payment may be reduced accordingly.
Advance tax payment is not assessed on SAs transformed or merged pursuant under the provisions of L. 1297/1972, L. 2166/1993, L. 2190/1920, L. 4172/2013 or according to other special law provisions.
How is taxable income calculated? Which expenses are deductible?
Greek SAs maintain double entry accounting books of the Greek Accounting Standards3.
Annual gross income is reduced by the depreciation of fixed assets, provisions for bad debts and expenses incurred. Only the expenses that meet three exclusive conditions4 and are not included in an exhaustive list of non-deductible expenses may be deducted. Expenses may also be disallowed on grounds of formality without recourse to the substance on the basis of the rules included in the Greek Accounting Standards.
Taxable income is calculated by deduction from net profits of carried-forward losses, specific tax-free reserves5, tax-free income or income taxed in a special way to the extent allowed.
Offsetting of losses incurred abroad against business profits derived domestically is not allowed, with the exception of income arising in other EU or EEA member states, which is not exempted based on the applicable DTT concluded and implemented in Greece.
Expenses paid to companies – tax residents of a non-cooperative tax jurisdictions or preferential tax regimes are non-tax deductible, unless it is proven that these expenses refer to real and usual transactions that do not have as their object the transfer of profits or income or capital for tax avoidance or tax evasion purposes.
How are tax losses treated?
Tax recognized losses may be carried forward for five subsequent years provided that the losses are declared no later than the end of the financial year in which they arose. Carry back of the losses is not permitted. As for losses incurred abroad, please see above. If, during a tax year, direct or indirect holding of a company’s share capital or voting rights is changed by more than 33% of its value or number, tax loss carry for-wards seize to apply, unless it is proven by the company that change of control has exclusively served commercial or business purposes and has not been made for tax avoidance and/or tax evasion purposes.
Which are the main filing and payment requirements?
SAs are obliged to file their corporate tax returns within six months from the end of the tax year. Other filings:
Periodical VAT returns/Tax withholding returns for payments/ A “brief table” which includes the intercompany transactions subject to transfer pricing documentation is filed to the Ministry of Finance before the issuance of the annual tax certificate and in any case within 4 months as of the end of the tax year in question/A list with the investment expenses under the provisions of the investment laws shall be filed/A declaration regarding the tax deduction for new productive investments in Greece according to investment Laws (tax exempt reserves still to be formed etc)/ On a trimester basis a list of the agreements (of the previous three months) between the company and other entrepreneurs/ A list with the clients or the suppliers of the company/ A list with the agreed discounts to the buyer of the goods or the client receiving the services shall be notified to the head officer of the tax office 4 months earlier/ Payroll withholding tax returns on monthly salary payments.
How are Capital Gains taxed?
Capital gains are regarded as business income, although conceptually they may not constitute “revenue”. Accordingly, they are taxed at a rate of 29%.
It is to be noted that sale of listed shares is subject to taxation under specific conditions, whereas a transaction tax of 0,2% is imposed as well.
Which are the main tax withholdings?
SAs shall withhold income tax (along with special solidarity contribution) from their employees’ salaries on the basis of their projected annual income and the relevant applicable scale.
Other cases of tax withholdings are the following:
i. Distribution of dividends; For profits distributed until 31 December 2016, a withholding tax of 10 per cent is applicable on dividends, the tax obligation not being exhausted for Greek SAs.. From 1 January 2017 onwards, the withholding tax will be raised to 15 per cent.
Pursuant to the law, intragroup dividends distributed by Greek SAs are totally exempt from tax withholding, provided that: (a) the recipient is covered by Parent – Subsidi-ary Directive (2011/96), is seated in an EU member state and is subject to one of the taxes provided in said Directive, (b) the recipient holds a minimum participation of 10% in the distributing company’s capital, shares, voting rights or profits rights, (c) the aforementioned minimum participation is held for at least twenty-four months. Exemption may apply as well before lapse of minimum required holding period upon providing cash guarantee equal to the amount of tax exemption.
However, according a recent amendment of tax legislation, the aforementioned exemptions shall be alleviated in case it is considered that a “non-genuine arrangement” exists, i.e. an arrangement which has not been put into place for valid commercial reasons reflecting the economic reality.
ii. Royalties, interests; Income from royalties and interest is generally taxable at a rate of 20% and 15% accordingly, the tax obligation not being exhausted for Greek SAs.
Intragroup royalties or interests paid by Greek SAs are totally exempt from tax withholding, provided that: (a) the recipient is covered by Interest-Royalties Directive (2003/49), is seated in an EU member state and is subject to one of the taxes provided in said Directive, (b) the recipient holds a minimum participation of 25% in the remitting company’s capital, shares or voting rights, (c) the aforementioned minimum participation is held for at least twenty-four months. Exemption may apply as well before lapse of minimum required holding period upon providing cash guarantee equal to the amount of tax exemption.
iii. Directors’ Income; Directors’ income is taxed as salary. Remuneration paid out of the company’s net profits is treated for tax purposes as dividend.
iv. Entrepreneurs fees; Corporations must withhold a tax of 20% calculated on the fees of self – employed persons (lawyers etc.).
Are there thin capitalization rules?
According to the New CIT, regarding tax year 2016, net deductible interest6 is limited to 40 per cent of taxable profits before interest, taxes, depreciation and amortisation (EBITDA). The aforementioned rate shall be gradually reduced to 30 per cent regarding tax year 2017.
However, said limitation only applies if net interest exceeds the amount of EUR 5 million. For tax year 2016 onwards, the aforementioned amount is reduced to EUR 3 million. Disallowed interest expenses may be carried forward with no time limit. Credit institutions as well as leasing and factoring companies are exempt from said rules.
Are there any transfer pricing rules?
Greece’s transfer pricing rules adhere to the OECD Guidelines and apply the arm’s length principle. As far as the interpretation and implementation of TP national rules is concerned, the New CIT explicitly refers to OECD General Principles and Guidelines for intragroup transactions. Several documentation requirements are provided (filing TP documentation files, summary information sheets, maintaining of the do-cumentation etc) the non-compliance of which may result to severe penalties. Penalties are also imposed in case of inadequacy or inaccuracy of the information provided.
Advanced Pricing Agreements (APAs) may be obtained from the Greek Ministry of Finance covering the transfer pricing methodology of specific future cross-border intra-group transactions. Duration of said APAs may not exceed four years.
Are there any special provisions for group tax relief?
No, tax consolidation is not possible under Greek Tax Law. A Greek company may not transfer losses to another affiliated company.
Are there any Taxes upon incorporation or capital increase?
Law 1676/1986 introduced a capital concentration tax of 1% on certain capital injections (merger of a company, capital increase). Such tax is no longer imposed upon the establishment of a new SA.
A duty of 0.1% is payable on capital in favor of the Hellenic Competition Committee.
Has Greece entered into Bilateral Treaties for the Avoidance of Double Taxation?
Greece is a signatory party to 57 income tax treaties. According to the Greek Constitution, international treaties, such as treaties for the avoidance of double taxation, prevail over any other domestic legislation.
Greece has also ratified treaties for the taxation of profits of shipping enterprises and airlines with several countries. Some of them overlap with the applicable treaty for the avoidance of double taxation.
Which are the main taxes on owning real estate?
Unified Real Estate Tax (ENFIA) is levied on each real estate owned by SAs in Greece. The main tax is based on a sliding scale and its calculation is based on the objective tax value of the real estate, ranging for plots of land from EUR 0,0037 to 11,25 per sq.m. and for buildings from EUR 2,5 to 16,25 per sq.m. SAs are also sub-ject to supplementary tax, which is calculated at the rate of 5,5‰ on the total value of their real estate. Exemptions that cover certain categories of real estate apply as well.
Another special duty (TAP) is imposed annually in favor of the municipalities and is calculated in most cases as 0.25‰ up to 0.35‰7 of the value of real estate.
A special annual tax is set at 15% on the objective tax value of SAs which own or have usufruct property rights on real estate located in Greece unless, among other conditions, the ultimate individual shareholder is disclosed and obtains a tax identification number in Greece.
Stamp duties?
A 2.4% stamp duty is levied on written agreements between SAs or between SAs and individuals, unless the transaction is subject or exempt from VAT.
Commercial leases are subject to 3.6% stamp duty, unless submitted to the VAT regime
Are there are any Sales or Turnover Tax?
Special sales taxes apply to sales in Greece of several kinds of goods such as tobacco and alcohol. The tax applies to their sale price. Consumption taxes are also levied on petroleum products as well as on some other categories of goods.
An insurance tax is levied on the amount of premiums and the rights derived from the insurance contract. Special tax on the tickets sold by cinematographic companies.
Are there any special Taxes or Duties concerning the operation of the SA?
There are several taxes and duties in favor of the municipalities such as: cleaning and lighting fees/fees for the use of streets, squares and pavements /tax on revenues of hotels/tax on use of public space/ /duties on mobile phones etc/ tax 20% on the advertisement’s value plus advertisement duty.
What is the tax certificate?
Greek SAs that are subject to compulsory statutory audits by chartered auditors and with gross income exceeding EUR150,000, must be also audited for tax compliance purposes. Such audit is performed by chartered auditors who are obliged to mention any tax violations revealed during their audit. At the end of the audit the auditors issue a Tax Audit Certificate where their findings are recorded. The abovementioned certificate is submitted to the audited company and to the Ministry of Finance respectively. Failure to comply with the requirement for issuance of a Tax Audit Certificate results in serious penalties and triggers immediately a regular tax auditon behalf of the competent Tax Authorities. Said requirement for a Tax Audit Certificate will cease to apply for tax years starting on 1.1.2016 onwards. It remains to be seen whether such obligation will be extended or not.
Is there any special tax treatment of companies?
- Companies of “L. 89/67”
Compulsory Law 89/1967 offers beneficial provisions to foreign companies so that they establish a presence in Greece with the exclusive purpose of providing certain services to their head office or other foreign affiliate companies. For reasons of conformity with EU law, said law has been radically amended by Law 3427/2005. Today, branches or offices operating under the provisions of Law 89/1967 are taxed for their income in Greece according to the general provisions of Income taxation. Still, their taxable income is determined in a favorable way, their revenue being calculated on a cost-plus basis by application of a certain mark-up which is pre-agreed with the Ministry of Finance.
- Ships and Shipping Enterprises of “L. 27/75”
Greek flagged ships and their shareholders enjoy a beneficial tax regime with several tax exemptions. Pursuant to this regime, payment of Greek tonnage tax results in the full exemption of profits derived from the exploitation of thw ships from any other Greek income taxes.
Branches or offices of foreign companies dealing exclusively with the management, exploitation, chartering, insurance, average adjustments, brokerage of sale, shipbuilding, chartering or insurance of either Greek or foreign flagged ships may be exempted from income taxation.
Are there any tax incentives under investment laws?
Law 3908/20118 provides for: (a) capital aids in the form of cash grant; (b) subsidy of leasing, which covers partial payment by the State of the installments of a leasing which has been entered into for the acquirement of new mechanical and other equipment (Law 1665/86); and (c) tax-free reserves as part from the assisted expenses in order to encourage dispersion of industry throughout the country until 15 years from the accomplishment of the investment..
For more information see relevant Chapter.
Is there any anti-abusive rule?
A general anti-abusive rule was recently introduced for the first time to the Greek Tax Law, which broadly allows tax authorities to disregard any artificial arrangement that has been set up for tax evasion purposes or has resulted into a tax benefit. Upon assessing artificial arrangements, tax authorities are instructed by the Law to compare the tax burden triggered to the tax burden that would arise in the absence of such arrangements.
What are the standard social security and welfare system contributions?
Employees and Employers are obliged to contribute to the employees Social Insurance Fund (IKA). The employees’ contribution is also withheld by the employer and calculated on the employee’s actual gross salary (in cash or in kind). The total cost of contributions can reach 41.06% of salary (15.50% employee and 25.56% on behalf of employer, as of July 1st 2014). However, such percentages are expected to increase soon.
However, a wide reformation of social security contributions system has recently tak-en place, which shall be effective from 1 January 2017 onwards.
Is there any Directors’-Shareholders’ liability?
Under certain circumstances enforcement measures (restriction of 50% of Bank deposits, not issuance of documents necessary for the transfer of assets etc) may be taken, during a tax audit, against the Directors of the SA, under specific title (chairman, managing director etc).
According to the Greek tax legislation, executive Directors and other individuals with certain management capacities are jointly liable with the SA for taxes not paid by the SA under the circumstances described by the law. There is differentiation of the liability conditions in connection with the type of tax due and Company’s status.
Shareholders with a minimum participation of 10% at the time of dissolution of SA or up to 3 years prior to SA’s dissolution bear also - under certain circumstances – personal liability for tax debts. Such liability is capped at the amount of profits distributed taken out of the SA as profits, payments in cash or in kind.
Under the Greek penal system, legal entities do not bear criminal liability. Therefore, in the non-exhausting cases of tax evasion, money laundering, lack of payment of the taxes due within the time frame, the Directors of the SA, under specific title bear criminal liability.
Furthermore, the SA’s representatives bear criminal liability for lack of payment of salaries due or illegal overtime work.
Disclaimer: This outline of the Greek legal frame has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Readers should consult their own tax, legal and accounting advisors before engaging in any transaction.
1. The determination that the "true place of effective management" is located in Greece is made on tha basis of the actual facts and circumstances of each case and by taking into account: a) the place of exercising day-to-day business, b) the place of taking strategic corporal decisions , c) the place where the annual shareholders’ meeting is held, d) the place where accounting books and records are being kept, e) the place where the BoD meetings are held, f ) the place of residence of the BoD members or any other executive directors. The residence of the majority shareholders or partners may potentially be taken into account as well along with the abovementioned factors.
2. The definition of a PE for foreign legal entities is similar to the one included in OECD Model Convention on the Double Tax Treaties for the Avoidance of Double Taxation (Article 6).
3. L. 4308/2014.
4. a) They are incurred for the benefit of the business or in the course of its ordinary commercial transactions, b) they correspond to real transactions and their value is not considered lower or higher than the market value, and c) they have been appropriately recorded in the company’s accounting books and are evidenced by proper documentation.
5. From January,1st 2015, maintenance of tax free reserves is no longer permitted.
6. Net interest is defined as the amount by which interest expenses exceed interest revenues.
7. For municipalities that have entered into a consolidation program an increased TAP may be imposed with a rate up to 3‰.
8. As amended by the laws 4072/2012, 4083/2012, 4146/2013, 4111/2013, 4155/2013, 4177/2013, 4242/2014, 4258/2014, 4301/2014.