Tax

 Tax law is a branch of public law and includes all the legal rules that regulate the content, agencies and terms for the lawful exercise of the State’s taxation powers. In its present form, tax law is a relatively recent branch of law in Greece. Despite efforts to codify it per taxation object, a large part of its regulations remains fragmented. Moreover, the fiscal crisis facing the country in recent years and the concomitant need to secure public revenue, as well as the obligations undertaken as part of the memoranda signed, have recently led to significant changes throughout the regulatory framework of taxation.

The Constitution establishes the basic principles concerning taxation, such as the principle of legality of taxation which requires, inter alia, the imposition of taxes solely by laws adopted by the Parliament, the prohibition of regulation of the basic elements of a tax by means of a regulatory act, the prohibition of contractual regulation of taxes, the narrow interpretation of taxation provisions and the return of unduly paid taxes. The Constitution also establishes the principle of taxation equality, in the sense of the universal nature of taxes, on the one hand, and taxation on the basis of each individual’s tax-paying ability, on the other. 

The fundamental rules of taxation in Greek law

The fundamental rules of taxation in Greek law are contained (a) in article 4 §§ 1 & 5 of the Greek Constitution which read as follows: 4§1 “Greeks are equal as against the Law”; 4 §5 “Greek citizens contribute without discrimination to public fees depending on their powers” (b) in article 78 §§ 1 & 2 of the Greek Constitution: 1) No tax is imposed or collected without a formal law that sets the object of taxation, the income, the nature of property, the expenses or the transactions to which the tax relates to 2) Tax or other financial burden cannot be imposed with a law having retrospective effect, beyond the previous tax year of the year when the law is passed; in other words, the legislator can only look at income produced one year back when imposing taxation. Relevant to the constitutional rule which requires a formal law for the imposition of tax is the fundamental principle that tax rules are narrowly interpreted.

1. VALUE ADDED TAX (VAT)
When was VAT introduced in Greece for the first time?

VAT was introduced in the Greek legislation by Law 1642/1986 “On the application of value added tax and other provisions”, which entered into force on 1st January 1987, in replacement of turnover tax and other indirect taxes and today constitutes the Greek VAT law, following its codification by Law 2859/2000 and further amendments in conformity with the EU VAT Directives.

What are the main characteristics of VAT?

VAT is a general, consumption tax assessed on the value added to goods sold and services provided within the European Union. It applies to all stages of production and distribution of goods, provision of services and intra-community acquisitions or imports of goods from abroad, against a consideration. The tax is borne by the end consumer of goods and recipient of services, whereas the VAT incurred on purchases and/or receipt of services (input VAT) may be offset against the VAT charged by the taxable persons on sales performed or services provided by them (output VAT). Any difference is payable to or recoverable from the Tax Authorities.

What Law is governing money laundering?

Law 4557/2018 regarding the prevention and suppression of legalization of proceeds from criminal activities and financing of terrorism incorporates the 4th European Directive on the Prevention of Money Laundering and Terrorist Financing (AMLD4) in the Greek legislation. To this end, this law of punitive character (and as such to be strictly interpreted) establishes a mechanism of control/supervision of the market, which is accompanied by several obligations, as well as administrative and criminal sanctions.

What legislation is currently in force in relation to anticorruption?

• Greek Criminal Code (GCC), articles 159, 234-237, 237A, 237B, 239
• Law 2656/1998, which ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
• Law 2802/2000, which ratified the EU Convention against corruption involving officials of the European Communities or officials of Member States of the European Union
• Law 2803/2000, which ratified the EU Convention on the protection of the European Communities’ financial interests
• Law 3560/2007, which ratified the Council of Europe Criminal Law Convention on Corruption and Additional Protocol
• Law 3666/2008, which ratified the UN Convention on Combating Corruption
• Law 3875/2010, which ratified the UN Convention against Transnational Organized Crime
• Law 4022/2011 on corruption acts of political and state officials and on cases of major public interest
• Law 1608/1950 (for the protection of the State’s property), which does not provide for different acts but serves as an aggravating factor (from a sentencing point of view) when the State’s financial damage exceeds the limit of € 150,000.

Which are the taxation objects in Greece?

The Constitution (art. 78 par. 1) determines the taxation objects in Greece and provides the imposition of tax on: (a) income, regarding the acquisition of financial means, (b) property, regarding the possession and transfer of financial means and (c) expenditure, regarding the use of financial means.

In particular:

Income taxation is imposed yearly on: (a) worldwide income acquired by individuals and legal persons/entities, Greek tax residents and (b) Greek sourced income acquired by individuals and legal persons/entities, foreign tax residents, according to the provisions of Greek Income Tax Code (article 3 of ITC, Law 4172/2013), unless otherwise specified.

Property taxation (such as “ENFIA”, Real Estate Tax, Transfer Tax etc.) is imposed on: (a) the possession of financial means in Greece, which reflects the ability to pay tax, and (b) the transfer of financial means, which is classified into the categories of taxation on (i) inheritances, (ii) gifts, (iii) parental transfer of property and (iv) transfer of property under consideration.

Expenditure taxation (VAT, excise duty, customs duty) is imposed on imported or sold products/ services, which (expenditure taxation) is incorporated at the price of the products/ services and charged to purchaser of these products/services.

What is double taxa

Quasi judicial recourse

The concept of the quasi judicial recourse was formally adopted as of 1.8.2013, through the entry into force of L. 4152/2013. The system remains the same after the entry into force of the Code of Tax Procedure (L. 4174/2013), regulating, among others, the procedure in case of dispute of the acts and omissions of the Tax Administration. As from 1.1.2014 (date of entry into force of the Code of Tax Procedure) the quasi judicial recourse constitutes an extra-judicial mandatory remedy for challenging any act or omission of the tax authority and it is a precondition for the admissibility of the judicial appeal lodged before the competent administrative court (article 63 of Law 4174/2013). By means of a quasi judicial recourse, and prior to any judicial review, a re-examination of the disputed act or omission is conducted by a special administrative authority particularly formed for this purpose, the Dispute Resolution Directorate. The Dispute Resolution Directorate is located in Athens. Further, a Sub-Directorate is located in Thessaloniki, competent for the review of tax acts and omissions of tax authorities of Nothern Greece.

The taxpayer through the quasi judicial recourse shall invoke against the disputed act or omission of the tax authority all arguments at its disposal either these referring to typical defects or on the merits.

The legal and regulatory framework in the fields of accounting and auditing of statutory financial statements in Greece is mainly formed by three key laws, which also constitute the main pillars of the whole system.

The first pillar focuses, on the application of principles for the adoption of accounting system and the keeping of accounting records adapted to the needs of Greek reality and second, on the preparation of the statutory financial statements. This framework is formulated by Law 4308/2014 “Greek Accounting Standards and Relevant Regulations” (Government Gazette A’ 251 / 24.11.2014).

The second pillar, in principle, regulates the functioning of the auditing profession and sets the framework for the implementation of the independent statutory audit process. It also extends to corporate governance issues as regards public sector entities. The framework of the second pillar has as main axis Law 4449/2017 “On the statutory audit of annual and consolidated financial statements and public supervision of the audit work and other provisions” (Government Gazette A’ 7 / 24.1.2017).

Finally, the third pillar covers company law, having as the main legal axis recent Law 4548/2018 “Reforming the Law of Societes Anonymes” (Government Gazette A’ 104 / 13.6.2018), which is being implemented on 1 January 2019 and has replaced the existing Law 2190/1920.

The legal and regulatory framework as regards accounting and auditing of statutory financial statements in Greece, which operates in full harmony with that of the European Union, includes a number of other relevant laws and regulations, which are included in the legislation of the capital market regulatory framework, the law regulating the operation of banks and insurance companies, and the company law. These provisions regulate issues and formulate legal and regulatory requirements in broader fields, such as corporate governance, the system of internal controls, and financial reporting for supervision purposes.

A. General Tax Framework on the Taxation of Trusts, Foundations and related parties

I. Are foreign trusts, private foundations etc recognised?

Foreign trusts and private foundations are recognized in Greece via primary [Laws] as well as secondary [Circulars etc] pieces of legislation.

It is worth noting, that the Greek set of tax rules on foreign trusts and private foundations is currently going through an active and dynamic process of aligning to international best practices.

II. How are Trusts and Foundations treated for tax purposes?

There is no tax imposed upon the assets held by non-Greek Trusts and Foundations. Generally, the Greek framework of applicable tax rules in such structures concerns the distributions (“fruits”), the income and any liquidation proceeds.

The criteria based on which individuals may be defined as Greek tax residents

According to the Greek Income Tax Code, as in force (Law 4172/2013), an individual is considered Greek tax resident, provided that:

• the individual maintains a permanent or principal residence or usual place of domicile or center of living interests, namely his personal or financial or social relations, in Greece;
• the individual is a consular or diplomatic or public official of similar status or public servant having Greek nationality and serves abroad;

Furthermore, an individual is considered as a Greek tax resident, regardless of his permanent residence or usual place of domicile, if he is constantly present in Greece for a period exceeding 183 days, including short periods of living abroad, from his first day of presence in Greece. Τhe above period of 183 days is calculated by the days, irrespective of the calendar year or the years, in which the period exceeds. This provision does not exclude any potential application of paragraph a above.

However, any individual who acquires income in Greece is also taxed in Greece for the income produced in Greece, regardless of his permanent or principal residence or usual place of domicile.

While the acquisition of real estate in Greece requires the one-time payment of tax for the acquisition of such property, whether due to a sale and purchase agreement, or due to an agreement on donation, or due to a deed of acknowledgment of inheritance, the right to real estate (right in rem) gives rise to taxation on this property.

Rights in rem that are fiscally considered as incorporating taxable capital are the rights of ownership, usufruct, habitation, surface.

Α.   The main capital tax is the Consolidated real estate tax (“ENFIA”), which is applicable on each owned piece of property and is calculated per annum (or part thereof in case of maintenance of real estate for a period less than a whole calendar year) on the basis of the following factors:  (a) the exact area (in square meters), (b) the type of use (residence, commercial, agriculture etc.), (c) the district (major cities are divided in several districts, and each district equals to a state-specified price per square meter (“zone”), (d) in case the property consists of a part or a whole building, the year of built (e) in case the property is located in a building, the floor , (f) the number, if any, of facades of the property.

The above depict the general rule applicable, and in some type of buildings, the factors that are taken into account for the calculation of ENFIA can vary, resulting to a lower or higher tax.

As a general guide, the ENFIA tax amounts to ca. 1,40 to 14,00 euros per square meter.