Greek tax regime at a glance – 2022 -2023 years of change
Date: 24th January 2023
2022: tax legislation encouraged resolution and growth
Year 2022 is noted as a year of change; a year during which numerous tax laws were enacted by the Greek government, bringing the country up to speed with EU and worldwide tax developments; tax legislation introduced during 2022 paves the way for the development of Greek economy and supports the targets set in the Greek Recovery and Resilience – NextGenerationEU plan.
Α. Tax legislation enacted during 2022, impacts on both entities and private individuals, resolves on controversial issues, and encourages growth in investment activities. A brief outline thereof is presented below;
- Law 4887/2022; new law on investment
Law 4887/2022 regulates and focuses on investment activities supporting enterprises: in their digital and technological transformation, and green transition; the creation of economies of scale; the implementation of innovative investments, especially the introduction of new “Industry 4.0” technologies, robotics, and artificial intelligence, the enhancement of highly skilled employment, the support of new entrepreneurship, the economic development of less-favored areas of the country and areas included in the Just Transition Development Plan (JTDP), the further enhancement of tourism and competitiveness in sectors with high added value.
A minimum investment of EUR 50.000 – 1m, depending on the legal form of the investor and the type of expenditure, is required for eligibility under the law. State aid incentives may include corporate income tax exemption for a 15 year period, subsidies, leasing subsidies, employment cost subsidies, and financing of business risk.
- Law 4916/2022; amending tax rules in force
Law 4916/2022 introduces amendments to existing tax rules; main changes include: new calculation type for the assessment of the annual real estate tax (“enfia.”); extra interest tax deductions on intra-group financing, in excess of currently applicable limits; new – enlarged scope of activities for Greek established family offices; inheritance tax exemption on joint accounts held with banks in Greece; extended to include non-Greek accounts as well (subject to exchange of information rules).
- Law 4935/2022, on tax incentives for corporate transformations
Law 4935/2022 applies to corporate transformations, whose transformation process starts as of May 26th, 2022; it is noted that in case the application of Law 4935/2022 is opted for, its provisions may not run in parallel with the provisions of other tax incentive laws on corporate transformations (Laws 1297/1972, 2166/1993, 4172/2013).
Incentives under Law 4935/2022 include: exemption from corporate tax on a pre-tax profit basis by 30% for a period of 9 years and for a maximum amount of EUR 500k; in case of businesses’ alliance and collaboration the limits above are set to EUR 125k per alliance member; capital gains tax exemption on the transfer of fixed assets to the new entity, resulting from the transformation; tax/levy free execution of transfer/ transfer documentation; tax deductibility of the cost incurred for the acquisition of participation interests in other entities.
Tax incentives above are granted subject to eligibility criteria related mainly to the size of participating entities, the size of the entity resulting thereof, and the number of employees of the new structure.
Law 4935/2022 further introduces provisions re losses carried forward and free transfer of shares, impacting on the previous tax incentive regimes applicable to corporate transformation.
- Law 4972/2022, amending tax rules in force
Law 4972/2022 introduces amendments to existing tax rules; new rules are set in place aiming to subject corporate loans to stamp duty; group companies may file supplementary income tax return to reflect income adjustment following transfer pricing tax audit assessment in a related company; Special Solidarity Tax, imposed on income gained by private individuals, is abolished, and so is the Special Business Levy imposed on business profit (subject to new employment requirements).
Law 4984/2022 and Ν 4879/2022 ratifying the new Double Tax Treaties with France and Singapore respectively.
Law 4987/2022, codifying amendments effected to the Law on Administrative – Tax Procedures
Greek government committed to codify gradually tax laws, in an attempt to simplify applicable regime.
Law 5000/2022, amending tax rules in force
Law 5000/2022 introduces major amendments to the tax rules; amendments include:
(i) ratification of the new Contribution Agreement amending the 2019 one, executed between Greek Ship-owners and the Greek State; the new Contribution Agreement, is EU shipping regime compliant, expands its scope of application to other shipping activities, rules on capital gains taxation (arising out from the sale of shares of shipowning/holding companies), aligns with the Greek standard dividends tax rate of 5% rule, applies as of January 1st, 2022, and includes a Collective Action Clause; and
(ii) extension of the VAT suspension on new buildings, and capital gains tax at 15% on capital gains realized upon sale of Greek real estate (held either directly or indirectly), up until December 31st, 2024.
Secondary tax legislation and Interpretative guidelines issued during 2022, rule on the simplification of rules applicable to, inter alia, tax relocation to Greece, the operation of family offices, the digitalization of the Greek tax authorities, the application of VAT on chain transactions, VAT on e-commerce, the codification of VAT rules, etc.
Opportunities over challenges: 2023 calls for swift implementation and fast business reflexes
It is our belief that year 2023 is a critical year; and a challenging one; state authorities have to swiftly implement and abide by tax legislation enacted, and the business community has to grasp market opportunities operating under good governance rules and principles; new tax provisions may be further enacted, if so dictated by the EU Green Deal – the Greek Recovery and Resilience Plan.
At the beginning of 2023, it is worth referring to and touching upon some issues of general interest that we will come across during the year. In particular:
- DAC6; legal professional privilege overrides the role of intermediaries involved in potentially aggressive cross-border tax planning
The EU Court of Justice in its Judgment in Case C-694/20, interpreting the provisions of Article 7 of the Charter of Fundamental Rights of the European Union on the protection of the confidentiality of all correspondence between individuals and the strengthened protection to exchanges between lawyers and their clients, recognizes that the legal professional privilege covers legal consultation, both with regard to its content and its existence; and further rules, that the obligation to notify, entails an interference with the right to respect for communications between lawyers and their clients, guaranteed in Article 7 of the Charter of Fundamental Rights, thus contravening legal professional privilege.
The reporting obligation on other intermediaries who are not subject to legal professional privilege and, if there are no such intermediaries, that obligation on the relevant taxpayer, ensure, in principle, that the tax authorities are informed. The Court therefore holds that the obligation to notify laid down by the Directive infringes the right to respect for communications between a lawyer and his or her client.
There is an ongoing discussion whether DAC8 may serve as facilitator to bring EU rules in line with the judgement above of the Court.
- Proposal Directive; to tackle the role of enablers that facilitate tax evasion and aggressive tax planning (the SAFE directive)
Following the end of the public consultation period, it is expected that the Commission will present the final text of the SAFE directive and proceed to its adoption within the next couple of months.
The objective of the proposal is to prohibit enablers who design, market and/or assist in the creation of tax arrangements or schemes in non-EU countries that lead to tax evasion or aggressive tax planning for EU member states; the proposal will include clear and objective criteria for defining the forms of aggressive tax planning that are prohibited; ruling on the policy options to achieve the objectives based on the principle of proportionality.
- EU Directive 2022/2464 on Sustainability Reporting, the Corporate Sustainability Reporting Directive (CSRD)
CSRD rules replace gradually NFRD; depending on the size of the enterprise, CSRD reporting will apply to financial statements – year end reports as of 2024 (FS publication to take place during 2025).
EU and non EU entities, as well as subsidiaries and branches of non EU entities, satisfying specific criteria will have to apply the new rules; entities satisfying the criteria should include in the report information necessary to understand the entity’s impacts on sustainability matters and how they affect the entity’s development, performance and position.
The CSRD further introduces a mandatory independent third-party assurance; the scope of assignment of the auditor, the assurance engagement including an opinion on compliance with the CSRD reporting rules, as well as with the EU REG 2020/852 – taxonomy regulation reporting requirements.
- Tax Audits 2023
As a concluding remark, we would like to highlight potential 2023 tax audits (to be conducted); EU and international status and progress on administrative cooperation and exchange of tax data evolved significantly during past years; Greek tax authorities have also been working hard on the e-transformation of internal processes and services provided, and eventually the digitalization of the tax system. Tax audit control techniques and e-tax data available, allow now days, more than ever before, for an easy and speedy access and evaluation of taxpayers’ compliance with tax laws and deriving obligations.
Taxpayers, both legal entities as well as private individuals, have to be alert re the ongoing changes in the tax regime and should on an ongoing basis review and take corrective measures, if deemed necessary or appropriate, to comply with the tax regime; even in cases when said regime feels like quicksand, subject to changes as above.
For any questions and further information on the above, please feel free to reach out to Smaro Anagnostou at S.Anagnostou@lambadarioslaw.gr.
