The Greek Parliament ratified the new tax bill providing for a number of changes in the tax treatment of enterprises doing business in Greece. This is the first set of tax rules introduced by the new government (in office since July 2019). Some of the rules implement announcements of the past few months, aiming to encourage investment and entrepreneurial activity in the Greek market.
This tax newsletter summarises key changes introduced by the new law, impacting enterprises doing business in Greece.
Click here for the GR version – Πατήστε εδώ για το ελληνικό κείμενο
1. Tax rates and tax exemptions
- The nominal corporate income tax (“CIT”) rate is reduced to 24% (from 28%) for fiscal years 2019 onwards.
- However for credit institutions subject to the regime regarding the voluntary conversion of deferred tax assets to deferred tax claims against the Greek State, the CIT rate remains at 29% for the tax years under such regime.
- CIT pre-payment which was assessed upon the filing of the CIT return for fiscal year 2018 is reduced to 95% (from 100%).
- Dividend withholding tax is reduced to 5% (from 10%) as of 01.01.2020.
- The provision extending the scope of application of the 0.6% contribution of article 1 of L. 128/1975 to credits granted by financial institutions including leasing and factoring companies is abolished.
- Interest payments effected as of 01.01.2020 towards legal entities that are non-Greek tax residents and do not maintain a Greek permanent establishment are exempt from interest withholding tax as regards:
- corporate bonds traded on a trading venue within the EU or a regulated market outside the EU, regulated by an authority accredited by the International Organisation of Securities Commission,
- bonds issued by credit cooperatives operating as credit institutions.
A Greek legal entity is exempt from tax on capital gains arising from the disposal of shares in a legal entity which is a tax resident of an EU Member-State, insofar as the transferring entity holds at least 10% participation for a minimum holding period of 24 months.
- The capital gain is not taxed upon distribution or capitalisation.
- Expenses related to the shareholding participation are not recognised as tax deductible.
- The provision shall apply for income generated as of 01.07.2020.
As per the transitional provision, losses arising from the transfer of shares shall be recognised for tax purposes after 01.01.2020 under the condition that (i) a valuation will have taken place up until 31.12.2019 and they will have been recorded in the accounting books or will have been reflected in the financial statements audited by statutory auditors and (ii) they will become final up until 31.12.2022. If final losses are lower than those of the valuation the final losses will be recognised, however if they are higher, losses of the valuation will be recognised.
It is clarified that the applicable withholding tax exemption on interest and royalties paid between related parties shall also apply to payments effected between Greek entities.