Some of the changes in the field of corporate taxation, announced by the Prime Minister in September in the Thessaloniki International Fair, have already been voted and others are in the process of being voted. According to the relevant press releases, these changes aim at providing a targeted support to businesses by reducing the tax burden, as well as reinforcing the economy, leading to economic growth.
We have also selected and summarised some other key recent international and corporate tax developments.
Key changes voted or in the process of being voted may be summarised as follows:
- Permanent character of the corporate income tax rate reduction from 24% to 22% that had firstly been enacted for the tax year 2021. This measure has already been adopted by virtue of Law 4799/2021.
- Three-year income tax reduction of 30% in respect of merging companies and self-employed sole traders partnering into a legal entity. The draft bill introducing this measure is currently subject to public consultation.
- Reduction of the capital accumulation tax applicable to all businesses from 1% to 0.5%. This measure shall apply as from 1st October 2021 and shall refer to transactions for which the tax liability arises from this date onwards. This measure has already been adopted by virtue of Law 4839/2021.
- Extension of the measure for reduction of social security contributions by 3% also for the tax year 2022. This measure has already been adopted by virtue of Law 4826/2021.
- Super-deduction by an additional 100% of specific expenses related to green economy, energy and digitalisation -available for small and medium-sized businesses.
- Extension of the suspension of pay TV tax – effective as from 1st October 2021 until 30th June 2022. This measure has already been adopted by virtue of Law 4839/2021.
- Reduction of the mobile fee from the floating rate of 12% - 20% to a fixed rate of 10% applicable to all individuals and legal persons except people aged up to 29 years old for which an exemption will be available, effective as from 1st January 2022. This measure has already been adopted by virtue of Law 4839/2021.
Important tax measures are also expected to be introduced in the field of corporate transformations and commercial cooperation, some of which have already been introduced in a draft bill. These will be covered in one of our upcoming newsletters.
Guidelines on the time of acquisition of capital gains income arising from a disposal of shares the consideration for which is subject to a condition precedent – Circular E. 2171/2021
In Circular E. 2171/2021, the Greek Tax Administration has provided significant clarifications with respect to the time of income acquisition as a result of the disposal of shares by an individual, a legal person or a legal entity, as well as to the determination of capital gains in the framework of Article 42 of the Greek Income Tax Code in conjunction with Circular POL 1032/2015.
In specific, it has been clarified that in the event that an agreement for the transfer (sale) of securities provides for the payment of an additional price which depends on the occurrence of future and uncertain events (condition precedent), the time of acquisition of the relevant income is the time of fulfilment of such condition, since this is when the beneficiary earns the right to collect it.
Apart from the above subject matter, the Circular provided clarifications with respect to other issues related to the transfer of non-listed securities, such as the determination of acquisition price upon transfer of securities in cases of prior corporate transformations, or upon free granting of shares to shareholders. Within this context, the tax authorities have taken the position that free shares issued to shareholders, as a result of converting taxed profits or profits from revaluation of real estate into share capital, have zero acquisition cost.
Moreover, the Circular clarified that a shareholder’s exit through a share capital decrease, resulting to an adjustment of the remaining shareholders’ ratio, shall not be deemed to be a transfer of securities.
States with a preferential tax regime have been announced by the IAPR – Decision A. 1186/2021
Pursuant to the Income Tax Code provisions, a number of anti-avoidance rules apply in respect of certain transactions with persons residing in jurisdictions having regimes which are deemed to be preferential. Preferential regimes are determined annually through a governmental decision based on criteria set-out in the law. The list includes those States that qualify as preferential in accordance with one of the two criteria set out in article 65 of the ITC, namely their respective corporate income tax rates being lower than 60% of the Greek corporate income tax rate.
The Greek Tax Administration issued on 23.08.2021 Decision A. 1186/2021 determining the states with a preferential tax regime for the tax year 2020.
- The respective list includes, among others, Ireland, Cyprus and Bulgaria.
- Hashemite Kingdom of Jordan, Montserrat, Nauru and Uzbekistan have been omitted from the 2020 list compared to the 2019 list.
- Timor-Leste, Kyrgyzstan, Mongolia, Barbados, Saba and Turkmenistan have been added in the 2020 list although not included in the 2019 list.
Guidelines on the substantiation of complicity with regards to violations of the Code of Tax Procedures - Circular E. 2176/2021
Circular E.2176/2021 provides clarifications with regard to the application of article 60 of the Code of Tax Procedures which stipulates that any person, who obstructs or attempts to obstruct the actions and the performance of duties by the Tax Administration in the exercise of its powers or harbors or instigates another person or accomplices with another person for the infringement of the Code is subject to the same penalties with the taxpayer.
In specific, it is clarified that complicity in the sense of the CTP means any assistance provided by a third-party to the taxpayer, either before or during, but not following, a CTP infringement. In any case, for the substantiation of complicity, the taxpayer needs to have actually committed an infringement. It is further noted that both individuals and legal persons may be considered as accomplices in the sense of the CTP.
As regards the penalties imposed to accomplices for committing infringements regulated by the CTP, these should be the same with the taxpayers.
Progress on adopting the EU Public Country-by-Country Reporting Directive
On 28 September 2021, the Council of the European Union adopted its position at first reading on the proposed directive on public country-by-country reporting (CBCR), meaning the disclosure of income tax information by multinationals with total consolidated revenues of at least Euro 750 million, paving the way for its final adoption. The adoption of the Council’s position follows a provisional agreement reached with the European Parliament in June.
The CBCR directive aims to enhance the corporate transparency of big multinational companies by requiring them to disclose publicly in a specific report the income tax they pay. Non-European multinationals operating in the EU through subsidiaries and branches will also be required to comply with the same reporting obligations.
The reporting should take place within 12 months from the date of the balance sheet for each financial year. The possibility for a company to defer under conditions the disclosure of certain information for a maximum of five years is also provided.
The next step is the formal approval of the provisional agreement by the European Parliament. Member states will then have 18 months from the entry into force of the directive to transpose it into national law.