Urgent tax measures ratified by the Greek parliament under the reform package for the new bailout program

The Greek parliament ratified a new law (Law 4334/2015), introducing part of the reform package that is a prerequisite for Greece’s new bailout program. Key tax measures introduced through the new law, as further clarified by the Greek Ministry of Finance (Ministerial Decisions POL 1158, 1159 & 1160/2015), are summarized below:

Taxation of legal entities

• The corporate income tax rate is increased from 26% to 29%.
• The advance payment of corporate income tax is calculated at a 100% rate of the amount of tax due for the respective fiscal year, instead of the previously applicable 80% rate (a 75% rate applies for smaller enterprises).

The above increased rates apply for profits arising in fiscal years starting from 1.1.2015, whereas the 75% advance payment rate applies for smaller enterprises, only for fiscal year 2015.

Taxation of individuals

• Special solidarity tax rates, applicable on the total reported income of individuals, be it taxable or tax exempt, are revised as follows:

The above tax rates apply on total reported income earned from 1.1.2015 and onwards.

• The scope of application of tax on “luxury living” is extended to private pleasure boats of a length exceeding 5 meters. The applicable rate is increased to 13% (instead of the 10% rate which was previously applicable) and shall be imposed on “luxury living” assets acquired in fiscal year 2014 and reported from fiscal year 2015 and onwards.

VAT

• The scope of the exemption on educational services is limited and will no longer include services provided by private tutoring centers and foreign languages and computer centers, which shall be subject to the standard VAT rate (23%). It appears however that when such services relate to vocational training, the exemption remains applicable. 
• The super reduced VAT rate, which was 6.5% until now, is reduced to 6%. Such rate will apply to certain pharmaceutical products, books, newspapers, magazines and theater tickets. The standard VAT rate and the reduced VAT rate remain at 23% and 13% respectively.
• As of 1.10.2015, hotel accommodation shall be subject to the reduced rate (i.e. 13%). Until that date it will continue being subject to the super reduced VAT rate (i.e. 6%)
• The VAT rate has been raised from the reduced (13%) to the standard rate (23%) for several categories of goods, including sugar, coffee, tea, herbs, oils other than olive oil, vinegar, salt, pastry goods, as well as services, including the transport of persons, restaurant and catering services, cinema tickets, concerts, sports and other entertainment and cultural events, and non-exempt medical services.
• The above changes entered into force on 20.7.2015. Any invoices issued after this date will include the new VAT rates, irrespective of whether the transactions for which they have been issued have taken place prior to this date.
• The reduced rates that are applicable in the Aegean islands (i.e. 16%, 9% and 4%) will gradually be abolished as of 1.10.2015 and 1.6.2016, depending on the per capita income of each island. For certain remote Aegean islands the above reduced rates will continue to be applicable until 31.12.2016. Detailed guidelines for the implementation of the relevant measure shall be provided through a relevant Ministerial Decision.  
• For B2B transactions of a value exceeding EUR 3.000 and for retail sales of a value exceeding EUR 1.500, the payment of which must compulsorily be made through the banking system, the amount of VAT that corresponds to such transactions shall be transferred directly by the bank to the Greek State within 5 days from the relevant payment and the respective bank shall provide to the interested taxpayer a certificate for the aforementioned amount of VAT collected and transferred to the State. The details for the implementation of the measure shall be regulated through administrative guidelines.

Insurance premium tax

• The rate of insurance premium tax is increased from 10% to 15% for car insurances and other insurance sectors except for life insurances and insurance against fire.
• All exemptions from insurance premium tax are repealed, except for life insurance policies the term of which is at least 10 years and which continue to be exempt from the tax.
• The above changes entered into force on 16.7.2015.