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GREECE: An Introduction to Tax

The last few years, Greece has continued to pursue its place as an investment-friendly destination on an international level, a task which has proven more challenging than anticipated due to the pandemic and its consequences. Therefore, apart from dealing with improving and strengthening its economic position (following almost a decade-long economic recession), Greece (like all countries) was also forced to address COVID-19 and its health, social and economic impacts. In this respect, the last two years a number of measures were put in place with a view not only to mitigate the adverse effects of the health crisis on businesses and individuals, but also to underpin the country’s ongoing process towards rebuilding its economy, post-recession. Among others, the government adopted a number of economic and fiscal policy stimuli (including tax measures) to ensure - to the extent possible - the viability (but also the growth) of enterprises and industries and also to support individuals. In addition, the last year a package of EU directives regarding VAT was implemented, as regards certain value added tax obligations for supplies of services and distance sales of goods, constituting another instrument for generating revenues at national level. In this framework, the present overview briefly outlines the most recent of those measures and rules that were (or are about to be) adopted by the Greek government.

Tax measures for the support of enterprises and individuals

In 2021, numerous provisions of tax legislation were amended providing for tax reliefs for both businesses and individuals. In this framework, Law 4799/2021 has introduced income tax reductions and amendments to the Greek Income Tax Code. More specifically, Corporate Income Tax (CIT) rate was reduced from 24% to 22%, applied as from 2021 onwards. A reduction was also envisaged for the advance income tax payment rate, which dropped from 100% to 55% for freelancers and to 80% for all legal entities (except for credit institutions). In addition, payment of special solidarity contribution was suspended for tax years 2021 and 2022 for certain categories of income, including income of private sector employees, income from business activity, capital gains and income from capital (dividends, interest, royalties).

Further, by means of Law 4839/2021 a reduction from 1% to 0.50% of the capital duty tax rate applied on capital increase was effected as from 1 October 2021. The same law has also increased the tax-free amount for parental gifts and donations of assets to individuals qualifying as A’ Class relatives (i.e between spouses, parents and children, etc.) from EUR 150,000 to EUR 800,000, as from 1 October 2021. The above relief is also granted to cash payments of the same amount made to the aforementioned beneficiaries through credit institutions.

Tax incentives for the promotion of business activity and growth

- Draft law “Incentives for the development of enterprises”

Further to the above, by virtue of a draft bill, tax incentives are offered to SMEs and very small enterprises (but also freelancers) wishing to merge, transform or collaborate. According to the draft law (which has been submitted for public consultation by the Greek government) the new entity resulting from the transformation is granted a 30% reduction on its income tax for three years following the completion of the transaction and up to the amount of EUR 1 million (in case of transformations and mergers of legal entities) or EUR 100,000 per contracting party (in case of collaborations). In addition, provisions are included for the transfer of losses from the transformed companies to the new entity, provided that their total turnover in the last year prior to the relevant transaction equals or exceeds the amount of EUR 450,000. Given that the public consultation of the draft law was completed on 1 November 2021, the final legal text is anticipated to be published soon.

- Incentives for “angel investors” 

In the past year and following the issuance of a Joint Ministerial Decision, the provisions for “angel investors” were enacted. According to them, individuals (Greek or foreign tax residents holding a Greek Tax Identification Number) who contribute to the capital of start-ups are granted the right to deduct from their taxable income 50% of the amount contributed. The deduction is envisaged for capital contributions up to EUR 300,000 per tax year, an amount that can be allocated to up to three different start-ups and up to the amount of EUR 100,000 per enterprise. As per the said Ministerial Decision, contribution shall be made through participation in the company’s capital increase following the issuance of new shares or parts (therefore not at the stage of the start-up’s incorporation).

Amendment of VAT provisions related to supplies of services and distance sales of goods

Apart from tax measures and incentive for the promotion of the local economy, a package of EU directives regarding new VAT rules on cross-border business-to-consumer (B2C) e-commerce transactions were implemented, with a view “to overcome the barriers to cross-border online sales and address challenges arising from the VAT regimes for distance sales of goods and for the importation of low value consignments.” More specifically, by means of Law 4818/2021 the provisions of Council Directives 2017/2455, 2018/1910 and 2019/1995 were implemented into Greek law and brought relevant amendments to the existing VAT provisions, applicable as from 1 July 2021. Those measures, besides facilitating cross-border trading in the interest of both for consumers (by making sure that the VAT is paid where the consumption of goods take place) and businesses (by safeguarding a level playing field on cross-border online sales) aim also to combat tax avoidance and tax evasion, through increased VAT payments and less VAT fraud.

The main changes introduced are the following:

- As from 1 July 2021, the One Stop Shop (OSS) has been extended to all business-to-consumer (B2C) services taking place in EU Member States where the supplier is not established. Online sellers, including online marketplaces/platforms, can register through OSS in one EU Member State and this will be valid for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU.

- The existing thresholds for distance sales of goods within the EU are abolished and replaced by a new EU-wide threshold of EUR 10,000. Below this EUR 10,000 threshold, the supplies of TBE (telecommunications, broadcasting and electronic) services and distance sales of goods within the EU may remain subject to VAT in the Member State where the taxable person is established.

- The VAT exemption at importation of small consignments of a value up to EUR 22 is removed. This means all goods imported in the EU will now be subject to VAT.

- A new special scheme - the Import One Stop Shop (IOSS) - for distance sales of low value goods imported from third territories or third countries was created. The IOSS allows suppliers and electronic interfaces selling imported goods to buyers in the EU to collect, declare and pay the VAT to the tax authorities, instead of making the buyer pay the VAT at the time that the goods are imported into the EU as it was previously the case. Where IOSS is not used, import VAT is collected from customers by the customs declarant (e.g., postal operator, courier firm, or customs agents) who pays it to the customs authorities via a monthly payment.

- Special provisions are introduced whereby online marketplaces/platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves (“deemed supplier”).

- New record keeping requirements are introduced for online marketplaces/platforms facilitating supplies of goods and services, including where such online marketplaces/platform are not a deemed supplier.

From the measures and actions mentioned above, it is apparent that Greece, during a challenging health crisis which continues to affect economies globally, continues to pursue not only its growth after several years of economic recession but also its establishment as a friendly and flexible destination for investments and employees.

Contributors: Petros Pantazopoulos, Partner and Katerina Sideromenou, Senior Associate