GREECE: An Introduction to Tax
Seeking to establish a stronger presence within the international community, Greece has introduced a series of amendments in its tax legislation within the last few years in order to shore up its economy and align its domestic tax legislation with EU law and OECD’s recommendations.
In recent years Greece implemented the anti-tax avoidance directives ATAD I and ATAD II which enacted amendments to the already existing domestic interest deduction limitation and CFC rules and the General Anti-Avoidance Rule and introduced new rules on exit taxation and hybrid mismatches. In the same framework, by virtue of L. 4714/2020, Greece transposed the DAC6 concerning the introduction of Mandatory Disclosure Rules.
As of 2022, the conclusion of the Agreement for the Avoidance of Double Taxation (DTA) with Singapore and of a new DTA with France illustrates the intention of Greece - having already signed 57 DTAs - to enhance its collaboration with other countries holding considerable global sway and strengthen the system of fair taxation through the avoidance of the double taxation.
Moreover, in the previous year Greece enacted a series of amendments aiming at the alignment of the domestic tax legislation with EU and international conventional law.
Amendments in the Greek Shipping Tax Regime
In December 2022 a series of significant amendments were introduced in the Greek shipping tax system, following the recommendations of the European Commission in order for the Greek shipping tax regime to be further compatible with EU State Aid rules.
More particularly, the Commission expressed its concerns that the Greek tonnage tax regime, along with other tax reliefs of L. 27/1975, may breach EU Maritime Guidelines, and suggested a series of measures. The Greek State firstly signed a Mutual Agreement with the Shipping Community (ratified by L. 4607/2019), providing, inter alia, for a new voluntary contribution at a rate of 10%, while more amendments were enacted by L. 4646/2019 in connection with the readjustment of the tax rates applicable to certain ships, such as professional and private leisure boats, sailing boats passenger and car-carrier ferries and dredgers, and the tonnage taxation of bareboat charterers and ship lessees.
More measures have been recently adopted by L. 5000/2022, the main points of which can be summarised as follows:
- The voluntary contribution imposed on Greek tax residents, who are the ultimate shareholders or partners or ultimate beneficiaries of ship-owning companies of Greek or foreign flagged vessels under the condition that the latter are managed by a ship management company of Art. 25 L. 27/1975, is reduced from 10% to 5%. The said voluntary contribution is also extended to capital gains received from shipping shares by the above natural persons when imported to Greece and exhausts any further tax liability of such individuals (including special solidarity contribution) in respect of their global dividend income received by ship-owning companies.
- As from 1 January 2023 the tonnage tax is extended to commercial operators of time/voyage chartered vessels, and of private owned and bare-boat chartered vessels, under the condition that: (a) at least 25% of the beneficiary's entire fleet is EU or EEA flagged; or (b) the share of the vessels that are both non-EU or non-EEA and time/voyage chartered does not exceed 75% of their owned and bare-boat chartered fleet..
- A fee in favour of the Greek State is levied on the Greek fishing vessels, tugboats and self-propelled dredgers, the time of engagement of which in maritime services does not exceed 50% of their operating time.
Extension of the Greek inheritance tax exemption to non-Greek joint bank accounts
Another amendment (enacted by L. 4916/2022) is related to the exemption from inheritance tax of the deposits of joint bank accounts, in case of death of any of the co-beneficiaries. More specifically, the previous tax regime providing for the exemption from inheritance tax solely for the surviving co-beneficiaries of Greek joint-bank accounts was considered by the European Commission to be incompatible with the free movement of capital. The exemption is extended to the surviving beneficiaries of foreign cash and investment bank accounts regardless of their tax residence, under the condition that they include a term stipulating that in case of death of any of the co-beneficiaries his capital will be acquired by the surviving co-beneficiaries (as this has already been the case for the domestic accounts). The said exemption from tax inheritance is not applicable to the deposits of joint bank accounts held in non-cooperative jurisdictions.
Amendments in transfer pricing provisions
New possibilities for refunding or offsetting taxes are provided to the related parties that carry out intragroup transactions and are subject to taxation in Greece by virtue of L. 4972/2022, that amended the previous transfer pricing provisions. More particularly, under the currently applicable Greek tax regime, in case the tax administration conducts a tax audit in the first related party and concludes that the transactions between the related parties do not comply with the arm’s length principle, and consequently proceeds with the increase of the taxable profits of the audited first related entity, then the second related party is entitled to request a corresponding adjustment - namely a reduction - to its taxable profits (second downward adjustment).
To this end, the second related party must file an amending tax return, along with the relevant audit report of the first related party issued by the tax authority within a deadline of three months, as from the notification of the corrective assessment act to the audited first related party. The second associated party is entitled to a tax refund or offset, under the condition that the audited first legal party has already paid the tax assessed by the tax administration by virtue of the corrective tax assessment, following the tax audit. However, the first related party retains the right to submit an extra-judicial appeal against the corrective tax assessment of the tax administration. In case the corrective tax assessment of the tax administration is annulled, the corresponding correction in the profits of the related party is carried out with the initiative of the Tax Administration.
The new provisions aim to comply with the notion of Art. 9 of the Model Convention for the Avoidance of Double Taxation of OECD. More particularly, before the entry into force of L. 4972/2022 in relation to domestic associated parties, the tax administration unilaterally accepted the tax adjustment through the increase of the taxable profits of the one related party, without at the same time allowing the reverse adjustment by the other counterparty, and consequently the same income was subject to double taxation. On the contrary, in case the one associated party - whose profits were upward adjusted - was foreign, the second downward adjustment of the results of the domestic counterparty was possible in accordance with the provisions of Art. 9 and 25 of the relevant DTA.
All the above tax reforms indicate the constant engagement of Greece in complying with the rules of EU and international tax law.