GREECE: An introduction to Tax
In the context of the development of national tax legislation in order to incorporate, among other things, changes in EU and international legislation – as well as to further improve Greek tax administration – Greece has in recent months enacted several new pieces of legislation in the field of tax law.
Introduction of a new Code of Tax Procedure (“the New Code”)
About two years after the previous Code of Tax Procedure (Law 4987/2022), which had brought terminological and technical improvements to the original Code of Tax Procedure (Law 4174/2013), the New Code (Law 5104/2024) came into force in 2024. The New Code aims to further simplify and digitise tax procedures – and modernise the tax system – to facilitate the transactions of citizens and businesses with the tax administration using modern technology. In particular, the tax administration will now communicate with taxpayers almost exclusively by digital means. This means that, as a rule, paper correspondence will be abolished, and digital notification of all documents by the tax administration will be introduced. Similarly, documents, requests, etc submitted by taxpayers will in principle only be digital. In the same context, the automatic completion and finalisation of certain tax returns is foreseen.
Furthermore, it is stipulated that companies established in Greece under the provisions of the special regime of Law 89/1967 are exempted from the obligation to document their intra-group transactions. The New Code further clarifies the types of tax audits by setting, among other things, stricter time limits for their completion, as well as conditions for conducting a new audit or re-audit in cases that have already been audited. The possibility of an intermediate tax assessment has been introduced in cases where there is an immediate and imminent risk of tax evasion in order to deal with the creation of companies that engage in abusive practices.
Finally, the taxpayer is provided the opportunity to accept the results of the tax audit at various stages of the procedure, with a corresponding deduction from the surcharges, to enhance tax compliance and speed up completion of the pending case.
Abolition of Stamp Duty – Introduction of a New Digital Transaction Tax
Almost a century after the adoption of the stamp tax in Greece (1931), Law 5135/2024 replaced stamp duty with a digital transaction fee for transactions from 1 January 2024. The replacement of stamp duty was necessary, and constantly requested by taxpayers, as the now-outdated provisions of the law could not respond to modern forms of transactions; due to the ambiguity of the letter of the law, failures and disputes thus easily arose. For example, stamp duty was imposed only on written contracts drawn up in Greece, so that the nature of the contract or transaction was not decisive regarding the imposition of the duty; only the surrounding context was decisive. Moreover, it was often unclear as to which of the parties was liable to pay the fee. Under Law 5135/2024, the fee is imposed only on specific transactions listed in the Law. Accordingly, in several instances stamp duty has been abolished, such as utility transactions, insurance transactions and contractual interest on loans and credits.
Importantly, as in the previous legislative regime, bond loans are exempt from transaction tax. The fee is imposed on transactions where at least one of the transacting parties is a Greek tax resident or has a permanent establishment in Greece, within the meaning of the provisions of the Income Tax Code. It thus abolishes the concept of territoriality under the former provisions of the Stamp Duty Code. There are four tax rates, namely 3.60%, 2.40%, 1.20% and 0.30%, and a maximum tax ceiling of EUR150,000 per loan agreement has been introduced. Moreover, in the case of settlement agreements, the fee is levied on the agreed amount and not on the amount initially claimed, as was the case under the old provisions. Finally, the fee is levied on ancillary contracts drawn up to secure the main contract, unless the main contract is exempt or outside the scope of the digital fee or a digital transaction fee corresponding to it has been paid.
Incorporation of Pillar 2 Rules Into Greek Legislation
With Law 5100/2024, Greece incorporated Directive (EU) 2022/2523 (“the Directive”), which ensures a global minimum level of taxation for multinational groups and large domestic groups, adopting the framework of OECD rules known as Pillar 2. As is well known, the Pillar 2 rules cover multinational enterprises and large domestic groups with annual revenues of EUR750 million or more. They ensure a minimum level of taxation through the imposition of a supplementary tax per jurisdiction, payable when the effective tax rate of the jurisdiction falls below 15%.
Under the Greek Income Inclusion Rule, the ultimate parent entity of a group located in Greece pays to the Greek tax authorities a supplementary tax at the rate applicable to its directly or indirectly owned subsidiaries, if they are located in low-tax jurisdictions. In certain cases, the Income Inclusion Rule will be applied by intermediate parents, such as where an intermediate parent entity located in Greece is not wholly owned by the foreign ultimate parent of the group or where an appropriate Inclusion Rule has not been established in the jurisdiction of the ultimate or other ultimate parent of the group. The Inclusion Rule applies to tax years beginning on or after 31 December 2023.
The Undertaxed Profits Rule applies to the collection of the additional tax not collected through the Inclusion Rule or through the appropriate domestic additional tax. The Undertaxed Profits Rule applies to tax years beginning on or after 31 December 2024. In addition, under the option provided by the Directive, Greek law introduces a qualified domestic minimum top-up tax. However, given that Greece is a country with a relatively high nominal tax rate, the domestic supplementary tax is not expected to be widely applicable. The law also includes safe harbour rules, including the Transitional Country-by-Country Report Safe Harbor (“Transitional CbCR Safe Harbor”), the Transitional UTPR Safe Harbor and a permanent safe harbour for the domestic surcharge (“QDMTT Safe Harbor”).
Entities located in Greece and belonging to a group that falls within the scope of the rules are required to file a supplementary tax return, as well as specific tax returns for the supplementary tax that will ultimately be due in Greece. In-scope entities located in Greece are required to submit the supplementary tax return no later than 15 months after the end of the reporting year (18 months after the end of the "transitional" year – ie, the financial year in which a group first falls within the scope of the Pillar 2 rules). The tax return for the payment of the additional tax must be submitted one month after the deadline for submitting the additional tax return.