KARAKITIS TAX & LAW wins court case about withholding taxation of corporate bonds

The dispute related to the tax regime that was applicable in Greece until 31.12.2013. By validating the arguments of our appeal, the administrative court annulled the tax audit assessment of withholding tax and penalties on interest accruals regarding a corporate bond loan. Namely, the court ruled that the relevant tax legislation treated corporate bonds and bonds issued by the Greek State consistently. In terms of the point in time at which the withholding tax obligation was triggered, the court held that unlike other interest income, which triggered withholding taxation at the earlier between the crediting of the interest income as a liability in the accounting books of the borrower and its payment to the lender, the withholding tax corresponding to the interest generated by corporate bonds was due to apply at the time of the interest payment. With this reasoning, the court annulled the withholding tax assessment of the tax auditing authority, which was based on the posting of the interest liability in the books of the company that had issued the bond loan and had not verified whether the corresponding interest income was also paid to the holder of the bonds.