The second week of December the Greek Parliament passed the much-awaited tax bill.
The tax reforms enacted can be categorized as follows:
- New investment and growth targeting reforms, which consist in: 1. the cut of the corporate and dividend tax rates, 2. The non-dom tax resident status relating to high-net-worth individuals who transfer their tax residence to Greece and invest half a million euros: Persons who meet the requirement of not having resided prior to 2019 in Greece for 7 years may choose to be taxed according to this new rule, which, however, pertains only to their offshore income. The tax amounts to € 100,000 per annum and is increased by € 20,000 per family member included. With this tax, the tax liability of the family members included in its scope and relating to offshore income items becomes exhausted and no reporting requirement must be complied with in relation to these income items in Greece. In addition, the offshore properties of these persons are excluded from the scope of Greek donation and inheritance tax, for as long as their offshore income is taxed in accordance with this new rule, 3. the introduction of the participation exemption for capital gains from shares in EU subsidiaries, 4. the tax exemption of the interest income of tax non-residents from Greek corporate bonds traded in regulated markets, 5. the decrease of the tax leakage of Collective Investment Vehicles;
- Measures for boosting real estate market activity, including the suspension of the VAT on the supply of buildings, to the extent the supply would normally trigger VAT (specifically, the supply of buildings which have never been occupied before and were built in 2006 or later), the postponement of the capital gain taxation on the sale of properties until 31.12.2022 and the simplification of the real estate transfer process;
- Personal income tax reforms, comprising limited personal income tax enhancements, which pertain to the taxation of sole traders, free-lancers and employees and relate to the income tax scale, the treatment of company cars and stock options. The new law makes also more clear the scope of application of the alternative 183-day tax residence criterion and considers individuals who have spent, during any given twelve-month period, 183 days of presence in Greece to be tax residents from day one of this period (the existing rules consider as part of the 183 days also short intervals of absence, without determining how short these intervals should be).
- Go-green tax incentives for company cars;
- Measures for reducing the gap between the effective and nominal tax rate and relating to the tax treatment of certain book entries including the write-offs of payables and receivables, the taxation rules governing the capitalization of tax-free profits and untaxed reserves and the increase of the threshold in order for a country to be considered as a country with preferential tax regime with regards to the application conditions of the Controlled Foreign Company (CFC) rules, thereby excluding countries with an effective tax rate of 10% or more, such as Bulgaria, which previously was considered as a country with a preferential tax regime;
- Other measures for improving the cash flow of businesses and relating to the reduction of the corporate tax advance payment made for this year on the basis of the Fiscal Year (FY) 2018 tax return filing and the abolishment of the withholding tax on certain domestic interest payments;
- Rationalizing the rules on the joint liability of the corporate executives for the payment of the tax obligations of the company;
- The negative aspect of the tax reforms: the general limitation period for tax audit assessments is effectively increased by 1 year;
- Unblocking the effective operation of alternative dispute resolution mechanisms in tax treaty matters by enhancing the existing procedural requirements for opening a Mutual Agreement Procedure (MAP);
- Measures against tax evasion involving digital platform transactions;
- Obligation for the digital transmission to the tax office of accounting books and records data.
For more details about these reforms, you may refer to our tax alert below: