New Tax Laws Anticipated in Greece
A significant reform of the Greek tax system is expected to take place within the upcoming weeks in the field of corporate taxation. Taxand Greece will revert soon with relevant news once the measures are finalised. In the meantime, Taxand Greece investigates recent important Court rulings relevant to upstream mergers and the constitutionality of the 15% special real estate tax.
Taxation of goodwill
The Greek Supreme Court has recently ruled with a majority of 5 votes that the goodwill which arises in upstream mergers falling under tax incentive law 1297/1972 is not deductible for tax purposes. In particular, the Court examined a case where Company A purchased 100% of the shares of Company B at a price higher than the latter’s net asset value. Subsequently, Company A merged with Company B by absorbing the latter. At the time of the merger, Company A booked goodwill which was equal to the difference between the purchase price of Company B shares and its net asset value as evaluated by the special committee. According to the Court majority, the goodwill in question is not tax deductible.
Taxation of capital
By virtue of a preliminary ruling, the Administrative Court of Appeals has recently referred the issue of constitutionality of Law 3842/2010 to the Supreme Administrative Court. Law 3842/2010 made significant changes to the special real estate tax legislation (SRET) including, among others, a significant tax rate increase (from 3% to 15%), a broadening of the SRET scope of application and a limitation of exemptions.The Supreme Court will rule on whether Greek companies fall within the scope of the SRET, taking into account that the purpose of the preamble of the law and of the enactment thereof was to tackle tax evasion taking place through offshore entities.
The anticipated reform of the Greek tax system will be well received by nationals and multinationals alike. The government are seriously looking to crack down on tax evasion and make the Greek market an attractive option for investors. Multinationals should keep informated of the reforms and plan for how these may affect their operations.