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Changes to Absorbing Tax Losses Impacts Mergers
A recent Law, 4072/2012 introduced a new provision, according to which, in the case of mergers by absorption benefitting from the provisions of tax incentive law 2166/1993, the tax losses of the absorbing entity are subject to the provisions of article 4 (3) of the Greek Income Tax Code, i.e the general income tax provision allowing for a 5 year tax loss to be carried forward. Taxand Greece considers the recent provision allowing losses of the absorbing entity in a merger.
The possibility to carry forward tax losses of merging entities has undergone a number of changes. In particular, in the context of non-binding letters addressing taxpayers' questions, the Greek Ministry of Finance had taken the view that upon a merger by absorption performed under the regime of Law 2166, not only do the tax losses of the absorbed company not survive the merger, but also the tax losses of the absorbing company.
The Greek Ministry of Finance has not adopted the same view with respect to tax losses of the absorbing company in the context of mergers performed under the regime of Law 1297/1972. Following enactment of the new provision, however, the tax treatment of tax losses of the absorbing entity has been equated under both tax incentive laws. Multinationals should make a note of this recent development if they are considering a merger.
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