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Corporate Income Tax Reduced – Distribution of Profits Subject To Withholding Tax

5 Jul 2011

The applicable corporate income tax rate for AEs (the equivalent of the French "Societes Anonymes"), EPEs (the equivalent of "Limited Liability companies") and other similarly taxed entities, including branches of foreign corporations, has been reduced to 20%.

From 1 January 2012, the profits distributed by these entities, on the basis of resolutions of their competent corporate bodies will be subject to 25% withholding tax. For distributions performed in 2011, a 21% withholding will apply. Withholding tax will be reduced or nil subject to the conditions of the Parent Subsidiary Directive or any applicable Tax Treaty. Taxand Greece looks at amendments brought in by the law and the impact this will have on industries affected by the Greek economy.

The law brings significant amendments to the Greek Income Tax system. The "split rate" system of taxation differentiating between distributed and undistributed profits launched in mid-2010 (but never applied) has now been repealed. The former corporate income tax system has been restored, whereby the corporate income tax at the level of the company is set at 20% for profits derived as of 1 January 2011, (specifically, for income of financial year 2011, the corporate income tax rate is set at 24%) and withholding tax on distributed profits is set at 25%. For profits distributed within the 2011 calendar year the applicable withholding tax rate is 21% (subject of course to the conditions of the Parent Subsidiary Directive or of applicable Tax Treaties).

The same withholding tax rate (ie 25%) also applies on profits remitted by Greek branches to their foreign head-office.

Taxand's Take

The recent decrease in corporate income tax rates falls under the overall effort of the Greek Government to support entrepreneurship and competitiveness of the Greek economy. This decrease is a positive move and welcomed by multinationals affected by the Greek economy.

Your Taxand contact for further queries is:
Maria Zoupa
T. +30 210 696 7000

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