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Main Tax Issues to Look Out For in 2012

18 Jan 2012

A tax Bill was brought before the Greek Parliament at the beginning of January 2012, which introduces several noteworthy measures. In the meantime, several announcements were also made by the Greek Government on some tax measures that would be adopted early 2012, some of which have been incorporated in this Bill. These measures were proposed in an attempt by the Greek Government to reduce public deficit and fulfil the relevant targets agreed with its lenders. Taxand Greece discusses these tax measures and their potential implications to taxpayers.

The Greek Ministry of Finance plans to increase the "objective" values in real estate properties to their prevailing market values. It is also envisaged that a "uniform" real estate tax will be imposed, substituting the current real estate tax (i.e real estate property tax, real estate duty, real estate municipality duty etc.).

The Greek Ministry of Finance also plans to abolish and / or amend certain provisions of the Greek Code of Books and Records. The most important being the abolition of rules such as the rejection of a company's books and the arbitrary calculation of taxable profits on the basis of fixed profit coefficients which is triggered in the event of violation of formal obligations. Rejection of a company's books used to be a mechanism applied by the Greek tax authorities under a "form over substance" approach where formalistic violations occurred that were considered as obstacles to the performance of tax audit verifications. Companies used to be faced with very serious sums of tax and penalties as a result of arbitrary calculations upon rejection of books.

These announcements have not been introduced in the Bill as yet.

Additional measures are provided in the Bill which was brought before the Greek Parliament on 10 January 2012 and are already affecting stock lending in Greece. More specifically, it is proposed that off-exchange loans of shares listed on the Athens Exchange become subject to 0.2% tax, the relevant agreements and actions not falling within the scope of stamp duty. Based on the proposal, the 0.2% tax will be applied on the value of the shares lent and will burden the lender, whether individual or legal entities, associations or funds, irrespective of their nationality and residence, and irrespective of whether they benefit from tax or duty exemptions by virtue of any other provision. It is proposed that this tax be applied and collected in the same manner as the existing 0.2% tax on sales of listed shares.

Taxand's Take

Increasing the "objective values" of real estate property and imposing a "uniform" real estate tax will result in an increase of the taxable base of real property for the purposes of calculating real estate taxes. This would therefore increase the tax burden of companies which own or wish to purchase real estate.

The rejection of companies' books as provided for in the Greek Code of Books and Records is often regarded as a heavy "penalty" for a Greek company in the course of a tax audit, which is often not proportionate to the actual violation of the tax laws. Moreover, a negative precedent used to be set for future tax audits that would usually repeat such assessment in the absence of evidenced amendments by companies of the practices that gave rise to the rejection. The proposed abolition of this provision is one of the measures anticipated to improve the quality and sophistication of future tax audits.

According to the proposed provision with respect to stock lending, off-exchange loans of shares listed on the Athens Exchange become ex nunc subject to 0.2% tax, the relevant agreements and actions not falling within the scope of stamp duty. The enactment of this new regime will put a long-awaited end to the existing uncertainty as to whether stamp duty should be imposed on such transactions. This will be another step towards enhancing the liquidity of the Greek markets through support of listed securities via stock lending products used by broker dealers.

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

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Taxand's Take Author