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New measures to cope with the Greek fiscal crisis
On 24 March 2010 the Ministry of Finance submitted to parliament the draft tax bill aiming to boost fiscal revenues and combat tax evasion. This draft bill has now been enacted. The proposed measures will have a considerable impact on businesses and investors. The bimost noteworthy changes to Greek tax law identified by Taxand Greece, that will have significant bearing on multinationals, are as follows:
- The introduction of a differentiated treatment in the taxation of undistributed and distributed profits as of 1 January 2011, distributed profits being taxed at 40% at company level while undistributed profits taxed by a rate currently set at 24% to be gradually reduced on annual basis by 1%, eventually lowered to 20% for profits incurred in 2014.
- Increased taxation of partnerships (from 20% to 25%), applying for fiscal years starting as of 1 January 2010.
- Restrictions in the deductibility of expenses incurred from transactions with entities established in non-cooperative jurisdictions or jurisdictions applying preferential regimes and scrutiny of triangular transactions with such entities, as of 1 January 2010.
- Restrictions in the deductibility of interest payments arising from financing of acquisitions that are further transferred in a two year period or acquisitions of shares in companies resident of non-cooperative or preferential tax regime jurisdictions.
- Extension of thin capitalisation rules to all loans granted by associated enterprises, including bond loans but also third party loans guaranteed by associated enterprises and elimination of time limitations regarding loans taken into consideration for thin capitalisation purposes.
- Introduction of additional strict rules in transfer pricing legislation, involving among others the increase in penalties applicable in case of non-compliance with transfer pricing rules.
- Changes in taxation of sales of listed shares, involving among others taxation depending on the period for which such shares have been held prior to being sold (in respect of shares acquired on or after 1 January 2011).
- Heavy taxation of certain employee benefits.
- Introduction of real estate property tax and increase of the special real estate tax from 3% to 15% as of 1 January 2010, affecting companies holding real estate property in Greece with specific (and further restricted) exemptions.
These changes will affect businesses with operations in Greece and will have a significant impact on foreign investors. Multinationals may choose to seek tax advice from your informed local Taxand advisor to mitigate potential risk and moderate any unforeseen costs.
These additional measures will make an impact on the Greek crisis but by how much they reduce the budget deficit remains to be seen...
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T. +30 210 69 67 000