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Public consultation on proposed changes to Income Tax Code
The Greek Ministry of Finance has initiated public consultation on a tax bill aiming to substitute the currently applicable Greek Income Tax Code. Taxand Greece takes a look at some of the indicative changes proposed by the Ministry.
New definition of tax residence
The OECD Model Tax Convention’s wording is broadly used, while former restrictions to Greek tax residents wishing to redomicile will no longer apply. The proposed definition also covers the “place of effective management” for corporate vehicles; among critical elements to be assessed upon defining the place of effective management, the list includes the state of residence of majority shareholders.
Revised definition of permanent establishment
The new definition is in line with the OECD Model Tax Convention on Income and on Capital.
Simplification of rules on tax deductible expenses
The proposed rule provides a generic definition of tax deductible expenses and a detailed list of non‐deductible expenses. Furthermore, new rules are proposed in relation to the tax treatment of bad debts.
New thin capitalisation rules
A new ratio linked to the enterprise’s EBITDA is proposed to determine non‐deductible interest due to thin capitalisation. Also, new rules are proposed on the tax treatment of non‐deductible interest in future fiscal years.
Tax loss carry‐forward in case of change of control
The right to carry‐forward tax losses is proposed to be affected in case of tax‐driven change of control, under certain circumstances.
Reduction of capital gains tax rate
The capital gains tax rate applicable on the disposal of real estate, shares and businesses is proposed to be reduced to 15% (instead of 20%). Also, changes are introduced in the definition of taxable capital gains (reference to market values, instead of statutory values, in the case of real estate, without further clarification).
Dividend partcipation exemption
Changes are introduced in the conditions for benefiting under the dividend partcipation exemption.
The bill is still in a preliminary form and therefore a number of revisions are anticipated. Pursuant to the Ministry’s press release, key goals are to simplify and modernise the applicable set of income tax rules, while implementing internationally acceptable best practices to combat tax evasion.
Two new measures are also proposed to the Income Tax Code: the introduction of Controlled Foreign Corporationg (CFC) rules as well as the distinct tax treatment of intra-group restructurings.