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Withholding Tax on Profits Distributed by Greek Companies
The Ministry of Finance recently released an interpretative Circular in respect of the new provisions on dividend withholding tax. Taxand Greece looks at the circular and the clarifications that have been made.
The Ministry repeated its position in connection with the time that the two years minimum holding period should be fulfilled in order for the withholding tax exemption to apply for dividend distributions falling within the scope of the Parent Subsidiary Directive. In particular, the Ministry clarified that the two-year holding period should be fulfilled at the time of the approval of distributions of dividends by the competent corporate bodies.
It is being further specified that in case the two-year requirement will not have been met at the time of approval the applicable tax should be withheld (subject to any reduced rates applicable under Tax Treaties). However, once the two-year period has been completed, a foreign qualifying parent shall be entitled to request a refund in respect of the amount of the tax withheld. In such cases, the amount of the tax withheld is to be refunded provided that it will not have already been deducted by the shareholder against any foreign tax due.
In view of the application of the new withholding tax on profits either approved as of 01 January 2012 or distributed within 2011 (at 25 percent and 21 percent respectively), it is clarified that the new provisions effectively cover distributions of profits of previous years within 2010. In respect of such profits, in addition to the 10 percent withholding effected as per the previous tax regime, an additional 11 percent tax is to be paid within the deadline for the payment of the withholding tax on final distributed profits, without any additional taxes / penalties being imposed. In case of distributions of profits by EPEs derived from fiscal year 2010, the withholding tax is to be paid until 29 July 2011, without any additional taxes being imposed. However, in cases of 2011 distributions of previous years' profits of EPEs which were formed up to 31 December 2010 (ie profits of balance sheets dated 31 December 2009 in cases of fiscal years coinciding with calendar years), no withholding tax is to be effected. This is because the recently enacted provisions for taxation on distributed profits in the case of EPEs are applicable on (distributed or capitalised) profits formed after the date of entry into force of the provisions in question i.e. after 31 December 2010.
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Yerassimos C. Yannopoulos
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