Tax Alert - Significant tax law amendments

The most important provisions of the Law are the following:

I.Amendments to the Income Tax Code (ITC)

1. Amendments to corporate income taxation

 a) Exit taxation rules (new art. 66 A ITC)

• Exit taxation rules are enacted. Exit taxes are levied on capital gains when taxpayers move their residence or transfer assets from a head office to a permanent establishment.
• The tax is imposed on the market value of the transferred assets, minus their value for tax purposes.

• The circumstances under which the new provisions are applied are the following:

• the transfer of assets from the head office to the permanent establishment in another Member State or in a third country in so far as Greece no longer has the right to tax the transferred assets due to the transfer;

• the transfer of assets from a permanent establishment in Greece to its head office or another permanent establishment in another Member State or in a third country in so far as Greece no longer has the right to tax the transferred assets due to the transfer;

• transfer of the taxpayer’s tax residence from Greece to another Member State or to a third country, except for those assets which remain effectively connected with a permanent establishment in Greece;

• transfer of the business carried on by its permanent establishment from Greece to another Member State or to a third country in so far as Greece no longer has the right to tax the transferred assets due to the transfer

• The tax rate is the current one imposed on corporate income during the exit year. It is twenty-four per cent (24%) today.

• A special return is filled for the tax payment. It is submitted three (3) working days before the exit and is paid in a lump sum or in five (5) equal annual interest-free installments, under conditions. The payment of a guarantee may be required by the Tax Administration if the taxpayer chooses to pay the tax in installments.

b) Hybrid mismatches rules (new art. 66B ITC)

• Hybrid mismatches rules are enacted. Hybrid mismatches are caused because of the differences in legal characterization of payments or entities between two jurisdictions.

• The rules apply to Member State tax residents and third country tax residents.

• The mismatches may lead either to double deduction of a payment, expense (e.g. deprecation), or loss either deduction in one state without being included in the tax base of the other state (deduction without inclusion).

• The provisions apply to transaction between affiliated companies, between a head office and a permanent establishment and between two or more permanent establishments of the same entity.

• The Tax Authority shall not recognize the deduction of the payment, expense, or loss if they are qualified as hybrid mismatches.

• The new provisions apply as of 1 January 2020.

c) Reduction of the corporate income tax advance payment (art. 71 ITC)

• The corporate income tax advance payment of legal persons and entities is reduced from 30 % up to 100 %, for the tax year 2019 depending on percentage decrease in VAT turnover of the first half of 2020 compared to the first half of 2019, as follows:

• It is noted that if the legal person or entity is exempted from VAT, the income tax advance payment is reduced to fifty percent (50 %).

• The same applies on natural persons engaged in business activity.

II. Amendments to taxation of individuals

a) Introduction of a special non-dom regime for pensioners (new art. 5Β ITC)

• A new tax rate of seven percent (7%) on their foreign-sourced income is enacted.

• The non-dom regime will apply for maximum of fifteen (15) years.

• Requirements:

1. the taxpayer has not been a Greek tax resident for the last five (5) of the six (6) years
2. the transfer of tax residence from a state with which an agreement on administrative cooperation in the field of taxation with Greece is in force

• The application of tax residence transfer in Greece must be submitted by 31 March of each tax year, but especially for 2020, by 30.09.2020.

• The provisions of the tax treaties that reserve the right to tax public pensions in source state are not affected.

• The Minister of Finance and the Governor of the Independent Authority of Public Revenues acting together will be expected to issue the relevant procedure for the import of the new provisions.

b) Exemption of benefit in kind in the form of shares and domestic tourism vouchers from income tax assessment (art. 14 ITC)

• Two more exemptions in income tax assessment are enacted:

• the shares that an employee, a partner, or a shareholder receive as a benefit in kind.

• the domestic tourism vouchers up to three hundred Euros (€ 300), for 2020

c) Deductions (art. 39 ICT)

• A deduction of seventy-five per cent (75 %) is established if the lessor or the assignor is a legal entity of public law or institution. Particularly, as far as the Autonomous Monastic State of the Holy Mountain is concerned, the deduction is one hundred per cent (100 %).

d) Stock options (art. 42 Α ICT)

• Favorable tax treatment of capital gains arising from stock options is enacted

• A fixed rate of fifteen percent (15%) is enacted on the capital gain that the employee obtains from the sale of the shares.

• The employee must own the shares for at least twenty-four (24) months.

• It is reminded that a capital gains tax of five percent (5 %) is imposed on the income derived especially from a legal person or entity not listed in stock exchanges, a start-up company or a small or a very small company, under conditions.

e) Research and Development (R & D) expenditure (art. 22 Α ITC)

• The additional percentage of tax deduction of R & D expenses is increased from thirty percent (30%) to one hundred percent (100%).

• There is a new process of examining the applications enacted, as follows:

• Submission of the necessary supporting documents accompanied with an audit report by a certified auditor – accountant or/and auditing company.

• The application must be checked within six (6) months. If this period expires, the expenditure is deemed to be approved.

• Regulation 537/2014/EU and L. 4449/2017 is the legal framework of the audit.

• The Minister of Finance and the Minister for Development and Investments acting together will be expected to issue the relevant procedure for the import of the new provisions.

• The new provisions will apply as of 1 September 2020.

f) Tax incentives to angel investors (art. 70 A ICT)

• A new provision for investors who contribute capital to a registered start-up company is introduced: a deduction from their taxable income, equal to fifty percent (50 %) of the amount of their contribution.

• It applies for a maximum of one hundred thousand (100,000) euros per start-up company and up to three (3) of them.

• The contribution must be made through a bank payment.

• The above apply as of 29 July 2020 (date of the publication of the law in the Government Gazette).

II. Amendments to the Tax Procedures Code (TPC)

a) Establishment of an Out-of-Court Tax Dispute Resolution Committee

• An Out-of-Court Tax Dispute Resolution Committee, which comes under the General Secretariat of Tax Policy and Public Property, is established. The aim is the quicker resolution of tax disputes, the reduction of congestion in administrative courts and the increase of public revenues.

i) The Committee

• The Committee will be called upon to resolve pending tax disputes before the Council of State and the administrative courts.

• The Committee sits in Athens and has an Office in Thessaloniki.

• The Committee is divided in Departments, which are composed by former administrative judges and Legal Advisors of the State. The reporter is a tax official, but they do not have the right to vote.

ii) Submitting an application before the Committee

• The taxpayer in a pending tax -but not custom- litigation before the Council of State or other administrative courts may submit an electronical request before the Committee until 31.12.2020.

• The pending tax dispute must not have been discussed by 30.10.2020.

• The provisions also apply on tax disputes pending until 30 October 2020 before the Dispute Resolution Directorate, if they become pending before the administrative courts by 30 December 2020.

iii) Allegations that can be made

• The allegations that can be included in the request before the Committee are only the follow:

• Loss of State’s right to impose the disputed tax or penalty, due to time lapse of it

• Loss of State’s right to impose the disputed tax or penalty, due to receipt of a tax certificate without reservation.

• Incorrect tax or penalty assessment, due to evident lack of a tax obligation or numerical error

• Retroactive application of the mist favorable tax sanction in the light of case law of the Council of State

• Reduction of additional tax, interest surcharges and penalties

iv) The review of the requests

• The review of the allegations is based on the case law and the settled practice of the Tax Administration.

• The Committee may propose the acceptance or the rejection of the request and at any case makes a justified proposal to the taxpayer.

• The deadline for the acceptance of the proposal by the taxpayer is five (5) working days, after the notice of it. If the taxpayer accepts the proposal, an out-of-court dissolution minute is composed and published on the Ministry of Finance website.

• The pending case is irrevocably resolved, if the taxpayer pays thirty percent (30%) of the principal tax due within five (5) working days.

• The payment of the thirty percent (30%) leads to the reducing of additional taxes, interest, surcharges, and penalties, depending on the installments opted for, as follows:

• Interests, stamp duty or any other amount are not applied on the payment.

• Previous payments reduce the debt.
• If two (2) installments are not paid, the out-of-court resolution is inverted retrospectively.

• If the taxpayer rejects the proposal, a cancellation minute is composed and the process before the courts is continued.

v) Review deadline

• The requests are reviewed by 28.05.2021 and the minutes are issued by 31.07.2021 the latest.

• The requests that are not reviewed until 28.05.2021, are deemed implicitly rejected and they are discussed before the proper court.

• While the case is pending before the Committee, the process before the Council of State or the administrative courts is suspended.

• The Minister of Finance is expected to issue the relevant procedure for function of the Committee.

b) The possibility of retroactive effect of APAs (art. 22 TPC)

• The possibility of roll-back implementation of bilateral or multilateral APAs is established.
• The roll-back implementation can be added as a clause, even in pending submissions.
• The provisions are applied since 1.1.2014.
• Finally, the tax returns that are amended and submitted because of an APA are considered within time limit.

c) Extension of deadlines for the payments of the due debts arising from tax assessments issued until 31.12.2019 (art. 72 par. 51 and 53a TPC).

• The new provisions apply on tax debts resulting from tax assessments issued until 31.12.2019 based on evidence that Tax Administration had available about retrospectively paid pensions in fiscal year 2013.

• The Deputy Minister of Finance and the Governor of the Independent Authority of Public Revenues acting together issued the decision about the extension of the deadlines, as follows:

III. Amendments to the Code of Customs

Classification duties on private use passenger cars and trucks (art. 121 and 123 Code of Customs)

• The tax rates on classification duties on private use passenger cars and trucks are changed and a progressive taxation on new and imported used cars is enacted, as follows:

• Moreover, an increase on duties depending on the year of the classification and the emission of pollutants and an exemption for particular categories of hybrid cars is enacted.

I. Incorporation of Directive (EU) 2017/1852 on the Tax Dispute Resolution Mechanisms in European Union into Greek Legislation

• Law 4714/2020 incorporates into Greek Legislation the provisions of Directive (EU) 2017/1852 on the Tax Dispute Resolution Mechanisms in European Union.

• The resolution mechanism applies to disputes between Greece and one or more EU Member States, arising from application of Double Taxation Treaties (DTTs) and the Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC), which has been ratified with L. 2216/1994 (Convention).

• The Dispute Resolution is structured in three stages:

• Complaint submission from the taxpayer (“affected person”)

• Mutual Agreement Procedure (MAP)

• Arbitration

• The right to apply to the national courts is also provided, so as the fullest legal protection of the affected person and safeguarding the process are achieved.

• The resolution mechanism applies in every complaint submitted since the publication of the Law and in disputes regarding to earned income or gained capital since 01.01.2018 (with a retroactive effect, following an agreement between the Member States).

• In summary, the stages of the procedure are the following:

A. Complaintforthedispute

• The affected person shall submit a complaint on a question in dispute before the Greek Competent Authority and each of the competent authorities of each Member State concerned, requesting the dispute resolution, within three (3) years of the knowledge of the dispute.

• The complaint terminates by right any other Mutual Agreement Procedure (MAP) based on Double Taxation Treaties (DTTs) or any other Treaty between Greece and a Member State.

• A complaint may include, among other things:

• Exact information about the facts and the circumstances of the case, along with the supporting documents and the evidence.

• Reference to the applicable national rules and to the Double Taxation Treaty (DTT) or Convention.

• The grounds of the dispute.

• The Competent Authority accepts or rejects the complaint within six (6) months. After the expiration of this period, the complaint is deemed to be approved

• If the complaint is rejected by the competent authorities of all Member States concerned, the affected person may file a petition for annulment against the rejecting decision.

• If the complaint is rejected by at least one but not all the Member States concerned, the affected person may apply for the composition of an Advisory Commission before the Competent Authority, under conditions. The Advisory Commission may commence the MAP.

B) Mutual Agreement Procedure (MAP)

• The Competent Authority and the competent authorities of the Member States concerned shall endeavor to resolve the dispute within two (2) years, which may be extended by up to one (1) year.

• If the competent authorities of the Member States concerned resolve the dispute and the affected person accepts this resolution and renounces the right to any domestic remedy, the final decision is issued.

C) Arbitration

• If the Member States fail to reach an agreement, the affected person shall apply for the composition of an Advisory Commission to deliver an opinion on how to resolve the question in dispute.

• The Advisory Commission delivers the opinion within six (6) months since its composition. This period may be extended by three (3) months.

• Subsequently, the competent authorities reach an agreement within six (6) months of the opinion notice. The competent authorities may deviate from the opinion, but if they do not reach an agreement, they are bound by the Commission’s opinion.

• The affected person is notified for the decision of the competent authorities. If the affected person accepts this resolution and renounces the right to any domestic remedy, the MAP decision is issued.

• The final decision is published entire or in summary, per case.

• The Competent Authority may agree with the competent authorities of the other Member State(s) concerned to compose an Alternative Dispute Resolution Commission, which delivers an opinion on the dispute resolution.

• The Commission may apply any other dispute resolution process, including the “final offer” (“last best offer”) arbitration process.

IV. Amendments to the Donations Tax Code (L. 2961/2001)

a) Exemption of donations of movable property (art. 43 of L. 2961/2001)

• According to the new provision, the donations of movable property by a Greek citizen are exempt under the following provisions:

• the movable property is located abroad

• the Greek citizen has been residing abroad for at least ten (10) consecutive years

• the taxpayer resides abroad for at least ten (10) consecutive years

• the movable property has not been acquired during the last twelve (12) years in Greece

b) Cash donations and parental grants tax assessment (art. 44 L. 2961/2001)

• The cash donations and parental grants provided by parents to their children for the purchase of a main residence are now exempt from donation tax up to the amount of one hundred fifty thousand (150,000) euros.

• The provision applies from the publication of Law in the Government Gazette.

V. Other provisions of L. 4714/2020

Exemption from duties, Excise duty and Consumption Tax on commercial ships’ supplies.

• Exclusively enumerated commercial ships’ supplies are exempted from duties, Excise duty and Consumption Tax.