Law 89/67 regime, as amended in 2019 and in force today, offers an attractive solution to Multinational Groups to establish their shared services centers in Greece while benefitting from a stable tax environment.
A foreign company established in Greece under Law 89 shall have the sole purpose of providing the head office and/or its affiliated companies, in Greece or abroad, one or more of the following services: consulting services, central accounting support, quality audit on production, products, procedures and services, drafting studies, designs and contracts, advertisement and marketing, data processing, receipt and provision of information, research and development, software development, computer programming and IT systems support, information filing, storage and management, management of supplier, clients and supply chain without executing transfers by own means, human resources management and education, call center activities and provision of information based on computer. However, to fall under Law 89 regime it is important that the services provided should be auxiliary and/ or supportive to the final product created abroad.
Likewise, a Greek company can establish a Law 89/67 office in Greece if it provides said services exclusively to the company’s branches, abroad or to affiliated not established in Greece companies.
From a PE risk perspective, the provision of such services does not trigger exercise of effective management by the mother and/or affiliated companies receiving the services abroad, as Law 89 provides for.
This regime’s main advantage is the specific and simplified taxation method used to calculate the offices’ taxable income. The gross revenue deriving from the services provided is determined by adding a certain profit percentage to the total amount of expenses and depreciations, except the tax income (cost-plus method).
The profit percentage (mark-up) is pre-determined by the Ministerial Decision granting permission of establishment to the office. The mark-up cannot be smaller than 5% and is to be re-evaluated at least every five years.
The above simply means that the office’s taxable revenue is determined as a standard percentage of its expenses and all expenses used to calculate the mark up are deducted from the taxable revenue with no further prerequisites.
As per obligations, Law 89/1967 offices or branches are required to have yearly expenses in Greece amounting to at least 100.000,00 euros and to employ at least four employees, one of whom can work part-time.
It is evident that the aforementioned cost-plus method offers both stability and predictability. However, this is not the only advantage of this regime. Even more importantly, the Greek state grants a series of aids, which are of course subject to certain requirements. Such aids may be granted for employing disabled persons, for professional training programs, for research and development projects, for payroll cost expenses and for establishment costs of IT and Electronic Systems.
The establishment of a Law 89 office in Greece requires an elaborate procedure, starting with the submission of a detailed application, accompanied by filled-in questionnaires, benchmarking study, lawyers’ and auditors’ certificates, and financial statements, that will ultimately lead to the issuing of a Ministerial Decision. The Ministerial Decision will eventually grant the establishment permission and define the office’s mark-up within 50 days from the submission of the complete file. To accelerate operation of Law 89 office or branch, it is possible to be granted a provisional licence within 15 days without the mark-up included. If the office provides a series of different services, a series of different mark-ups are to be defined as well.
Considering the above, Law 89 regime undisputedly offers through its incentives, to Foreign and Greek Companies, business development opportunities in Greece within a tax friendly environment.
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