Tax reforms in Greece following the bailout

(Last Updated On: 08/09/2015)

Greece/September 2015

By virtue of the Laws 4334/2015 and 4336/2015 adopted as part of Greece’s bailout program agreed with its creditors significant tax reform measures were taken.

Some of the main tax measures read as following:

•Corporate income tax rate increased from 26% to 29%;

•Prepayment of the corporate tax is increased  to 100% of the tax amount due for each current financial year (also for individual business income);

•Special solidarity tax rates, calculated on the total reported income of physical persons, have been increased;

•Standard  VAT rate of 23% has been imposed on categories of processed goods and services, which used to have lower or no VAT, including sugar, salt, coffee, tea, oils (except olive oil), vinegar, cinema tickets, restaurant, clinic , diagnostic centers etc;

Low VAT rate of 13% still applies to raw products (meat, fish, milk etc), pharmaceutical products, electricity, gaz, books (6%), theatrical shows (6%), hotel services, home care services etc;

•VAT shall be deducted by the financial institutions from payment transactions above 1500 € (to individuals) or 3000 € (to business entities) with regard to sale of goods or rendering of services, via the electronic banking system. Banks are obliged to issue relevant certificates to companies.

However, it is significant to stress out, that Greek entities do not need to worry about the obligation to prepay the corporate income tax (26%) on payment transactions to foreign entities with a preferential or non-cooperative taxation regime, thus this obligation is abolished by Law 4336/2015  retroactively from its adoption (March 2015).  At this point it must be pointed out that, although, Greek companies have been released from the above tax prepayment obligation they are still obliged to justify that any transaction with any entity of a preferential or non-cooperative regime has been actually taken place, is relevant to the core business of the company and is concluded on a fair and arms ‘length basis.

Capital Controls getting slightly less strict in Greece

The European Central Bank’s decision not to increase the amount of emergency liquidity to Greek banks on June 28, 2015 forced the Greek government to impose emergency capital controls.

The reaction from Greece came by announcing bank holiday which started Monday June 29, 2015, closing the Athens Stock Exchange and imposing strict capital control measures on cash withdrawals and capital transfer.

On July 20, 2015 the banks re-opened and gradually some initial strict measures were loosened as Greece were in negotiations and finally agreed with the European Stability Mechanism an 86bn bailout plan in the mid of August.

The main capital controls measures that have been imposed, and are in force today, read as following:

•Withdrawals from banks or ATMs are allowed up to the daily amount of 60€ or up to 420 € on a weekly basis per person and bank. Foreign credit and bank cards issued abroad can be used at cash machines freely.

•Bank transfers of money to destinations outside Greece are limited to 500€ per physical person on a monthly basis. Greater amounts and up to 2000 euro per physical person may be transferred abroad in cases of serious health problems or extraordinary social reasons upon submission of the necessary documentation to the financial institution.

•Legal Persons and businessmen may transfer payments abroad for specific transactions serving the public or social interest (including the payment of medical expenses, import of pharmaceutical products, as well as business payment transactions, letters of guarantees or credits up to  100.000 euro on a daily basis per client and within the limits set by the competent Committee at each financial institution separately)  only upon approval by the Bank Transaction Committee of every financial institution.

•Opening a bank account is permitted for limited specific transactions and provided that no other existing bank account can be used for these.

•Transferring cash abroad is limited to 2000€. Foreign residents are not subject to this restriction.

•Students abroad: transfer of 5000 euro (or the equivalent in foreign currency) is allowed for a three months period for accommodation and living expenses for students studying abroad or participating in student exchange programs and it is compulsory to be made through electronic banking means to the students (beneficiary) account. In case the amounts are directly credited to accounts of the owners of student residences then the permitted amount is increased to 8000 euro (or the equivalent in foreign currency) per three months.

On the 3rd of August, the Hellenic Capital Market Commission announced the re-opening of the Athens Stock Exchange.

Maria Sarantopoulou
Tax & Legal Advisor
maria.sarantopoulou@eurofast.eu

Print Friendly, PDF & Email