Recent developments in International Taxation. Greece. Theodoros I. Skouzos. Iason Skouzos + Partners Law Firm.

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1 Recent developments in International Taxation Greece Theodoros I. Skouzos Iason Skouzos + Partners Law Firm skouzos@taxlaw.gr

2 From 1 January 2014, in the middle of an austere budgetary approach, the new Income Taxation Code (Law 4172/2013), which had already been published since July 2013, was entered into force. It is a piece of legislation directed towards the simplification and practical treatment of tax issues, which in its entirety comprises provisions of general formulation, which require further clarifications as to their regulatory object and scope. Thus, from May 2014 to May 2015, in addition to some legislative reforms, numerous circulars of the Ministry of Finance were also published. They are briefly listed below: 1. Value Added Tax (VAT) Code In August 2014 Law 4281/2014 brought the following amendments to the Value Added Tax Code - Law 2589/2000 (hereinafter VAT Code): Article 1 provides for the return of the tax arising as a VAT credit balance. It, thus, depends on the taxpayer s choice if he will request the return of the VAT credit balance in the periodic VAT return of the tax period in which it arose or if he will set it off in a following tax period. For business years after , the obligation to submit a recapitulative annual VAT return is abolished, and now for transactions carried out from onwards, it is provided that only a periodic VAT return be submitted for each tax period. Article 251 replaces Article 39 of the VAT Code ( Special status of small businesses ), according to which taxpayers registered for VAT purposes who had a gross income of up to ten thousand Euros ( 10,000) during the preceding business year are released from the obligation to file a return and to pay VAT. 2. Remittances abroad during the years Ministerial Circular No. 1228/ provided additional clarifications in the framework of handling cases of taxpayers who sent remittances abroad during the years By way of indication: With regard to covering remittances with products of clearance sale of assets (real estates, listed or non-listed shares, etc.) which were acquired until the end of 1999 or from 1 January 2000, and were in any case sold before the remittance was dispatched, the total amount arising from the clearance sale is taken into account, provided that it is also demonstrated by the relevant vouchers, while the financial ability to acquire such assets is also examined. In the cases of remittances from joint bank accounts, they must be equally allocated to the joint beneficiaries of the account. In the cases of repatriated capitals, which are used for covering the difference (property increase), a certificate issued from the Bank demonstrating the actual fact of their import and the fulfillment of the requirements for their stay, as well as that the relevant reduced tax has been paid (with 3% coefficient) will be enough. 3. Greek Accounting Standards Law 4308/ incorporated in the Greek domestic law Accounting Directive No. 34/2013/EU of the European Parliament and on the Greek Accounting Standards were entered into force. In brief, this law pursues to concentrate the accounting rules governing the organization and operation of businesses and other underlying entities, as well as the financial information provided by them, while at the same time priority is given to small businesses, and the simplification of the Code of Tax Depiction of Transactions - Law 4093/2012 (hereinafter C.T.D.T.) is implemented. The main issues regulated are the following: a) the scope and classification of underlying entities, based on their size; b) the accounting records; c) the sale documents; d) the principles governing the preparation of financial statements; e) the measurement rules; f) the exemptions; and g) the unified financial statements. 4. Real estate transfer tax Article 41 of Law 4172/2013 provides for a capital gains tax upon transfer of real estates against consideration (sale or exchange).

3 Furthermore, Ministerial Circular No. 1251/ provides clarifications with regard to the calculation of the above tax. Indicatively, the following cases are regulated: Legal and actual modifications on the property between the time of acquisition and the time of sale. Contract ratification, which does not constitute an act of transfer when it does not entail the change of any element determining the capital gain, while the time of the initial act is taken as time of acquisition of the property. Special cases as to the acquisition price (such as urban planning settlement of a partially arbitrary construction, acquisition by means of enforced auction, etc.). Splitting of usufruct-bare ownership, in which case both the time and the value of acquisition are set based on the time when such splitting occurred. Unification of usufruct-bare ownership Reduction of the amount of the capital gain up to the amount of twenty five thousand Euros ( 25,000), when the property is held by the taxpayer for at least five (5) full years. However, by virtue of Article 90 of Law 4316/ , the above tax of capital gain from the transfer of properties against consideration is suspended from 1 January 2015 until 31 December Provisions for tax residents abroad With regard to the manner of proof of the residence abroad for tax purposes, Ministerial Circular No. 1260/ requires the following documents: Documents demonstrating the permanent residence abroad of the taxpayer and his family (spouse and children). Certificate of residence for tax purposes from the competent foreign tax authority. Document demonstrating professional employment abroad. It should be noted that with regard to taxation of the income acquired by a resident abroad for tax purposes, the provisions of the domestic laws apply only to income from sources in Greece, while the income acquired abroad is not subject to taxation in Greece. 6. Taxation of reserves For balance sheets of companies closing on and onwards, according to Ministerial Circulars No. 1143/ and 1264/ , keeping Reserve Accounts from tax-free income is not allowed. In the event that a company does not wish to distribute or capitalize them, it must necessarily include such amounts in the taxable profits of the tax year 2014, setting off in any case any tax losses of preceding fiscal years (until the year 2013). 7. Free circulation of VAT-exempt goods within the EU Ministerial Circular 1006/2015 as of January 2015 enables the free circulation of goods, with exemption from payment of VAT, to importers established in our country or in another EU Member-State, through the direct dispatch thereof to another EU Member-State, on the condition that they have a T.I.N. in Greece and they are subject to VAT. 8. Income from transfer of titles and the whole business 10.1.Pursuant to the provisions of Article 42(1) Law4172/2013, as of 1 January 2014 onwards, every income arising from capital gain on transfer: a) of titles (namely stocks or securities of domestic or foreign companies, whether listed in a stock exchange market or not, shares in personal companies, state bonds, interest-bearing bills, company bills, or derivative financial products), and b) of the whole business, is subject to income tax for natural persons Furthermore, Ministerial Circular No. 1032/ gives rise to the following: The capital gain arising is taxed during the tax year in which the transfer occurs and is included in the annual income tax statement for the relevant year, regardless of the time of payment of the price.

4 The meaning of transfer includes the contribution of titles for the coverage or increase of a company s capital. For natural persons, the above income is taxed with a 15% coefficient. For natural persons who are not residents in Greece for tax purposes, the amount arising from the transfer of titles of a domestic business is also subject to tax with a 15% coefficient, as income from a source in Greece. For a natural person, resident in Greece for tax purposes, who at the time of transferring bearer shares of an S.A., listed either in the Athens Stock Exchange or in a foreign stock exchange, holds less than 0.5% of the shares of the specific S.A., the capital gain arising from such transfer is not subject to the above taxation, regardless of the time of acquisition of the shares and the number of shares transferred. For natural persons who are residents for tax purposes of a state with which Greece has signed a Double Taxation Treaty (hereinafter D.T.T.), the income arising from the capital gain of the transfer of such titles is exempt from income tax, provided that the documents demonstrating such person s residence abroad for tax purposes are submitted. For natural persons residing in a non-cooperating state, the income tax statement, in which the above income is included is filed with the competent Tax Office before any transfer and the tax is paid in a lump sum. For domestic legal persons or legal entities, as well as the legal persons who do not have their residence for tax purposes in Greece, but keep a permanent establishment in it, for the income acquired by them from the transfer of titles, the capital gain arising based on the books kept in the business and the relevant vouchers is taken into account, as in any case the income acquired by such legal persons is considered to be income from a business activity. For the legal persons and legal entities who do not have their residence for tax purposes and do not keep a permanent establishment in Greece, the income arising from the capital gain from the transfer of such titles is exempt from income tax. The capital gain arising from the transfer of shares of a maritime ship-owning company is exempt from income taxation, as it is considered to be income acquired by the shareholder in the context of operating the ship, and with the imposition of the tax provided for in Law 27/1975 on the shipowning maritime company, its tax obligation is exhausted. 9. Exemption of intra-group dividends and payments Pursuant to Article 48(1) and Ministerial Circular 1039/ , as of 1 January 2014, exemption from the income tax is provided for the dividends received by a legal person, resident in Greece for tax purposes, provided that: a) the legal person implementing the distribution is a resident of Greece or abroad (EU) for tax purposes; b) the legal person receiving the dividends i) holds a minimum rate of participation of at least ten per cent (10%) of the value or the amount of the share capital or the voting rights and ii) holds the above rate for at least twenty four (24) months In brief: For legal persons keeping double entry books, the amount of the dividends which is exempt from income taxation appears in a special reserve account, without the term tax-free. If such reserve or part thereof is distributed or capitalized, it does not increase the profits of the business, but it is subject to tax withholding with a 10% coefficient, similar to the profits distributed. For the other legal persons who keep single entry books, the amount exempted is subtracted from the net profits. For dividends of a domestic parent company from a domestic or foreign subsidiary thereof, established in another EU Member-State, a tax crediting method is established.

5 For the dividends or profits received by a domestic parent company from a foreign subsidiary thereof established in a non-eu country, only the amount of the tax withheld over the dividend is subtracted from the corresponding tax. Also, for the legal person, on the conditions of par , an exemption from income tax withholding is provided also for the income from interest and royalties (15% and 20% coefficient respectively). 10. Tax treatment of income from dividends, interest and royalties Pursuant to Law 4172/2013, in conjunction with Ministerial Circular 1042/ , the income acquired by a natural person in cash or in kind in the form of dividends, interest and royalties is considered income from capital. In brief: For natural persons income from dividends is taxed with a 10% coefficient, income from interest is taxed with a 15% coefficient, and income from royalties is taxed with a 20% coefficient. For legal persons or legal entities having their residence for tax purposes in Greece, with regard to the income stated by them, there is tax withholding with a 10% coefficient for dividends, with a 15% coefficient for interest and with a 20% coefficient for royalties. For a domestic natural person or a natural or legal person or a legal entity which does not have its residence for tax purposes and does not keep a permanent establishment in Greece (i.e. with an office, a branch, etc.), tax withholding on all the dividends, interest and royalties exhausts their tax obligation. For natural persons exercising a business activity, by virtue of the royalties they hold (e.g. artists, authors, etc.), for income from royalties whether of domestic or foreign origin, the exhaustion of the tax obligation does not apply, but they are taxed as income from a business activity. No 10% withholding is implemented on profits exported by a permanent residence in Greece (branch) of a foreign company to its central office abroad, since the branch has no legal personality. For a domestic legal person or a legal entity, whether for-profit or non-profit, or a permanent establishment in Greece of a foreign legal person, income from dividends or interest, tax withholding is implemented without exhausting the tax obligation, it is taxed as income from a business activity and the tax withheld is set off with the income tax. For a natural person, resident abroad for tax purposes, the income from dividends or interest abroad, regardless of whether they are entered in Greece or not, must be entered in such person s annual income tax statement. For a natural person, resident abroad for tax purposes, if income from interest abroad has been imported in Greece, tax withholding is implemented on the gross amount of the interest and withholding is carried out by the domestic financial-credit institution or trustee which intervenes as a payment body and exhausts the tax obligation of the natural person. Provided that the beneficiaries of the income from dividends, interest and royalties, whether natural persons or legal persons or legal entities, do not have their residence for tax purposes in Greece or do not keep a permanent residence in Greece, but they are residents of a state with which there is a D.T.T., the provisions of the bilateral treaty shall apply, by virtue of increased typical power. 11. Provisions for amortization of bad debts Pursuant to Circular Ministerial Decision No. 1056/ , as of 1 January 2014, for all legal persons and legal entities, regardless of whether they keep single entry or double entry books, as well as for natural persons exercising a business activity, the provisions on amortization of doubtful debts are acknowledged in tax terms and deducted only if proper action securing the right of collecting such debts has been taken, prior to their formation or deletion. The provisions are calculated based on the time during which the debts remain uncollected and depending on the due amount of the debt, while for the amount of the debt to be determined, what is

6 taken into account is not the total unpaid balance of each client or debtor, but the unpaid amount of each transaction with such client or debtor. 12. Avoidance of double taxation - Crediting of tax abroad Pursuant to Article 9 of Law 4172/2013 and Ministerial Circular 1067/ , for income acquired from onwards, in the event that a resident in Greece for tax purposes acquires income abroad, for the avoidance of double taxation, the process of crediting of the tax paid abroad is adopted, provided of course that it is proven by the relevant documents In particular: It is provided that the income tax be reduced by the amount of the tax paid abroad. If the tax abroad is higher, the additional tax is not returned. If there is a D.T.T., no tax crediting is implemented, provided that according to the provisions of the relevant D.T.T., the specific income is exempted from tax abroad and is only taxed in Greece. If the tax coefficient imposed abroad is higher than the one set in the provisions of the D.T.T., only the tax arising based on the coefficient set in the D.T.T. will be credited. 13. Settlement of debts due 15.1.Law 4321/ provides for a new favorable settlement for debts to the Tax Administration, in accordance with the Tax Law Code and the Code for the Collection of Public Revenue, assessed and payable by 1 st of March In brief: The debtor can file an application for entering a settlement, with partial payment of the above debts and with simultaneous exemption, according to a percentage, from additional taxes of fees provided for in Law 2523/1997, fines for late submission or non-submission of a statement or an inaccurate statement of the Tax Law Code, which have been co-assessed along with the main debt, as well as the surcharges on them Debts pending before the competent courts may be subject to the settlement, provided that waiving from exercising any right of any legal remedy or means or appeal before any competent court or authority precedes their assessment by the competent tax authority, while numerous benefits are provided to the debtor. 14. Tax depreciation of fixed assets According to Article 24 of Law 4172/2013 and Ministerial Circular No. ΠΟΛ.1073/ , for all the legal persons or legal entities or natural persons acquiring profits from a business activity, the tax amortization of fixed assets are subtracted from the total of their income from business transactions, regardless of the time of acquisition of the fixed assets, i.e. the tax amortization is implemented on tax periods starting from 1 January 2014 and onwards, irrespective of whether they were acquired before or after such date. 15. Flagrant crime procedure for debts due Article 20 of Law 4321/2015 and Ministerial Circular dates decriminalize the non-payment of debts for total amounts lower than fifty thousand Euros ( 50,000). In particular, the minimum amount of the total debt due, including all kinds of interest or surcharges and other levies to the Public, the legal persons governed by public law, as well as the undertakings and organizations of the broader public sector, was increased from the amount of five thousand Euros ( 5,000) to the amount of fifty thousand Euros ( 50,000), while the flagrant crime procedure in the event of non-payment is abolished.