18th Croatian Arbitration and Conciliation Days Zagreb Partner Richard Kreindler (Frankfurt-International Arbitration) will speak on the subject of "The 2010 IBA Rules on the Taking of Evidence in International Arbitration."
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18th Croatian Arbitration and Conciliation Days
Publiziert am 20.März.2014 von Abraam Kosmidis
The Impact of New Greek Property and Shipping Tax Laws
Publiziert am 16.März.2014 von Abraam Kosmidis
The Impact of New Greek Property and Shipping Tax Laws
Greek tax laws have undergone major changes over the past year or so as part of the range of measures designed to combat the financial crisis and to meet the obligations of the bailout agreement. This has helped some, but forced others to make some difficult decisions. The removal of the property tax attachment to electricity bills was a popular move that benefitted many. Its replacement by a broader real estate ownership tax and the reduction in the rate of property transfer tax from 8-10% down to 3%, which came into effect in January 2014, has had the desired effect of stimulating movement in the property market, but this has not always been for positive reasons. A large number of property owners have made the decision to divest themselves of their assets to avoid the higher tax burden on ownership. One result of this is that revenues from property taxes in 2014 may be as high as €3.8 billion for 2014, compared to the 2009 figure of only €500 million; another is that property prices have collapsed.
Casualties and beneficiaries
There was much resistance among Greeks to the introduction of the new 3% transfer tax as it removed the tax burden from the few with large landholdings and onto the shoulders of the many - the 87% of the population who are home-owners, who would on paper share the tax burden more fairly but in reality have found it crippling. The new unified property taxes follow the model set by the troika in its €240 billion bailout package, where the tax burden is moved from property transfers to ownership. This applies not only to commercial and residential property, but to farms, sports fields and vacant land. Transfer tax revenue is therefore expected to drop in 2014 to only €2.65 billion, compared to the €2.90 generated under the old law. The government plans to cover this shortfall with cuts in investment spending.
The beneficiaries of this property market slump are the foreign buyers, who are attracted by lower prices as well as by the lure of residence permits, which are now granted to non-EU investors buying property valued at over €250,000; but not all foreign buyers are going for the more expensive properties. Prices at the end of 2013 had already fallen by 32% since 2008, and they are still falling. This is the second steepest property price decline in the EU after that of Croatia. Greek prices are forecast to drop by another 20% in 2014. A Bank of Greece survey shows an average annual rate of change to residential property prices of -29.9%. Homes are generally on the market for 10 months before being sold at 20% below the asking price.
Some Greek real estate agents estimate the decline in property prices to be nearer 50%. With the exception of luxury property and property in the more popular tourist resorts, the quantity of sales has dropped considerably since the market’s peak in 2005. Property analyst Christos Bletas said that in Athens ‘the lack of interest displayed last year… hasn’t been experienced since the second world war.’ Greeks have traditionally seen property as the securest of investments. This is no longer the case, and the sevenfold increase in overall property tax has meant that for many people their home has become a huge financial drain on their diminishing resources.
According to the Hellenic Property Federation (POMIDA), which is ‘fighting against the new burdens place upon real estate property owners due to the debt crisis,’ more than 500,000 people want to sell, but around 300,000 residences remain empty—a golden opportunity only for foreign buyers of holiday homes. The biggest buyers are the British and Russians, closely followed by the Germans, Turks and Chinese. However, the Hellenic Realtors Federation has warned that the new taxes could result in a freezing of transactions that would lead to a collapse of the market.
Shipping news
Greek commercial ship-owners may be among the richest people in the country, but they have traditionally enjoyed special tax concessions on their ships. This is because of the high-risk nature of the business. However, these concessions, which are enshrined in the constitution and have been respected by governments without exception since the 1940s, have now been reviewed as part of the enforced reassessment of the country’s tax laws. Until this year, most of the ship-owners had conformed to an agreement made in 2013 with the Minister of Finance to contribute voluntarily to the country’s finances. Legislation rushed through parliament by Antonis Samaras’ coalition government before Christmas 2013 has now imposed on them a mandatory tripled tonnage tax.
The President of the Union of Greek Shipowners (UGS), Theodoros Veniamis, said this was a ‘constitutional deviation’ and that ‘a negative climate has been created for any type of business investment inGreece.’ The ship-owners have said they are willing to wait for the government to reconsider, although in February 2014 the Merchant Marine Minister, Miltiadis Varvitsiotis, said that the tax was an emergency three-year measure only. This is not good enough for the UGS, which has threatened to move their fleet abroad and to sail under a foreign flag unless the policy is reconsidered.
Unemployment in Greece is now 28%, the highest in the EU. Against a background of economic and social marginalisation, after four years of austerity under the bailout agreement, and facing further fiscal shortfalls in 2014, Prime Minister Samaras is sticking to his guns as far as the ship-owners are concerned. He has refused to make further unpopular spending cuts in other sectors that have already made considerable sacrifices. This decision to demand a greater contribution from one of the richest sectors of the economy has drawn praise from Giorgos Stathakis, the opposition Syriza party shadow minister for development, who called it ‘a positive step’.
Vassilis Antoniades, MD of the Boston Consulting Group, which has undertaken a recent study on Greek shipping and the Greek economy, said: ‘The shipping industry is a significant contributor to Greece in terms of jobs, cash and economic activity, and it stands to lose all three if it changes the regime for attracting shipping companies to the country.’ Greek shipping employs around 200,000 people and is estimated to have brought more than €140 billion foreign exchange into Greece over the past decade. The industry accounts for around 7% of the country’s GDP, so there is a real fear of the consequences of the government getting this wrong, even though the policy is justified by the ship-owners wealth and the country’s need.
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Enterprise Greece: An initiative to facilitate new investments
Publiziert am 10.März.2014 von Abraam Kosmidis
The primary concern for the Greek government is to put country’s economy back on track. The Officials are more than interested in finding ways not only to maintain the existing investments, but also to appeal and to support new ones. The government is making every effort to encourage its international trade collaborations and to boost even further the investment environment in Greece. Greece must surpass all the bureaucratic practices of the past which did not let the investments to rise. The present hard times demand a new flexible working environment.
In order to achieve the above goal, the government has launched some measures: it proposed the new investment law which allows businesses to start up within a day (see the article of 28 February 2014: Starting up a business in Greece within a day’). The last few months, it focuses on reviewing the existing exports procedures and processes followed by the exporting companies of the country. The exports policy reform is considered to be another major step towards the creation of a stable investment environment in Greece.
First of all, it was necessary for a National Exports Strategy to be established. In the recent past, there had been taken some few reluctant actions for creating the “National Strategy for Trading Facilitation (NSTF)” in Greece. The efforts to create a thorough exports strategy have become more intense the last two years (the crisis made clear that an extroverted exports approach is the pillar of the Greek economy – along with tourism). The Greek NSTF is based upon the examples of other countries such as England, Austria and Holland which have applied successfully similar kind of strategies.
The NSTF aims to simplify all the pre-customs and customs procedures related to the exports trading, thus reducing the time and administrative costs for the exporting companies. Export Trading becomes more favorable for investors either they come from Greece or even from abroad. More particularly, foreign investors will be interested in investing in Greece, because from now on the country’s legislative framework allows them to easily export anything produced by their investment. The initiative to form a National Exports Strategy must have taken place long time ago as Greece has a great advantage due to its geographical location and it may become the hub for the region’s international trade. The officials expect to achieve the following objectives, after the NSTF is implemented
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- Reduction of the number of days needed to export by 50% by 2015
- Reduction of the export cost by 20% by 2015
- Support the Greek investments in markets from abroad
- Provide information and advice to the interested investors from abroad on the legislative framework that rules the investments in Greece.
- Look into the markets of other countries in order to inform the business unions and investors.
- Provide support and advice to investors who wish to export to other countries.
- Organize promotion campaigns for goods and products produced in Greece.
- Cooperate with international trade institutions to form a common trade policy.
- Make suggestions regarding the improvement of the legislative framework for the exports or the investments in Greece.
- Cooperate with the Ministry of Foreign Affairs to organize the business visits of the President of the Hellenic Republic, the Prime Minister and the ministers to other countries.
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Starting up a business in Greece within a day
Publiziert am 28.Februar.2014 von Abraam Kosmidis
On Monday, 17th February 2014, the Greek Minister of Development, Mr Xatzidakis, gave a press-conference, where he presented a draft of a new investment law which will change radically the methodology followed in order to start up a new business in Greece. It aims to reduce the time required to begin a new business up to a single day. It will allow all businesses to operate without any severe public sector interference and simplifies the required procedure to get a start-up license.
This law is considered to be one of the most important laws that the Greek government has issued, during the last 18 months, that’s why it was so important for the Greek Prime minister, Mr Samaras to be present and attend this specific press-conference. He said that this law is a very significant weapon, used to boost the Greek Economy and to reduce the “monster” of bureaucracy.
What the investment law will include
The final format of the law will not be finalized prior to its voting process by the Greek parliament, by the end of April. However, the basic core of this new law is as follows:
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- The law is applicable to every business sector.
- An entrepreneur wishing to begin a business in Greece, he/she can fill in an application in the web-portal (which will be created soon enough), where he/she can upload all the necessary documentation. In most cases – for example such as general shopping stores, the entrepreneur will get the license to start operating his business within a day. In addition there are some other cases regarding businesses with environmental impact (e.g chemical industries, mines) where a license is required. The public authorities will provide for this license, before the businessmen apply on the web. The law will ensure that the steps required in order to obtain the license will be narrowed from 21 (steps required so far) to 7.
- The procedure followed so far, demanded that the public authorities had to check over plenty of paper documentation before providing any operation license. From now on, this control will be done by some credited auditors – either belonging to the public or the private sector. It will take place during the operational lifetime of businesses. This means that the control of businesses will be more efficient and effective. The results of these controls will be upon the actual facts and data arising throughout the operational lifetime of a business.
- The law will define that strict penalties will be imposed to any entrepreneur who is found (during the audits) to be law offender. The penalty may reach up to the level of three million Euros, or it may even mean that the business may close permanently.
- The web-portal will allow everyone who wishes to start-up a business, not only to apply for an operation license, but furthermore, it will allow the businessmen to follow up the progress of their application. The ultimate target is to provide most of the operation licenses within a single day.
- The law aims to simplify the procedure to establish and operate a Business Park. The public authorities will no longer interfere during the licensing process. The law aims that the Business Parks operate in a more organized and steady environment. The law encourages the establishment of new Business Parks and facilitates the operation of the existing ones.
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NEW TAX CODE IN GREECE 2014
Publiziert am 15.Februar.2014 von Abraam Kosmidis
NEW CODE OF INCOME TAXES IN GREECE JANUARY 2014
During 2013 the fundamental tax legislation has changed to an extended degree. In general the most representative characteristics of this reform were the large number of laws and provisions, the repealing of laws and the lack of interpreting circulars. Within the limits of the Code of Income Tax, the following are the main changes for 2014:
New Code of Income Tax (Law Nr. 4172/2013) that replaced Law Nr. 2238/1994
The new law on income tax (Nr. 4172/2013), that replaced Law Nr. 2238/1994, applies from 01.01.2014. The main changes and regulations are the following:
1. The term of ‘tax residence‘ is introduced and clarified (article 4, tax residence). Especially as far as legal persons or legal entities are concerned, they are now considered as tax residents in Greece, if at any period of time within the fiscal year, the ’place, where the actual administration takes place’ is in Greece. In Article 4, par. 4 it is mentioned that the ’place, where the actual administration takes place’ is considered to be in Greece according to the facts of each case. For this purpose the following are taken into account a) the place where the daily administration is exerted, b) the place where important decisions are taken, c) the place of the annual general assembly of the shareholders or the members , d) the place where the tax accrual workpapers are kept, e) the place of the management board meetings or of any other executive body of the administration and f) the residence of the members of the management board or of any other executive body of the administration.
2. The term of ‘permanent establishment’ is assigned (article 6, permanent establishment) according to the directive guidelines published by the Organisation for Economic Co-operation and Development. A non-exclusive list of examples, which can set up permanent establishment under circumstances is following below.
3. The income sources are reduced from six (6) to four (4) [art. 7, taxable income]. The income sources are the following: a) Income from paid employment and pensions, b) income from entrepreneurial activity, c) income from capitals and d) income from capital appreciation due to its transfer.
4. The over-twelve month period is not applying any more (art. 8, fiscal year). The fiscal year coincides with the calendar year. The time when the income is acquired is considered to be the time, when the beneficiary had the right to collect it. Exception is introduced in the case when the not collected accrued income, is received in a later time from the beneficiary of paid employment and pension income. Then the actual time of the receipt is considered to be the time when the income is acquired. The latter is valid only when the actual receipt of this income is clearly stated on the yearly remuneration statement provided to the beneficiary.
Income tax for natural persons
5. On the income of natural persons there is a new applicable tax table (art 15, tax rate).
6. There is a tax reduction only in the case of medical expenses or donations (art. 18, Tax reduction due to medical expenses and art. 19 tax reduction due to donations, see Ministerial Order 1010/2014).
7. The income deriving from paid employment and pension income, other benefits in kind that exceed the amount of three hundred (300) euro per year are included in the taxable income of natural persons (art. 13, Benefits in kind). The allotment of a business car, the benefits in kind in the form of credits, the rights to equity option and the house allotment all form part of benefits in kind. The salary payment in advance and regarding over three (3) months salaries is considered to be a credit. The final withholding tax regarding this income will start from 01.01.2015 (Law Nr. 4172, art. 72, par. 21 and art. 60, par. 1).
8. The profits from business transactions are taxed as profit deriving from entrepreneurial activity (art. 21, Profits from entrepreneurial activity). The same applies for systematic real estate sale. Every increase in property that derives from illegal or unjustified or unknown source or cause is considered as profit deriving from entrepreneurial activity and the imposed tax rate is 33% (art. 29, tax rate).
9. The provisions about the deductive and non-deductive operational expenditure undergo a fundamental change (art.22, deductive operational expenditure and art. 23 non-deductive operational expenditure). The deductive operational expenditure includes the expenditure for the business interest, that corresponds to actual transaction. These transactions must not be underpriced / overpriced, they must have already been declared in the transaction record book for this period and they can be proven with relevant documents. The interests from debenture and interbank loans were excluded in the end from the provisions regarding deductive operational expenditure. The expenditure concerning scientific and technological research deduct from business gross receipt after its rallonge by 30%. The previous law 2238/1994 had specific provisions about expenses percentage that did not deduct (for example private cars, mobile phones) and it was enriched with many explanatory circulars and court decisions. The new provisions should be as well be explained through detailed circulars, especially in terms concerning the meaning of underpricing/overpricing, how should be the division of expenses that cover personal and business needs (mobile phones, private car etc).
10. New tax rates concerning fiscal depreciation of capital assets are introduced (art. 24, fiscal depreciation). The depreciation starts the next month from its use. In case of financial leasing the lessee and the owner can equally proceed with fiscal depreciations.
11. The taxpayer is not allowed to use a different valuation method for the next four (4) years after the first tax year from the use of this valuation method (art. 25, valuation of reserve stocks and semi-finished products).
12. Doubtful debts are differently forecasted (art. 26, doubtful debts). For debts to the amount of 1.000 Euro that have not been recovered, the possibility of a relevant forecast can be built up to the percentage of 100% in case all necessary action towards the assurance of the recovery right has been taken. For debts over the amount of 1.000 Euro and for which all necessary action towards the assurance of the recovery right has already been taken, then the forecast percentage is up to 50% for over 12 months of delayed payment, 75% for over 18 months and 100% for over 24 months respectively. In this particular issue it should be clarified what consists ‘necessary action‘, due to the fact that no reference is done in the explanatory report of the law. New restrictions about the forecast of doubtful debts are introduced in cases when the counterparty has a 10% participation at least or it is under insurance or security. At this point it should be noted that there exists no limitation for the insecurity of debts until 30% in the total debit balance of the account ‘Clients’. Lastly the provisions of the Law 2238/1994, art. 31, par.1, 9th case still apply for the yet not formed forecasts until 31.12.2013 (non-verificated forecast within five years).
13. Damage transfer is possible to be put in offset procedure with business profits in the next five (5) years (art. 27, damage transfer). There exists a limitation in damage transfer in case the business ownership has changed more than 33%, unless it can be proven that this change was due to trade or business reasons and not for tax evasion. Moreover there exists no offset for damage caused abroad with profits within national territory. Damage caused abroad can only be in offset procedure with income in other state members of the European Union or the European Economic Area. This income should not be also been already exempted in the provisions of the Double Taxation Agreement that is signed and applied from Greece.
14. The income can be determined through indirect control methods (art. 28, Income determination method) according to the Income Law (Nr. 4174/2013). In case when the applicable accounting standards are not kept, then the taxation documents are not edited according to the Code of Income Tax. The same applies when the tax accrual workpapers are not submitted, after relevant invitation from the tax administration.
15. Business profits have a taxation of 26% for taxable income until 50.000 Euro and 33% for taxable income over 50.000 Euro (art. 29, tax rate). For natural persons that made their inscription in the tax authorities from the 1st of January 2013 and later, there exists a 50% discount for the next three years, presupposed that the business profits do not exceed the amount of 10.000 Euro.
16. The capital income obtained by natural persons includes participations, interests, royalties and real estate income (art. 35-40). There exists participation withholding tax 10% and hereafter there is no other tax obligation of the natural persons. At the same time the concept of participation becomes broader according to the Organisation for Economic Co-operation and Development (OECD) guidelines. An interest withholding tax 15% is imposed and hereafter there is no other tax obligation of the natural persons. There is royalties withholding tax 20% and hereafter there is no other tax obligation of the natural persons. The real estate rental income until 12.000 Euro has a tax rate of 11% and thereafter 33%. There exists no provision referring to supplementary income tax for real estate rental. The imputed income from owned or allotted property is calculated on 3% of its rateable value.
17. The income deriving from capital gain transfer has a 15% tax rate and includes the income from real estate transfer and the income from securities (art. 41-43, see Ministerial Orders 1004/2014, 1008/2014). In detail, this taxation concerns the increase in value that derives from the onerous contract for real estate or undivided shares on property rights or participations. The latter two cases should raise their value in 50% or more, from real estate or real estate contribution for coverage or capital increase. The tax is withheld from the notary. If a real estate is kept for five years and in this time no other real estate transfers occurred, then a 25.000 Euro non-taxable limit is applicable. Additionally there is a depreciation rate on the appreciation, relevant to the time a real estate is kept. The income from capital gain transfer includes the increase in value from securities transfer, if these transfers do not constitute business activity. The contribution of these securities for the coverage or capital increase is considered as transfer as well. Damage from capital transfer and offset with relevant capital gain are always possible to be transfered.
Income Tax for legal persons and legal entities
18. The law determines the tax subjects and the tax exempted legal persons (art. 45, 46). All income obtained by legal persons and legal entities are considered as business profits (art. 47, Business profits). The capitalization and the distribution of profits with no income tax for legal persons and legal entities imposed thereon are considered as business profit. The actual applicable tax rates are as follows (art. 58, Tax rate):
| Article | Tax liable legal persons | Simple Entry Bookkeeping | Double Entry bookkeeping |
| 45α | Capital Companies | - | 26% |
| 45β | Partnerships | 26% until 50.000 € 33%>50.000 € | 26% |
| 45γ | Non-profit public or private law bodies and institutions | 26% | 26% |
| 45δ | Co-operative societies and their associations | 26% until 50.000 € 33%>50.000 € | 26% |
| 45ε | Civil societies, civil law partnerships with gainful or non-profit activities, participating enterprises or dormant companies in case they exercise business or profession | 26% until 50.000 € 33%>50.000 € | 26% |
| 45στ | Joint enterprises | 26% until 50.000 € 33%>50.000 € | 26% |
| 45ζ | Other legal entities | 26% until 50.000 € 33%>50.000 € | 26% |
| 58 par.2 | Agricultural associations and producer groups | 13% | 13% |
19. New restrictions are set regarding the taxation of the received intra-group dividends by a legal person that is tax resident in Greece (art. 48, tax exempted intra-group dividends). The tax exemption prerequisites should exist together. The participation exemption according to the Directive on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States applies for the participations received by a legal person from every subsidiary, regardless of being resident in Greece, in a Member State of the European Union or a third country, with the exemption of non-cooperative States.
20. The provisions about the undercapitalization change completely (art. 49, Undercapitalization). For the interest discount, the amount of the loans and the net position are not calculated anymore, but instead the amount of the debit interest after abstraction of the credit interest is calculated. Interest expenses up to the amount of 5.000.000 Euro per year are fully deductible (this applies for 2014 and 2015 and from 2016 the amount is reduced to 3.000.000 Euro, art. 72, par. 9 β). The excessive interest expenses are not recognized as deductible business expenses and they are transferred for discount without time limitation, in case they exceed 60% of the EBIDTA (for 2015 the percentage is 50%, for 2016 40% and from 2017 30%, art. 72, par. 9 α).
21. The significance of the connected person is broader (art. 2, par. 7) and the principle of the ‘same distance‘ principle is introduced, as well as the relevant provisions from OECD for intra-group transactions (art. 50, 51) and for business restructuring.
22. New favourable regulations are introduced. These regulations are in regard to the contribution of assets (activity branch) instead of titles, the exchange of titles, the merger and dissolution of businesses and the statutory seat transfer of a European Company (Societas Europaea - SC) or a European Cooperative Society (ECS) from Greece to another Member State of the European Union, since they have a permanent establishment in Greece (art. 52-55). The benefits described in art. 52-55 do not apply in case the mentioned actions aim at tax abuse or tax evasion (art. 56, non-applicable benefits).
23. The withholding tax is as follows (art. 64, Withholding tax) and the 300 Euro limit does not exist anymore (see Ministerial Orders 1011/2014 and 1012/2014):
| Income (Payments) | Withholding Tax Rate | Tax obligation completion |
| Participations* | 10% | YES |
| Interest* | 15% | YES |
| Royalties* | 20% | YES |
| Remunerations for technical services, administrative remunerations, remunerations for consulting services and other relevant services, independently if they were provided in Greece and the beneficiary is a natural person | 20% | NO |
| Remunerations received by contractors that undertake any kind of structure and tenants of public, municipal and communal or harbour facilities** | 3% | NO |
| Annuities paid as a periodical benefit | 15% | YES |
| Annuities paid in one-off payment until 40.000 Euro | 10% | YES |
| Annuities paid in one-off payment over 40.000 Euro | 20% | YES |
| The increase in value from real estate transfer | 15% | YES |
*Notice: According to art. 63 there are exemptions for intra-group payments.
**Notice: From the provisions‘ interpretation it comes as a conclusion that there is no withholding tax in case of a legal person.
| Withholding tax from institutions of the General Government | |
| Kind | Withholding tax rate |
| Liquid fuel and tobacco manufactures | 1% |
| Other goods | 4% |
| Services | 8% |
24. The provisions about non-cooperative and cooperative states in tax matters and about states with privileged tax regime, that consisted art. 51A of the previous Law 2238/1994 are reformulated (art. 65, non-cooperative states in tax matters and states with privileged tax regime).
25. For the first time there are new provisions about not distributed income from subsidiary legal person or subsidiary legal entity, that is tax resident in a non-cooperative state or in a state with privileged tax regime, in order to avoid tax abuse or tax evasion of the parental Greek company (art. 66, Controlled foreign companies).
26. The tax return concerning legal persons and legal entities is submitted until the last day of the sixth month from the end of the tax year. The tax payment is done maximum in eight (8) equal monthly rates. The first rate is paid along with the submission of the tax return and the other seven (7) rates until the last day of the seventh month from this submission. Nevertheless the last payment cannot be done beyond the same tax year. The payment in advance in 80% still applies for legal persons and legal entities (art. 68-71).
27. The not distributed or capitalized legal persons‘ assets in the way they are formed until the 31st of December 2013 and while not being taxed at their creation due to tax exemption according to the Law 2238/1994 - after the Code of Income Tax publication or its relevant circulars and court decisions - and in case of their distribution or capitalization until the 31st of January 2013, have an independent tax rate of 15%. By the payment of this tax there is no other fiscal obligation on the part of the legal person and its shareholders or partners. Examples for the above mentioned assets are: not taxed assets from mutual funds‘ profits or the added value due to their takeover in a higher price from the price when obtained (Law Nr. 2238/1994, art. 103, par. 1, 10th case and art. 6, par. 3, 10th case), tax free assets from sold shares that were registered in the stock market and are worth higher price from the price when obtained and Derivative Transactions at the Athens Derivative Exchange (Law Nr. 2238/1994, art. 105, par. 11 in combination to art. 38, par. 1 and 6) and lastly tax free assets that derive from the one-off income tax payment, according to the administration’s opinion (Ε.5343/29/28.05.1974 und 1072615/1079πε/Β0012/15.04.2004). Referring to it the detailed Ministerial Order 100/2014 was published. From the 1st of January 2014 and on the not distributed or capitalized assets are obligatory in offset procedure with tax recognizable damages that derived from any cause within the last five (5) years and until they are finished. In case of their distribution or capitalization they undergo an independent tax rate of 19%.
After the payment of the latter tax there exists no other fiscal obligation on the part of the legal person and its shareholders or partners. It is not allowed to update a special account for tax free assets regarding balance sheets that close from 31.12.2014 and thereafter, unless there are investment or development laws or special provisions in other laws, that determine differently.
DISCLAIMER: The goal of this publication is to give general and brief information. Under no circumstances should the present information form the base of entrepreneurial decisions without prior consultation of an expert.Gesamten Artikel lesen »
Growing Opposition to Continued Greek Austerity Measures
Publiziert am 15.Februar.2014 von Abraam KosmidisGreek Prime Minister Antonis Samaras began his six month tenure of the EU Presidency in January with a speech criticising the continued imposition of austerity measures. This has meant four years of harsh spending cuts and a tight fiscal policy, which he said the country could no longer tolerate. His is now a leading voice in the growing opposition against renewed austerity measures, which have been imposed on states in economic crisis across the EU. Greece has felt the sharp end of the EU currency and debt crisis and has already received €250 billion in bailout funds. For many leading politicians and the majority of the public alike, enough is enough.
For the Presidential handover ceremony in Athens, trouble was expected. Over 5000 police were drafted in to ensure peace was maintained and there would be no disruption. This did not stop many Greeks coming onto the streets of the city to let visiting EU officials know what they thought. Neither left nor right wing party leaders attended, but the point was made. Outside the ceremony, demonstrators and police clashed and crowds were forced back with tear gas; inside, the new EU President presented an equally clear message that Greece was exhausted by austerity and that although the government’s economic reforms were having an effect, there should now be a new agenda to stimulate growth and create jobs.
Greek Finance Minister Yannis Stournaras said: ‘Greece does not want to have any more fiscal conditionality. It is out of the question because it is already too tough.’ He spoke for many. Years of depression, mass unemployment and wage cuts that have left even those lucky enough to have a job to struggle on around a third of their former incomes, have left the country exhausted. With the news coming at the beginning of February of an unexpectedly large primary surplus, the Finance Minister has criticised the Troika’s earlier pessimistic forecasts, which had expected a €3 billion shortfall in the 2014 budget. He said that if he had agreed to the lenders’ demands for greater austerity measures, the Greek economy would now be facing ruination. Greece has worked hard to eradicate the structural problems in the economy and the huge current account deficit that had been the two major causes of the crisis, but admitted that ‘the other side of fiscal consolidation is a decline in living standards’ and that it would take some time ‘from the moment that figures improve until the moment that people will see some money in their pockets.’
Priorities and difficulties
On 15 January, Prime Minister Samaras outlined Greece’s priorities for the next six months. Measures to promote economic growth and improved social cohesion will be set in motion, and solutions to the serious problem of youth unemployment must be a part of these. The first signs of economic recovery may be visible, but one of the aims of any set of recovery measures must be the prevention of a repetition of the crisis. The Prime Minister said that the crisis and the response to it had proved that the EU can be effective, and he recognised the solidarity shown by the people of Europe. Looking towards the May 2014 European and municipal elections, he said he wanted ‘to make sure that citizens won’t vote with the bitter taste of crisis in their mouths.’ This is a serious concern, as recent polls have shown Prime Minister Samaras’ New Democracy government falling behind the opposition Coalition of the Radical Left (SYRIZA), and that it may even be in danger of fighting for second place behind the neo-fascist Golden Dawn party.
The New Democracy government’s shrinking majority in parliament has made passing some of the tough economic measures demanded by the Troika’s bailout conditions increasingly difficult, which Finance Minister Stournaras has criticised as being unrealistic: ‘The majority is very slim, so we have to be very careful. There are things that can be done and things that cannot be done.’ Official discussions of a third bailout package can start only after the May elections; but if unofficial discussions are able to show any positive signs before then, Samaras may be able to gain some ground on the SYRIZA coalition, which rejects completely the terms of the previous bailout agreements. SYRIZA’s leader, Alexis Tsipras has said he would renege on the agreement, withholding at least 60% of the debt, which would create a further crisis that could drive Greece out of the eurozone and leave it bankrupt. However, New Democracy itself has said that it cannot repay the €250 million owed to the banks, while setting aside a bill that would provide debt relief for households that have fallen into difficulties only because of the government’s austerity measures – the cuts to wages and pensions, and tax increases. This apparent insensitivity cancels out any goodwill created by any new people-friendly agenda or optimism about recovery, and does them no good in the polls.
The focus of resentment
For many of those protesters in Athens, the EU is the main architect of the social and humanitarian crisis in Greece, and German chancellor Angela Merkel as its dominant figure. Economic recovery in itself does not prompt people who have suffered years of hardship to forget their resentment against those who have managed the crisis, however successful they might be. This is a familiar scenario whether a given leader is popular or despised: the electorate will complain during the hard times, but then get rid of them after they’ve delivered success. As the US financier George Soros has said of the current situation in Europe: ‘The acute phase of the financial crisis is now over. Future crises will be political in origin.’ He sees the crisis as having crucially altered the relationship between the countries of the eurozone, from a ‘voluntary association of equal states’ to ‘a relationship between creditor and debtor countries that is neither voluntary nor equal.’ This is borne out by Chancellor Merkel’s popularity at home, where she has won a third term in office, and the increasing resentment felt towards Germany, and Merkel in particular, within the countries that have suffered the hardships of the EU bailout agreements. In an EU summit held last December, during the first week of Merkel’s new term, she found herself trying to push through a new policy for enforcing structural reform on eurozone economies against united opposition of all elected European leaders, including even her usual allies, and the plan was defeated.
Unpopularity is the price of power. Personalizing the crisis in this way may give a satisfying focus to people’s anger, and elected leaders may feel compelled to reflect this, but it is not necessarily wise politics if your focus is a better future for Europe. Merkel’s plan was seen as dictatorial, a view that was probably influenced by the power of her position. Structural reform is painful, as seen during the undoubtedly difficult years of the Greek bailout, but it has led to signs of recovery. If Merkel had been successful, the European Commission would have been empowered to police structural reforms, but it would also have partially subsidized them. Merkel’s view was that €3 billion spent on immediate changes was preferable to €10 billion spent after unnecessary delay. These changes may or may not have helped the Greek economic recovery, but it’s certain that without the support of the previous EU bailout agreements the country would be in a much worse economic position. Part of the fallout of the eurozone crisis has been the loosening of commitment to the EU and its principles by many people in the countries worse hit by the crisis – including their politicians.
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Greece Set to Leave the Bailout Scheme as it Assumes the EU Presidency
Publiziert am 9.Januar.2014 von Abraam Kosmidis
On Monday 30 December 2013, the Greek Prime Minister, Antonis Samaras, announced that the country would leave the bailout programme in 2014. In a televised speech he stressed that with Greece assuming the EU stewardship this January, the coming months held the promise of renewed confidence after nearly four years of difficult austerity measures. Following Ireland’s withdrawal from the bailout programme earlier in December, this will be a major step on the road to recovery from the financial crisis that has gripped the eurozone since 2010. The Prime Minister said that in 2014 Greece would ‘venture out to the markets again [and] there will be no need for new loans and new bailout agreements.’
After receiving two aid packages that helped to reduce the nation’s debt in 2012 by €130 billion, during 2013 confidence grew amongst investors that the debt would be repaid, which resulted in a fall of interest rates on Greece’s 10-year bonds by about 8% compared to its peak figure of 30% at the height of the crisis. This meant that Greek government bonds became one of the most profitable assets during 2013, showing returns as high as 47%. However, some analysts doubt the assertion that Greece will need no further aid during 2014 as its international lenders have reached no agreement on a figure for the fiscal shortfall in the new annual budget, and officials from the financial troika comprised of the European Commission, the European Central Bank and the International Monetary Fund have been pressing the Greek government to make further cutbacks.
Old problems, new solutions
In addition, the deflation in the economy, the so-called ‘internal devaluation’ of wage cuts, high unemployment and price cuts, is set to continue well into 2014. This may create difficulties for the Greek government: persistent internal economic problems combined with the inefficiency of the country’s public administration, its unpopular and problematic tax system and the pressures of the upcoming EU parliamentary elections in May 2014, could at least be distracting for the Greek EU presidency and at worst weaken its authority. Only a year ago, even Greece’s continued membership of the EU seemed in jeopardy. Four years after Greece’s dire economic situation helped to trigger Europe’s worst debt crisis for more than half a century, there are still doubts about whether it can stay the course.
Since Antonis Samaras became Prime Minister of the coalition government in 2012, the political scene has been dominated by widespread public anger over the harsh austerity measures that were a prerequisite for implementation of the international bailout programme. The government’s majority in parliament was reduced from its original twenty-six seats to only three in December 2013 after Samaras expelled the controversial former cabinet minister, Vyron Polydoras, from the conservative-Socialist coalition when he refused to support a revised tax law demanded by the country’s lenders.
This new legislation, which replaces the unpopular property tax attached to electricity bills, introduces a new broader based real estate tax, which also covers land holdings. Projected figures show that it will raise about €2.65 billion, which is €0.25 billion less than under the previous tax law and which the government plans to offset by cutting €200 million from its 2014 investment programme. The level of home ownership in Greece is amongst the highest in Europe, at 80% compared to the 70% EU average, so a large proportion of families’ wealth is tied up in property. In order to boost the stagnant market, under the new legislation property transfer tax is reduced from its previous 8-10% to 3%. Polydoras had argued that the new tax would be ‘heavy and unbearable.’ Although inspectors from the troika have agreed to the new tax, they have expressed concern that Greece may not be able to collect it efficiently. In defiance, the Greek parliament has extended the ban on home repossessions for a further year.
The Greek government has not always been in agreement with its international lenders over its austerity measures, particularly in this restriction on home repossessions. This is one of the main reasons why in December, for the third time, the troika interrupted an inspection visit to Greece and withheld the latest bailout payment of €4.9 billion. This does not put Greece in immediate financial difficulty as no large bond payments are due until May 2014. Anticipating an end to recession, the Greek Finance Minister Yannis Stournaras is expecting to see growth in the economy by 0.6% in 2014, which would be a welcome recovery after the 25% drop during the past six years. He said that the new tax legislation would be the last austerity measure before the economy begins to turn around.
Taking centre stage
Greece’s taking over of the EU presidency, which gives it the ability to control policy, could be a major milestone in the rehabilitation of the country’s image as an economically and politically stable state. However, the population’s growing hostility to the EU and Germany in particular is one part of the crisis that refuses to go away. This is exemplified by the drive-by shooting that took place in December at the official Athens residence of Germany’s ambassador. Fortunately nobody was hurt. Greece’s Deputy Prime Minister and Foreign Minister Evangelos Venizelos quickly reacted, describing the attack as a ‘cowardly terrorist action’ aimed at tarnishing the country’s image abroad at the commencement of its EU presidency. He stressed that Greece stood alone in the EU as having made the fiscal adjustments worth €70 billion over three and a half years - equivalent to 35% of the country’s GDP - that had been necessary to combat the economic crisis. Venizelos has described the much stated irony of Greece’s ‘presiding over Germany’ as indicative of the collapse of the founding principle of equality amongst states within the EU. In the face of these initial problems, the Greek coalition government sees the six-month period of its EU presidency as a chance for Greece’s European credentials to be taken seriously, and for Greece to be seen as a country that is on the road to recovery.
There is always the worry that, despite its budget surplus, Greece may still miss its fiscal targets. There is still speculation about a new bailout, despite the Prime Minister’s assertion that Greece would be leaving the programme. Others also worry that Greece’s presidency will divide rather than unite Europe, that its often difficult relationship with the troika may overshadow its term of office and only strengthen the divide between north and south. Venizelos has expressed the opinion of many in Greece, that considering the government’s success in combating the country’s economic problems, the troika’s rescue programme could have been ‘more flexible and more clever.’
Priorities for Greece will be to stimulate economic growth and tackle its immigration and youth unemployment problems. Some members of parliament privately admit that with the government focussing on European affairs, it will allow Greece to enjoy an unofficial period of grace free of the necessity to implement more of the unpopular reforms that have polarised Greek opinion and weakened the coalition. The European parliamentary elections in May 2014 brings the prospect of much anti-EU sentiment being voiced in Greece, but Venizelos is determined that Greece, as ‘the laboratory of the crisis,’ should contribute positively towards the vital debate on Europe’s future.
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The impact of the austerity measures on Greeks
Publiziert am 12.Dezember.2013 von Abraam Kosmidis
Austerity measures under the terms of the international bailout have put increasing pressure on the Greek people. Cuts in services, salaries and pensions alongside higher taxes and a 59% rise in electricity prices since 2007 have ensured that many now face a hard winter with their electricity supply cut off because of non-payment of bills. The consensus is that the government went a step too far in 2011 when it added an emergency real estate tax to electricity bills rather than giving the task of collection to the beleaguered tax authority. This only forced more consumers to default on their electricity bills. With the number of unemployed now at 1.37 million, or 27% of the workforce, the number of disconnections in 2013 is set to surpass last year’s figure by between 5% and 6%, and between January and September the total disconnections was already at 257,002.
Years of austerity
This is just one of the hardships that have been inflicted on the country. Under pressure from international lenders, the Greek government has been seen as unfairly discriminating in their insistence on cutting wages and pensions to the poor and low paid while leaving the rich and the army of tax evaders comparatively untouched. The bailout funds secured last December were expected to end a long period of uncertainty over Greece’s future as part of the euro zone; after three years of austerity, people naturally hoped that this would also improve their own personal financial situation. The period of euphoria lasted all of two months. By February, tens of thousands of protesters had taken to the streets across the country with the sound of drums, whistles and cries of: ‘Robbers, robbers!’ A nationwide strike by the two biggest labour unions had shut schools, trapped ferries in their ports, and left hospitals to run on emergency staff only.
The aim was to test the will of the government in the face of growing anger. After only eight months in power, Prime Minister Antonis Samaras’s coalition government was determined to implement the reforms agreed with the European Union and International Monetary Fund. Ilias Iliopoulos, secretary general of ADEDY, the public sector union, made no bones about the protests: their intention was to ‘get rid of the bailout and those who take advantage of people and bring only misery.’ He added: ‘A social explosion is very near.’ Costas Panagopoulos, head of Alco Pollsters, said: ‘If these expectations are not satisfied by the summer, then whatever is left of the working class will respond with more protests.’ This is what has happened.
Restoring some balance
In 2012 the income of the poorest 10% in Greece had been reduced to half its 2009 figure and 37% were below the poverty line. With the growth of the Greece Solidarity Campaign and action against the closing of the state TV and radio stations, the furore over the Lagarde List with its implications for freedom of the press, privatisation and cuts to the health service, the seizing of state buildings and distribution of food and medicines to the needy, the problem of disconnection to the electricity supply had to be addressed. Relying on their own ingenuity, people began to illegally reconnect to the grid, and the sheer numbers of disconnections has created an ‘electrician’s movement’ – a loose group of professional electricians united by their dedication to restoring power supplies to those who cannot afford to pay their debts to the power company. They do this for free, considering the cutting of electric power from consumers to be immoral. Figures from the Hellenic Electricity Distribution Network (HEDNO) show that about 10% of Greek households have an illegally reconnected supply. Although their official position is that theft of electricity is dangerous and unfair to legitimate consumers, only 310 cases have been taken to court as the company wants to avoid prosecuting low-income families.
The price of electricity continued to rise – by an average of 12% in 2012 and a further 8.8% in January 2013. Under the bailout terms, further price rises for low-voltage electricity were scheduled for May, but costs to the Public Power Corporation (PPC), which is 51% government owned, were lower than forecasts so plans were dropped. However, by July the way was paved for a new deal on renewable energy sources with the Ministry of Environment Energy and Climate Change making cuts to the feed-in tariff on new photovoltaic installations of up to 45%, with plans to cut tariffs on existing photovoltaic installations by up to 10%. These cuts were initially offered to producers as voluntary, with the ministry promising that LAGIE, the Greek electricity market operator, would extend the length of purchase contracts, while the government would put pressure on banks to extend loans and cut interest rates. Although voluntary, it was expected that this deal would be pushed through by the ministry whatever the response from supplies, with the aim of establishing a viable sustainable energy market where the €436.1 million deficit of LAGIE’s Renewable Energy Sources fund is eliminated. An essential part of this new deal for power was the further increase of prices to electricity consumers imposed in July. While industrial consumers would pay less, domestic users were faced with a further 120% rise in prices. The Greek Regulatory Authority for Energy (RAE) saw this as essential to correcting the ‘significant structural distortions and weaknesses’ in the Greek energy market, while critics condemned it as the government again forcing the consumer to pay for their lack of planning.
Late promises
Despite the hardship of living without electricity, many people who have their supply cut off rely on candles for lighting and fires or braziers for heating. Recently this has resulted in three deaths from fire or carbon monoxide poisoning and the opposition has put the blame firmly on the government’s austerity policies. The government was quick to react with promises that it would restore power to households that cannot afford to pay. Environment Minister Yiannis Maniatis said: ‘We will not allow any of our fellow citizens to die of cold.’ A case-by-case review will be undertaken to assess who are genuinely unable to pay after municipal authorities have provided the PPC with lists of poor families in each area. With winter already here, the question has to be asked: is this just a matter of good intentions too late; or a case of politicians backed into an inescapable corner, and the appearance of good intentions is all that counts? What is certain is that the people still feel unfairly treated and more will die before the spring.Gesamten Artikel lesen »
The Struggle to Control Greece’s Tax Evasion Problem
Publiziert am 24.November.2013 von Abraam KosmidisFor many years, economists have viewed the rampant tax evasion in Greece as one of the country’s most serious obstacles to its hope of escaping the seemingly endless and debilitating budget austerity that has brought protest and violence to the streets and engendered an atmosphere of anger and resentment among its people. In the early days of the crisis, optimistic officials were predicting an improvement in tax collection with the aid of such arcane measures as using aerial photography to force tax evaders to declare their swimming pools, and homing in on doctors who live in affluent neighbourhoods but report unusually low incomes. Many similarly ineffective measures aimed at collecting tax arrears from the rich have only moved the money elsewhere, such as the tax on yacht owners which has emptied Greek marinas.
These efforts have grabbed the headlines but did little for the country’s struggling economy. Together with the 22 new tax laws introduced within two years and figures for tax arrears - €45 billion in 2011 and €56 billion in 2012 – that showed the opposite of success, many people were suggesting that the authorities were just stumbling around in the dark and would never make any progress. By the end of July 2013, ahead of the most active annual tax period, arrears had increased to about €60 billion, or nearly one fifth of the country’s public debt. The inefficiency of the country’s tax collection system and the people’s hostility was brought into sharp relief by recent events in the small Cretan village of Archanes. Tax inspectors arrived during a saint’s day celebration and went from restaurant to restaurant demanding that owners produce their financial records. There was pushing and shoving. Angry words were exchanged. The inspectors fled, run out of town. Many more villages around the country can tell a similar tale. This is the kind of highly visible but pointless exercise that hurts the small, struggling businessman but makes no dent in the tax deficit, and engenders only more hostility.
The struggle for change
Until recently, all the changes made in the tax collection system have added up to more confusion for accountants, and money-saving efforts to reorganize the tax bureaux have resulted only in a slowed down and more expensive administrative tangle. Together with the widespread anger seen at the grass roots in places such as Archanes, this has added up to an almost insurmountable problem for both government and administrators. The problem of widespread tax evasion remains.
Meanwhile, the furore over the notorious ‘Lagarde list’ continues. The journalist, Kostas Vaxevanis, who in 2012 was acquitted for infringing privacy laws after publishing this list of over 2000 wealthy Greek tax evaders together with details of their holdings in the Geneva branch of HSBC, is now facing a retrial. At stake is the right of a journalist to act as the nation’s conscience where public interest is paramount. Confusion reigns here too. In October 2010, before publication of the list, the then French Finance Minister, Christine Lagarde, gave it to the Greek authorities in the hope of helping in the nation’s fight against tax evasion, which was widely seen as the root of the country’s economic problems. Instead, the Greek Finance Minister George Papaconstantinou failed to act, and the now former minister is also facing trial amid suggestions that he tampered with the list, removing the names of relatives. Vaxevanis only published the list after seeing that Papaconstantinou was sitting on it. We now have a situation where two people are on trial – one for publishing it, the other for concealing it. As far as tackling the tax evaders goes, nobody on the list is currently facing legal proceedings, and investigation has been handed down from the elite auditors to local tax offices. At best, the lack of manpower, with only 0.87 auditors per 1000 citizens, will ensure that any further movement will be slow.
Latest measures
Hope for improvement in Greece’s tax collection problems has been put in the country’s new Code of Tax Procedure, published in July 2013, which amends several areas of tax law, including tax compliance, the assessment and collection of income tax, the new real estate property tax and VAT. It also consolidates a number of rules that were formerly scattered throughout various pieces of legislation, simplifying procedure and making important changes that will affect taxpayers, such as introducing a twenty year prescription period for tax evaders, and the charging of interest and the imposition of penalties on overdue taxes.
The new procedures introduce widened state powers to obtain evidence and conduct audits. In the case of new evidence coming to light since a tax audit has been completed, tax administrators are able to reopen an investigation and adjust its assessment of the due taxes. Where there is evidence or suspicion of tax evasion, a full scope audit can be undertaken without notice. With prior permission from a Prosecutor, taxpayers’ private homes can be entered in order to obtain further evidence. A license issued by the Prosecutor can also enable auditors to cut through third party professional privileges of privacy and non-disclosure to obtain information and documents concerning transactions with the taxpayer. The tax administration has powers to seize copies of all financial records in any format, printed or electronic.
In order to safeguard the state’s interests in collecting unpaid taxes, the administration can request payment of a guarantee. A new proactive tax assessment system has also been put in force where tax is assessed before filing a tax return, either to be paid in one lump sum or a guarantee or security against fixed assets supplied prior to a final tax assessment being made within the following year. Assets, including those held by third parties, can also be frozen without a court order, and in emergencies such as the taxpayer’s imminent exiting of the country or transference of assets to a third party, urgent enforcement measures can be implemented even before the debt becomes outstanding. New rules also ensure personal or joint liability of shareholders or partners for tax debts owed by dissolved companies if they have held a minimum 5% share for up to three years before dissolution.
The extension of the prescription period for tax assessment to twenty years applies in all cases of tax evasion, which is defined as concealment of income by any means, failure to calculate VAT owed, fraudulent collection of tax refunds, the falsification of financial records or invoices, the acceptance or issue of false invoices, or the fraudulent reporting of business expenses. Significant penalties apply to all types of tax evasion, from percentages of the value of concealed transactions or false returns (up to 100%), €500 fines for each falsified document (capped at €50,000 per annum), penalties between 10% and 30% on delayed payments, to 100% over the due tax figure for failure to file a tax return. With these new measures in place, Greece needs only an efficient and well manned authority and a more compliant population to ensure that the current high tide of tax evasion finally turns.
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