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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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- 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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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):
|Tax liable legal persons
|Simple Entry Bookkeeping
|Double Entry bookkeeping
|26% until 50.000 €33%>50.000 €
|Non-profit public or private law bodies and institutions
|Co-operative societies and their associations
|26% until 50.000 €33%>50.000 €
|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% until 50.000 €33%>50.000 €
|Other legal entities
|26% until 50.000 €33%>50.000 €
|Agricultural associations and producer groups
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):
|Withholding Tax Rate
|Tax obligation completion
|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
|Remunerations received by contractors that undertake any kind of structure and tenants of public, municipal and communal or harbour facilities**
|Annuities paid as a periodical benefit
|Annuities paid in one-off payment until 40.000 Euro
|Annuities paid in one-off payment over 40.000 Euro
|The increase in value from real estate transfer
*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
|Withholding tax rate
|Liquid fuel and tobacco manufactures
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.
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Greek 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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For 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.
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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- The company acquires or joins with an existing business that already has its own skilled and experienced staff and therefore boosts the acquiring company’s knowledge base.
- It increases the acquiring company’s customer base and provides easy access to a new market.
- The new company may have new technologies or patented products that the acquiring company might not be able to access other than through a merger or acquisition.
- The target company often conducts the same type of business as the acquiring company, and so the acquisition or merger can help to reduce competition and increase the company’s market share.
- What to do with existing staff of the acquired company? There may be a duplication of roles as a result of the merger or acquisition and as a result some staff may become surplus to requirements. However there are European laws, such as the Transfer of Undertakings (Protection of Employment) Directive, that govern how staff in this situation must be treated.
- Failure to fully understand and comply with the different rules governing business operations in a foreign country.
- Failure to fully research the economic viability of the target company, including all its assets and liabilities.
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