Weblog KPAG Kosmidis & Partner – die deutschsprachige Anwaltskanzlei in Griechenland

VIELVERSPRECHENDES TREFFEN ZWISCHEN MINISTERPRÄSIDENT SAMARAS UND BUNDESKANZLERIN MERKEL

Publiziert am 5.August.2014 von Abraam Kosmidis

Samaras MerkelBesonders zufrieden erschienen griechische Regierungskreise nach dem letzten Gespräch zwischen der Bundeskanzlerin und dem Ministerpräsidenten Samaras, welches äußerst positiv verlief. Die Bundeskanzlerin volles Verständnis für die Prioritäten und Zielsetzungen der Regierung gezeigt und Verhandlungen für September offen gelassen hat.

Regierungschef Samaras und der neue Finanzminister Gikas Chardouvelis betonten die Verbesserung der Lage der griechischen Wirtschaft und die von der Regierung eingeleiteten Reformen. Der griechische Ministerpräsident teilte zudem der Bundeskanzlerin seine Absicht mit, Steuerermäßigungen und Erleichterungen hinsichtlich der Tilgung von überfälligen Schulden zu beschließen. Darüber hinaus begrüßte die Bundeskanzlerin die Einhaltung des Haushaltsplans und deutete an, dass nach dem bevorstehenden Troika – Besuch im September die Verhandlungen sowohl über eine Steuersenkung als auch Schuldenregulierung beginnen können.

Ein weiteres Gesprächsthema war die Reaktion in Bezug auf die Privatisierung der „kleinen DEI“ (öffentliche Elektrizitätsversorgungsunternehmen). Dabei wurde angesprochen, dass im Herbst eine Zunahme der sozialen Reaktionen zu erwarten ist, falls keine Erleichterungsmaßnahmen vorgenommen werden. Frau Bundeskanzlerin Merkel äußerte zudem ihre Zufriedenheit hinsichtlich der positiven Entwicklung der griechischen Wirtschaft, begrüßte die Reformmaßnahmen der griechischen Regierung und lobte die Umwandlung des Landes in eine moderne Wirtschaft.

Im Rahmen der bereits laufenden „ersten Phase der politischen Verhandlungen“ finden auch die Reise nach Florenz und das bevorstehende Treffen des griechischen Ministerpräsidenten mit dem italienischen Regierungschef M. Renzi statt, welcher die EU-Partner von einer Lockerung der Sparmaßnahmen überzeugen will.

Zugleich äußerte ein hochrangiger Regierungsbeamter seine Zufriedenheit hinsichtlich der überraschenden Stellungnahme des künftigen EU-Kommissionspräsidenten Jean-Claude Juncker in Bezug auf die Migrationspolitik der EU und den Schutz der europäischen Grenzen.



Financial tools for the back bone of the Greek Economy: Small and Medium Enterprises

Publiziert am 20.Mai.2014 von Abraam Kosmidis

Financial tools for the back bone of the Greek Economy: Small and Medium Enterprises

Definition of SMEs

SME stands for Small and Medium Enterprises. The European Commission (EC) has provided for the definition of SMEs:

  • A small sized enterprise is the one which employs less than 50 people and its turnover is less than 10 million Euros
  • A medium sized company is the one that employs less than 250 people with a turnover less than 50 million euros and
  • A micro sized company employs less than 10 people and its turnover is less than 2 million Euros.

The importance of the SMEs for the Greek economy

The results of the annual report of the EC on the SMEs (SBA fact sheets – Greece 2010- 2011) showed that by the year 2010, they represented the 99,9% of the total number of companies in Greece. The SME sector employed the 85% of the work force.

The Greek economy is still based on the small and medium enterprises, despite the fact that the sector has showed a deep decline and has suffered the effects of the economic crisis. In the 2011, there were 62.287 less SMEs compared to companies existing in 2009, which led to 144.604 job losses.

Support tools for the SMEs

It is evident that the SMEs sector is very crucial for the enhancement of the competiveness of the Greek economy. The government during the last four years has taken several steps to support the SMEs, for example it enacted several laws that simplify the start-up processes of a business, it adopted initiatives that promote the extroversion of the companies, it supported the creation of the electronic platform www.startupgreece.gov.gr which provides the new entrepreneur with all the necessary information to create a new business in Greece.

SMEs are dealing with a very serious problem: lack of liquidity. One of the reasons that are responsible for this problem is the difficulty to have access to various financing instruments (loans, grants, etc) because traditional banking loan system requires strong guarantees that the SMEs cannot provide.

The Greek government has undertaken some initiatives that will help the small and medium companies to overcome this difficulty:

Agreement with the European Investment Bank

On 12 June 2013, the European Investment Bank (EIB) and the Greek government signed an agreement, according to which the EIB provides 500 million Euros to support the foreign – trade oriented SMEs in Greece. The agreement was also signed by 3 Greek and by 3 foreign banks which provide the loans to the small and medium enterprises.

Hellenic Fund for Entrepreneurship and Development

The Hellenic Fund for Entrepreneurship and Development (HFED) was established in 2011 and is fully owned by the Greek state. Its original mission was to facilitate the access of the SMEs to the available financial instruments delivered by the Greek banks, by providing guarantees on behalf of the companies. Nowadays, the fund has broadened the range of its activities and it had created 4 sub-funds (each one of them with distinctive management) in order to provide financing tools at attractive terms. The HFED and its sub-funds are co-financed by the National Resources and the European Structural Fund. The sub-funds are:

Entrepreneurship Fund. The mission of the fund is to help the creation of new SMEs and to support the existing ones by refinancing their working capitals. The current activities of the fund are:

  • Provision of low interest loans (total budget of the project 550million Euros). This activity is suitable for existing SMEs or start-ups. The interested parties may apply for a loan to the banks co-operating with the HFED.
  • Provision of low interest loans (total budget of the project 80 million Euros). The activity aims to support SMEs located at the Greek islands.
  • Provision of guarantees for any SME wishing to get a loan from a bank (total budget of the project 150 million Euros).
  • Provision of loans (total budget of the project 315 million Euros) special for SMEs oriented to the following sectors: foreign trade, youth entrepreneurship, innovation, green entrepreneurship.
  • Fisheries Fund. The mission of the fund is to provide guarantees to any SME with activities such as production, processing and marketing of fishery products. The fund is currently inactive.
  • Fund for Energy Efficiency in Households. This fund helps the owners of households to undertake all the necessary actions to enhance the energy efficiency of buildings and reduce their energy consumption. These actions may include application of heat insulation, maintenance of heating and air cooling systems, replacement of old window technology. The program started on 1 February 2011 and it is valid until the resources are over. The interested party may contact a co-operating bank.
  • Agricultural Entrepreneurship Fund. The fund ensures that any viable small to medium business of the agricultural sector is funded. The current activity regards financing SMEs that process and market agricultural products.

Institution for Growth in Greece

Despite the fact that the 2 previous initiatives helps the SMEs increase their liquidity by getting access to financial instruments, there are recent studies that show there is still a funding gap in the Greek market (around 15-18 billion euros).

In order to overcome this gap the government decided to establish another fund which will provide loans to SMEs: Institution for Growth (IfG). The preliminary negotiations started two years ago, followed by the voting of the law by the Greek parliament that described the formation process of the IfG (Christmas 2013). By the end of April 2014, the Greek government signed two important agreements: one with the German investment bank KfW and another agreement with EIB. It is ready to start its operations within the next 3 weeks.

The Hellenic Republic will participate no more than 50% in the capital share of the fund it will be financed by 3 main sources:

  • Greek financial resources (eg. National Strategic Reference Framework). The Greek state has already pledged 350 million Euros
  • Investments Banks (e.g KfW) or International Investment Organisations (e.g EIB). The French government has expressed the willingness to invest in the fund through its Bank for Public Investments and the “Caisse des Depots”. The China Development Bank has also showed interest in investing in the IfG.
  • Private investors (e.g. Onassis Foundation has promised to offer 30 million Euros).

IfG is addressing to foreign private investors, therefore it was decided to locate this institution to the Duchy of Luxembourg (as international practice proposes). Even though, it will be located in Luxembourg and will be ruled by the laws of this country, the IfG invest in companies active in Greece. Its aim is not to substitute the existing financial institutions (such as HFED) but to overcome funding gaps. In order to achieve this goal, the IfG will operate as an “umbrella fund” which will embrace three sub funds that will provide:

  • Debt financing for SMEs. 200 million will be given equally by the Hellenic Republic and the KfW. 50 million Euros will be given by EIB. It will be the first of the three funds what will start operating.
  • Equity capital to SMEs having significant growth potential.
  • Debt or equity financing for infrastructure projects which are not funded by the EIB’s programmes.

The interested parties may contact the banks for more information and apply for loans.

After 4 years of deep recession, the Greek economy is gaining again its competitive advantage. Financial institutions from abroad show their trust to the economy of the country and they appreciate the progress achieved regarding the creation of a friendly investment environment.

The initiatives described above aim to enhance entrepreneurship and liquidity for the SMEs, as well as to reduce the unacceptably high levels of unemployment.



Greece’s Budget Surplus Sparks More Controversy

Publiziert am 13.Mai.2014 von Abraam Kosmidis

With the May 2014 European and local elections looming, the conservative-led coalition government has already embarked on the process of making political capital out of the first primary budget surplus recorded in a generation. Predicting a figure of around €2.5 billion, more than three times the government’s original estimate of €800 million, Prime Minister Antonis Samaras has stated: ‘We must help those most affected by the crisis, in order to give them a second chance. Our goal is to exit the crisis without leaving anyone behind.’ To this end, he has vowed to return 70% of the surplus to the people hit hardest by the austerity measures. This will go some way to addressing the problems of low-earners, and includes a €500 bonus to pensioners and members of the police and security services, who along with the majority of public sector employees have borne the brunt of drastic cuts over the past four years. By the end of April, more than a quarter of a million people had already applied for these ‘social dividends’.

The opposition, led by the radical-left Syriza party, immediately went on the attack, arguing that the idea of a primary surplus was the invention of a government that had not only drastically cut spending but failed to include in their calculations factors such as debts to state suppliers, which it had neglected in favour of a transparent attempt to buy votes from the casualties of austerity. Syriza argued that any budget surplus had been achieved only with the creation of a surplus of the unemployed and poverty-stricken. Meanwhile, the German Chancellor Angela Merkel still insists that in return for Germany’s backing, Greek austerity measures should continue.

Syriza issued a statement declaring that Greece clearly still had a long way to go before coming out of austerity, and that a new Memorandum of Understanding between Greece and the Troika would only lead to further cuts and job losses in the public sector, despite the country preparing a bond issue to raise money on the markets for the first time since the international bailout began. The statement concluded: ‘The celebrations about the primary, pre-election surplus… cannot hide the future that Mr Samaras and Mrs Merkel have in store for the Greek people.’

Public sector protests

The Troika’s austerity measures had included a demand for 25,000 public sector workers to go through the government’s ‘mobility scheme’, whereby workers are suspended on 75% wages while waiting to be transferred to another job. The scheme has been called a ‘precursor to layoffs’ because unless another job was found within a year the worker would be dismissed. The agreement caused a rash of protests and demonstrations by workers and unions, the preferred method being the occupation of local government offices rather than strikes, which would have only resulted in more lost wages.

The European Commission stated that the suspensions were a necessary part of the government’s restructuring programme, aimed at bringing the high public sector wages bill in line with the euro-zone average. For decades, Greece’s main political parties have traditionally rewarded loyal supporters with public sector positions, causing it to grow rapidly and become ever more expensive to maintain, although only 22.6% of Greeks work in the public sector compared to the EU average of 25%. The problem is commonly seen as more a matter of productivity than size. According to the opinion polls, Greece, out of all the EU countries, is the least satisfied with its public administration service. In a country where the security of public sector jobs has traditionally been inviolable, this was a recipe for conflict, which brought more workers onto the streets in protest in March 2014 ahead of resumed talks between the government and the Troika.

The coalition government has not held back from hailing an end in sight for the economic crisis, although austerity will have to continue as part of the loan agreement. It is committed by the end of 2014 to cutting 11,000 civil servants, reducing supplementary pensions and eventually to reducing the main pension. The Memorandum of Understanding puts a freeze on wages until 2018.

Run-up to the election

Despite the huge numbers of applicants for the social dividend, Prime Minister Samaras had to wait until the EU Statistics agency Eurostat had certified the actual amount of the budget surplus before proceeding with any payouts. The figure of €1.5 billion or 0.8% of annual GDP was confirmed in a press conference on 23 April by European Commission spokesman Simon O’Connor, who said it was ‘well ahead of the 2013 target, which was for a balanced budget.’ Meanwhile, the bond issue of €3 billion, which took place on 10 April, attracted orders for nearly seven times this amount. Greece has the highest unemployment figure in Europe and is still blighted by deflation, but this sign of growing confidence among its EU partners in its prospects for recovery has sent one positive message to voters who may doubt that the recovery is real, and has helped to counteract the stigma attached to a country that is blamed for starting the financial crisis in Europe.

On 28 April, in a meeting chaired by Alternate Finance Minister Christos Staikouras, representatives of the two coalition parties agreed on how the €525 million social dividend would be distributed, the main aim being to provide healthcare coverage to a large sector of the population who are uninsured. A bill will be tabled in parliament this week, with measures agreed between the Greek government and its creditors. The bill will be hastened through the parliamentary process in the hope of beginning distribution of the dividend by 9 May. Means testing will be based mainly on 2012 incomes, although the government is anxious not to leave out people who became unemployed in 2013.

€430 million will go to vulnerable groups such as pensioners and people on low salaries. The starting income level to qualify for the one-off benefit will be €4,000 per annum, rising to between €10,000 and €11,000, depending on the number of children in the family. A base figure for the award will be €500, with an added €150 per child, so that a family with two children should receive €800. A further €20 million will go to people who became unemployed in 2013, and between 68,000 and 70,000 in the police force or the military will be awarded a total of €35 million. In addition, services for feeding and housing the homeless will receive €20 million.

The largest single group to receive the dividend will be the 350,000 to 4000,000 people without social security, who will receive a total of €20 million worth of healthcare coverage. This group includes the long-term unemployed, people who are retired and uninsured, and unemployed professionals who have not kept up with insurance payments or suffer chronic health problems. It remains to be seen how these measures will affect the election results.



Another opportunity to invest in Greece

Publiziert am 5.Mai.2014 von Abraam Kosmidis

Exploitation of the Greek state-owned assets: Another opportunity to invest in Greece.

Since 2010, Greece is making a continuous effort to recover from the severe effects of the economic crisis and to boost its economy. Because of the fact that the Hellenic Republic is the biggest owner of properties in the country, the policy makers decided to exploit these properties by selling or leasing land, real estate buildings, and shares of public corporations.
However, it was not easy to handle such huge welfare, because different public companies used to handle (monitor, valuate and exploit) the public properties. The fiscal strategy that Greece is following defines that the public sector must be reformed and some of the public companies must close. So now, there are 2 main institutions, which exploit the state-owned properties.

Hellenic Republic Asset Development Fund

One of the two companies is the “Hellenic Republic Asset Development Fund (HRADF)”. It was established on 1st July 2011 under the medium term fiscal programme. Its legal form is “Societe Anonyme” of which the Hellenic Republic is the only share holder. Its duration is expected to be 6 years, but it may exceed this timeline once the Ministry of Finance decides that would be necessary. Among the members of the Board there are two observers who have been appointed by the European Commission and the Eurozone respectively.

Mission of the Fund

The medium term fiscal programme of 2011 defined that the Greek government had the commitment to develop a Privatisation Programme for the state-owned assets. The Fund was established in order to support and promote this privatization programme in a transparent, rapid, and efficient manner.
Then the Greek government enacted an “Interministerial Committee for Restructing and Privatisation”. This committee (which consist of the ministers of: Finance, Development and Competiveness, Infrastructure, Environment, and Tourism) decides which one of the public properties are ready to be privatized and then it transferred to the HRADF. The fund has the jurisdiction to sell, to develop and to liquidate the 900 assets that have already been transferred to it from the state. These assets are divided into 3 categories:

  • Real estate and land development (e.g. 35 real estate buildings, Helliniko S.A.)
  • Infrastructure (e.g. Athens International Airports, Regional Airports)
  • Corporate (e.g. Hellenic Football Prognostic Organisation, Hellenic Petroleum, Hellenic Post).

Completed Projects

These are some of the completed projects of the fund:

  1. Helliniko SA. It was the company which was responsible to manage and exploit the land as well as the establishments situated in the area of the former Athens International Airport. On 31 March 2014, it was announced that 100% shares of the company was sold to a private investor. The purchase price was 915 million Euros.
  2. Hellenic Football Prognostics Organisation S.A. On 11 October 2013 33% of the company shares were sold to a private company. The purchase price was 652 million Euros.
  3. State Lottery Tickets. On 30 July 2013, the rights to operate circulate and manage the Lottery Tickets were transferred to a private company for 12 years. The purchase price was 770 million Euros.
  4. Real Estate Buildings. So far, 28 real estate properties have been sold or leased with total revenue 261,3 million Euros.

Since 2011, the Fund has received 2,6 billion Euros through the implementation of the privatization programme.

In –progress Projects

These are some of the on-going projects of the HRADF:

  1. Piraeus Port Authority S.A.(OLP) / Thessaloniki Port Authority S.A(OLTH). The HRADF wishes to sell the 67% of the shares of both these companies. There are already 6 different available proposals for the OLP.
  2. 12 more port authorities. The Fund wishes to sell shares of twelve more port authorities.
  3. 37 Regional airports. The HRADF wishes to privatise the airport authorities of 37 greek airports.
  4. Thessaloniki Water Supply and Sewerage Company S.A. The fund invited the investors to purchase the 51% of the shares of the company.

Future Projects

The HRADF is about to proceed to the following actions within the next 12 months

  • Privatisation of the Hellenic Post: the Hellenic Republic is holding 90% of the shares. It wishes to sell this percentage.
  • Selling of the 17% of the shares of the Public Power Corporation S.A.
  • Selling of shares of Athens Water Supply and Sewerage Company S.A
  • Acquisition of the ownership right on the “Aghia Triada” land. It is a seafront property of 132,483 m2 located 27 km from the center of Thessaloniki city.

Public Property Company

There is a second company which is entitled to exploit the state-owned properties. It was first established in 1998 (with a different name) and its main objective was to exploit the tourist properties of the country. In 2011, it merged two other state-owned companies with similar activities and it got its final name – Public Properties Company SA (PPC).
Nowadays, the PPC is handling more than 70.000 state –owned properties mostly of tourism interest (marinas, ski resorts, camping, spa resorts). The PPC exploits all these properties which have not been transferred to HRADF. It may lease some of them (the leaser in most cases has the obligation to invest money to renovate the place) but it may manage them as “branch offices”. Examples of these branch offices are the “Parnassos Ski resort” and the Vouliagmeni Seashore SA (a land situated in south Athens area and offers leisure and sea-related services).

Projects of PPC

  • Nafplia Palace Hotel: it is a group of 3 hotels situated in Nafplio – Peloponnese. The PPC has signed a leasing contract with an investor who is obligated to invest 6,3 million euros to renovate the whole group.
  • The PPC will run the renovation works of the lifts at Parnassos Ski Centre from July to November 2014. The cost of this project is estimated around the 29,5 million and it will be delivered through the National Reference Framework.

The first e-auction for properties

The most innovative project that PPC is running is the website: www.e-publicrealestate.gr. It is an electronic – Ebay style – platform where the smaller public properties are auctioned. It runs since July 2013 and it aims to make these properties accessible to as many investors as possible. The types of properties that can be auctioned are residential, commercial, sports and tourist facilities and / or urban and rural land. In the near future, 16 are scheduled but no specific dates are given yet.

The co-ordination of the HRADF and the PPC

So far, the two companies used to cooperate for a small amount of properties. The PPC used to promote “mature” projects which were ready to be privatized such as the case of Helliniko S.A. The updated memorandum defines that the two companies will cooperate more in the future. More specifically, PPC will make sure that the properties are not mortgaged and they can be transferred to the HRADF. It is expected that by the end of 2015, 3000 properties will be transferred to the HRADF.

Exploitation of the church properties

A third company entitled to exploit properties is the newly established (January 2014) company responsible for the exploitation of church properties. It is half-owned by the Holy Archbishopry of Athens and half-owned bt the Hellenic Republic. The properties which the company will manage can only be leased. They cannot be sold. The state will receive the 50% of the incomes and the other 50% will be used for the church charities. The first property to be leased is a land of 83.000 m2 located to Vouliagmeni, south of Athens.

The advantages of the privatization programme for the economy of the country

The Greek government is making every effort to boost the economy. This aim can be achieved by attracting new investors. The privatization programme was one step towards this objective. Privatisations will not only help to reduce the public debt, but they will also bring some indirect benefits. The privatised properties will be developed by the investors and thus new jobs will be created. The underutilized assets will be used in a more effective way (as it will happen in the case of Helliniko or even Aghia Triada). The local communities and economies will be boosted. In the end, privatizations is a tool that enhances the good business climate that the new investors want to see in Greece.



Tourism: the keystone for the development of the Greek economy

Publiziert am 4.April.2014 von Abraam Kosmidis

Tourism Keystone Development Greek Economy

Greece is an ideal tourist destination. It is a country with unique and diverse landscape, ancient history and heritage. Tourism has always been considered as the main pillar of the Greek economy. The economic crisis in Greece unveiled that in fact, tourism was not considered to be part of a serious national strategy. The present economic situation makes clear that tourism – must be used as a vehicle for the re-ignition of the Greek economy as long as several structural reforms are achieved and appropriate legal framework is implemented.
The European Union thinks of tourism as a sector of special interest because of the fact that tourism contributes for 10% of the EU GDP and employs 20 million people. According to World Tourism Organization (UNWTO), during the year 2013 1,08 billion of citizens have travelled around the world, half of ten have visited Europe. Therefore, it is obvious that tourism can play an even greater role in the years ahead, towards the economic growth of the EU. This truth is also valid in Greece, where the tourism sector contributes 16,4% to the national GDP. On these grounds, the Greek EU Presidency promotes all the policies decided by member-states, so that Europe remains the top destination on the tourism map.
Furthermore, taking into consideration that among the European countries, Greece has the second place with 16.500 km of coastlines (first being Norway), it is not a surprise that the Greek government aims to enhance its Coastal and Maritime Tourism. It will be one of the major fields of Action of the Greek Presidency.

Pleasure boats: new legal framework to boost coastal tourism in Greece

The Greek Minister of Shipping, Maritime Affairs and the Aegean has issued a law bill regarding the pleasure boats (or recreation ships, as also known) sector. It is the first time that a Greek government is making an attempt to apply a consistent legal framework upon the activities of the pleasure boats area. The government aims that this law will appeal more tourists from abroad who travel by pleasure boats. The existing vague situation of the yachting sector was for long prohibitive for tourists, as they preferred other neighboring countries to moor their boats, but not anymore.

Legislation on coastal tourism and the benefits it brings

This law bill provides the definitions of all types of pleasure boats:

  • Private recreation ships – motor yachts and sailing boats, with length over seven meters, used solely for leisure voyages.
  • Professional pleasure boats – motor yachts and sailing boats, having the capability of hosting 49 people. A charter contract between the owner and the charterer is required.
  • Professional tourist boats used to perform a daily sea trip.

Benefits by law implementation are:

  1. Reinforcement of the Greek economy. The Hellenic Chamber of Shipping conducted a study which shows that every year almost 17.000 pleasure boats are moored at the marinas or the harbors existing along the Greek coastline. The people working on the pleasure boats sector as a whole are estimated to be 20.000.The government aims that this legal framework would be an incentive for more people preferring this form of tourism to moor their boats in Greece. If the estimations are correct, then in few years time there would be a creation of 60.000 new job opportunities.
  2. Increase of the income of local businesses. It is estimated that every tourist who is spending 100 € on the services provided by a marina is spending another 450 € on the local economy.
  3. Increase competiveness with other countries providing similar facilities. The bureaucracy is eliminated because the electronic registry for pleasure boats is established. Additionally the charter contract is submitted to the Greek authorities electronically. So far, it was necessary for the user of recreation ship to pay a small amount of harbor duties to get a departure permit. From now on, this harbor duty is repealed.
  4. Pack in tourists from abroad. Foreign tourists will prefer Greece and its facilities for the following reasons:
    • it will be permitted to charter a bareboat pleasure ship, as long as its length is up to 24 m (something which is already valid in other European countries).
    • Foreign flagged (not coming from the EU) recreational ships can be chartered (under specific conditions).
    • As already mentioned above, the paperwork is eliminated.
  5. Pack in new investors interested to run business relating to the yachting sector. The law will introduce modern practices aiming to create a business – friendly environment.

Tourist Development: the key sector which will reinforce the economic climate in Greece

The Greek Ministry of Tourism has developed a law bill whose aim is to promote different aspects of this important economic sector.
This law bill provides definitions of complex tourist infrastructures such as marinas, ski centers, and accommodation. The law bill introduces some reforms that will make the operation processes of all the above facilities more flexible and efficient.
Furthermore, the law bill explains the meaning of the term “agro-tourism” and again it provides the framework under which all the businesses providing agro-tourism facilities will operate.
If Greece wants to ensure sustainability of its tourist product, it is crucial to invest on the “human capital” – the people who be employed with tourist relevant jobs. Therefore, it is important to provide such an educational structure which meets the modern needs of tourist global environment. The law bill introduces changes that will affect the operating methods of tourist schools.
Finally, the bill regulates matters that concern the efficient use of land available for tourist development.

The benefits of this law are:

  •  It g emphasizes on the human capital, environmental protection and improvement of tourism infrastructure. These three elements ensure tourism sustainability. Hence, Greece will be more and more considered as the ultimate tourist destination.
  •   he agro-tourism will provide support to the local economies of several regions of the country and it will highlight the competitive advantages of the Greek rural products.

Greek authorities realize that only rational reforms on tourism sector can bring the economic growth to the country. At the same, the EU takes tourism under great consideration, therefore serious coordinated actions on national and EU level must be taken, for tourism to be the tool for development.



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.



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

  • Reduction of the number of days needed to export by 50% by 2015
  • Reduction of the export cost by 20% by 2015

The key presupposition to implement the National Exports Strategy is the formation of a governmental supervisory body (political level), called the “Co-ordination Committee of the National Strategy for Trading Facilitation (CCNSTF). This committee is formed with the participation of the following ministries: Ministry of Finance, Ministry of Foreign Affairs, Ministry of Development and Competiveness, and Ministry of Rural Development. The European Commission and the United Nations Economic Commission for Europe (UNECE) will be invited to hold an advisory role. The purpose of this committee is to make sure that the principles of the NSTF are followed, and to provide the necessary support and guidance to a body called the Operational Steering Committee for Trade Facilitation -OSC (operational level).

The OSC will operate under the supervision of CCNSTF and it will be set up with the participation of the above mentioned ministries as well as participants coming from the following business unions: Hellenic Federation of Enterprises, Panhellenic Exporters Association, Greek International Business Association, Exporters Association of Crete, Hellenic Company of Logistics and Greek Federation of Customs Brokers Associations.

The Committee will have to monitor and underline the progress done during the implementation of the National Strategy for Trade Facilitation. It must also coordinate and supervise all the involved parties (ministries, business unions, exporters). It can come up with suggestions to improve the efficiency of the NSTF.

In addition to the Operational Steering Committee, the Greek government decided to set up a new entity called “Enterprise Greece”. This new company will function supplementary with the OSC, in order to enhance the effort for extroverted entrepreneurship in Greece.

The responsibilities of the “Enterprise Greece” are to:

  • 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.

The law bill was voted by the Greek parliament on 26 February 2014. The new entity is expected to start functioning on 1 April 2014, but its full operation will begin on 1 October 2014.

There is a strong political will to reverse the prevailing conditions that ruled the investments so far. Greece needs radical structural reforms, if it wishes to return on the road of development. There are mainly two points that the government may focus on in order to bring the country in developmental orbit: appeal new investments and improve performances of exports.

The new investment law is the first of a series of actions towards this direction. The creation of the entity “Enterprise Greece” is the second one – together with the implementation of National Strategy for Trade Facilitation. The government hopes that the NSTF and the “Enterprise Greece” will be a major tool for the boost of the economy, as they both set a stable and friendly environment for the investors – exporters. They both promote the extroverted “climate” that is cultivated in Greece.

 

 

 

 



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:

  •  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.

 

The benefits of the investment law:

The Greek government aims to achieve some great advantages when this law is in force:

ü  The numbers of steps required to obtain an operation license will be reduced up to 60%. So far, the entrepreneur was obliged to collect documentation such as health and fire safety regulations as well as studies on environmental impacts. Many and different public authorities were involved to provide all these papers. They now become obsolete. The procedure only requires the entrepreneur to fill in an application.

ü  This automatically leads to reduction of bureaucratic constraint that the public authorities had to deal with. Since the interference between the entrepreneur and the public authorities is minimized, then the corruption phenomena are eliminated.

ü  The entrepreneur becomes more responsible to provide true data regarding the operation of his/her business. He /she is aware of the fact that any fake data may cause the business to shut down. He/she also feels that all the actions that the entrepreneur is responsible for will benefit his/her own business.

ü  Until now, there were not any clear and objective standards which would thoroughly describe the business licensing process. Every case for licensing a business was examined as separate case and not under the ‘umbrella’ of specific standards. As a result, there was a chance of misinterpretation of the law, unjustified time delays and eventually corruption seemed to be the only solution.

ü  The Greek business licensing procedure will conform to the EU and international practices, creating a business friendly environment in Greece.

More importantly, the long –term benefit of the application of this investment law, will be the enhancement of the business environment in the country. The government hopes that this law will create a safe business working framework that will appeal in the near future investors from abroad to invest in Greece.

The business world of Greece and from abroad is expecting this new law to be quickly enacted. It took several months of preparation and the cooperation of several ministries (such as the Ministry of Internal Affairs, the Ministry of Public Order, Ministry of Tourism, Ministry of Environment, etc), but the results are very hopeful. The entrepreneurship in Greece changes from its foundation. A new era for investments in Greece  begins.



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):

ArticleTax liable legal personsSimple Entry Bookkeeping Double Entry bookkeeping
45αCapital Companies26%
45βPartnerships26% until 50.000 €

33%>50.000 €

26%
45γNon-profit public or private law bodies and institutions26%26%
45δCo-operative societies and their associations26% until 50.000 €

33%>50.000 €

26%
45εCivil societies, civil law partnerships with gainful or non-profit activities, participating enterprises or dormant companies in case they exercise business or profession26% until 50.000 €

33%>50.000 €

26%
45στJoint enterprises26% until 50.000 €

33%>50.000 €

26%
45ζOther legal entities26% until 50.000 €

33%>50.000 €

26%
58 par.2Agricultural associations and producer groups13%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 RateTax 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 person20%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 benefit15%YES
Annuities paid in one-off payment until 40.000 Euro10%YES
Annuities paid in one-off payment over 40.000 Euro20%YES
The increase in value from real estate transfer15%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
KindWithholding tax rate
Liquid fuel and tobacco manufactures1%
Other goods4%
Services8%

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.



Growing Opposition to Continued Greek Austerity Measures

Publiziert am 15.Februar.2014 von Abraam Kosmidis

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.