Α. New social security bodies for all insured individuals. Integration of the existing social security bodies into E.F.K.A. and E.T.E.A.E.P.

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1 Legal Flash May 2016 Law 4387/2016 Unified Scial Security System - Refrm f insurance and pensin system Incme taxatin and gaming taxatin regulatins and ther prvisins has been published in the Gvernment Gazette (Bulletin 85/ ), which intrduces majr refrms t the existing scial security system. Α. New scial security bdies fr all insured individuals Integratin f the existing scial security bdies int E.F.K.A. and E.T.E.A.E.P. Unified Bdies fr Main and Auxiliary Scial Security The Unified Scial Security Bdy ( E.F.K.A. ) is intrduced as the new bdy fr main scial security, which will initiate its peratin n Int E.F.K.A. shall be autmatically integrated, frm the initiatin f its peratin, all the existing bdies fr main scial security (e.g. Ι.Κ.Α.-Ε.Τ.Α.Μ., Ε.Τ.Α.P.-Μ.Μ.Ε., Ε.Τ.Α.Α., Ο.Α.Ε.Ε.), whereas the scial security bdies Ν.Α.Τ. and Ο.G.Α., will maintain a separate legal persnality slely fr the perfrmance f their nninsurance cmpetencies. Frm the entry int frce f the abve law, E.T.E.A. ( Unified Auxiliary Insurance Fund ) shall be renamed as Unified Fund fr Auxiliary Insurance and Lump Sum Benefits ( E.T.E.A.E.P. ) and incrprates the existing welfare sectrs f the scial security bdies which will be integrated int E.F.K.A. (e.g. the welfare sectr f E.T.A.A., E.T.A.P.-M.M.E. etc.). Subject t mandatry insurance with the abve bdies are the already insured individuals f the integrated scial security bdies, as well as thse wh will undertake fr the first time (frm the start f peratin f the new bdies and hencefrth) insurable wrk r acquire an insurable prfessinal capacity n the basis f the general r special r statutry prvisins regulating each frmer scial security bdy. The legislative prvisins that cncern each integrated bdy will cntinue t apply t the extent that are nt explicitly ablished by the new law r their cntent des nt cntradict the new prvisins. Β. Issues regarding insured emplyees Increase f the mnthly cap fr the impsitin f scial security cntributins Frm the publicatin f the abve law, the maximum limit f emplyment earnings ( cap ) fr the calculatin f the mnthly scial security cntributins, applying t emplyees and emplyers, cnsists in the tenfld f the amunt crrespnding t the basic minimum salary f an unmarried emplyee ver 25 years f age (currently Eurs). Therefre, the cap is increased frm 5, Eurs t 5, Eurs. The abve cap applies als t multiple emplyment with regard nly t the emplyees cntributins.

2 Increase f cntributins fr auxiliary scial security Frm , cntributins fr auxiliary scial security fr all emplyees are increased by 0.5% bth fr the emplyee and the emplyer. Therefre, said cntributins will be calculated at the rate f 3.5% n the emplyment earnings (fr the emplyer and the emplyee) frm 3% that currently applies, i.e. the ttal cntributin rates (fr all insurance sectrs) will be determined at 16% fr the emplyee and 25.06% fr the emplyer (frm 14.56% and 24.56% respectively, which currently apply), except fr specific categries f emplyees wh are subject t special prvisins (e.g. heavy and unhealthy ccupatins, etc.). The abve rates f auxiliary scial security will be decreased fr the perid t 3.25%, while afterwards they will be restred t the currently existing levels. The fllwing categries f insured individuals will be required t pay scial security cntributins as emplyees (with the crrespnding participatin f the emplyer): Categries treated as emplyees Lawyers under a salaried mandate arrangement; The individuals appinted as members f the Bard f Directrs f a S.A., wh receive remuneratin and whse cntributins will be calculated n the lump sum payments; The insured individuals f Ε.Τ.Α.Α. (e.g. engineers, dctrs), wh prvide services under an emplyment cntract; The directr, general manager, authrized representatives, managing r cllabrating bard members, administratrs f cmpanies r cperatives, if said individuals are engaged under an emplyment cntract fr the remuneratin received; The bard members f agricultural cperatives, if said individuals receive remuneratin; The insured individuals wh, until the entry int frce f the new law, were subjected t insurance with the Insurance Sectr fr Shipping Agents and Emplyees f O.A.E.E., as salaried insured individuals. The rates f insurance cntributins fr the abve categries f insured individuals, wh are nt ccupied under an emplyment cntract (and wh are subject t the abvementined rates) are expected t amunt at 12.72% fr the emplyee and 21.38% fr the emplyer, hlding reserve n the nn-applicatin f specific jintly cllected by I.K.A. (until tday) cntributins (e.g. cntributins in favur f Ο.Α.Ε.D. etc.) and pending clarificatins fr the applicatin f a ptential withhlding (and way f withhlding) f a 4% rate in favur f the sectr fr lump sum benefits. C. Cntributins f self-emplyed and freelancers Calculatin f cntributins n the basis f incme Frm the way f calculating the cntributins fr the self-emplyed will be fundamentally altered and, thereinafter, the applicable rates f cntributins will be calculated n the mnthly incme f said individuals, as such is specified n the basis f their net taxable incme gained by their activities during the previus tax year. The cntributin rates fr all insurance sectrs (e.g. pensin, health care, lump sum benefits, etc.) that will be applied n the afresaid incme will be the fllwing: (a)

3 20% fr the pensin sectr, (b) 6.95% fr the health care sectr, (c) 7% fr auxiliary pensin and (d) 4% fr lump sum benefits. Therefre, the insurance burden f the self-emplyed (frmerly insured at Ο.Α.Ε.Ε. and Ε.Τ.Α.Α., including partners r sharehlders f any type f cmmercial cmpanies, except fr S.A. and Private Cmpany (I.K.E.), BD members f a S.A. with a sharehlding participatin f at least 3%, administratrs f an I.K.E., sle partner f an I.K.E.) will range frm 26.95% (fr pensin and health care by Ε.F.Κ.Α.) up t 37.95% (fr thse additinally mandatrily subjected t the sectrs fr auxiliary pensin and lump sum benefits f E.T.E.A.E.P., e.g. private practices f dctrs, engineers, lawyers, etc.). Maximum and minimum limit f mnthly incme The minimum mnthly basis n which the each time applicable cntributin rates are calculated, is determined n the basis f the amunt crrespnding t the minimum basic mnthly salary f an unmarried emplyee ver 25 years f age. Specifically, a mnthly incme f at least Eurs is presumed. Als in the case f self-emplyed individuals, the cap f 5, Eurs will be applicable as mnthly maximum incme upn which cntributins will be calculated. Especially fr the partners f partnerships, as incme by said activity fr the purpses f scial security cntributins is cnsidered the result f multiplying the ttal prfits f the cmpany by the participatin rate f each partner. In case f lsses r zer prfits, the cntributins will be paid n the afresaid minimum mnthly incme f Eurs. Discunts t specifc categries f insured individuals Cnditins fr treatment as an emplyee Fr the perid frm t , especially fr the insured individuals f E.T.A.A. (e.g. dctrs, lawyers, engineers, etc.), certain reductins t the cntributins that will be required t be paid will be applied n the basis f incme criteria. Said reductins will range frm 50% (e.g. fr annual incme between 7, t 13,000 Eurs) t 5% (fr annual incme between 57, t 58,000 Eurs). Hwever, n cntributins will be paid fr a mnthly incme f less than Eurs. In relatin t any self-emplyed individuals wh are paid n the basis f invices fr the prvisin f services and whse incme is generated frm their engagement by ne r tw persns (individuals and legal entities), the prvisins fr emplyees as t the amunt f cntributins and the party liable fr the payment will apply by analgy. D. Parallel insurance Ablitin f the ptin t subjectin t nly ne scial security bdy Τhe new scial security law ablishes the ptin f subjectin t nly ne scial security bdy fr the newly insured individuals (i.e. insurance after ), in case f perfrmance f activities that established the bligatin f subjectin t insurance with tw scial security bdies (e.g. emplyee registered with I.K.A.- E.T.A.M. and in parallel registered with O.A.E.E as self-emplyed), as was in frce under the previus regime. Frm , the insured individuals wh are subject t the bligatin f being insured with tw r mre scial security bdies integrated int E.F.K.A., shall pay the applicable scial security cntributins fr each undertaken prfessinal activity. In such case, and in relatin t any additinal prfessinal activities - ther than the first ne - the bligatin fr the payment f a minimum mnthly scial security cntributin (n the minimum mnthly incme f Eurs) will nt apply. In particular, any persns wrking under an emplyment cntract and are simultaneusly self-emplyed, shall pay in favur f E.F.K.A.: (a) mnthly scial

4 security cntributins as emplyees and (b) scial security cntributins as selfemplyed fr the incme, if any, generated frm the perfrmance f freelance activities. It has t be clarified, as it is nt clear frm the prvisins f the new law, whether the mnthly incme cap f 5, Eurs (up t which scial security cntributins are calculated) shall apply separately fr the incme frm any activity r jintly fr all types f incme (by adding all types f incme arising frm the varius activities subject t an bligatin fr insurance). Ε. Issues regarding pensiners New way f calculatin f pensins The way f calculatin f pensins is changed fundamentally, as the hencefrth payable pensin (fr thse persns acquiring such right under the each time applicable cnditins) shall cnsist f: the Natinal Pensin, which amunts fr the first implementatin f the law t 384 Eurs per mnth. Said amunt is fully paid, prvided that at least 20 years f insurance have been cmpleted and the beneficiaries have been permanent and lawful residents f Greece fr at least 15 years. Otherwise, relevant reductins f the amunt are prvided fr. and the cntributry pensin, the amunt f which is determined n the basis f the pensinable earnings (i.e. hencefrth, the average f the mnthly earnings during the whle insurance perid), the years f insurance and the prvided annual replacement rates. Emplyment f pensiners Amendments are als prvided with regard t the issues f emplyment f pensiners frm the publicatin date f the law. In particular, the retired individuals wh undertake wrk r an activity r acquire a capacity, which is mandatrily subject t insurance with E.F.K.A., will receive grss pensin (main and auxiliary) reduced by 60%, fr the time perid during which they retain their ccupatin. Fr such time perid, they will nrmally pay the applicable scial security cntributins. It is clarified that, under the regime applicable s far, the reductin rate f the pensin was cnnected with the amunt f pensin received by the retired individual, while there was als a prvisin fr the full suspensin f the pensin in case f retired individuals under 55 years f age. The abvementined (previus) regime shall cntinue t apply fr the retired individuals wh undertk wrk r were self-emplyed befre the publicatin f the new law. F. Other issues Cmmn registry fr incme tax and scial security cntributins The new law prvides the establishment f a cmmn registry fr the persns liable fr the payment f scial security cntributins and incme tax, in which the prcedures fr registratin, filing, payment and payment certificatin f incme tax and scial security cntributins are incrprated and aligned. Fr the implementatin f the cmmn registry, a relevant Ministerial Decisin will be issued. Limitatin perid fr Ε.F.Κ.Α. claims The new prvisins regulate n a unified basis the issue f the limitatin perid f the claims f the varius scial security bdies fr utstanding scial security cntributins. Specifically, frm the date f publicatin f the law, the claims f the scial security bdies, which will be incrprated int E.F.K.A, fr utstanding cntributins are subject t a 20-year limitatin perid, which shall cmmence frm the first day f the fllwing year during which the insured emplyment r

5 service was prvided. The prvisin des nt apply t claims that have been already barred by the statute f limitatins (under the prvisins applicable s far). It is nted that it is anticipated fr respective ministerial decisins and insurance regulatins t be issued, by means f which certain issues f the prcedures fr the implementatin f the new law shall be specified. Furthermre, it is nted that the applicatin f cntributin rates fr different sectrs f insurance (e.g. pensin, health cverage, etc.) are subject t different dates f entry in frce. This infrmatin is intended nly as a general update fr interested persns and shuld nt be used as a basis fr decisin making. Fr further details please cntact PwC: 268, Kifissias Avenue Halandri tel PricewaterhuseCpers Business Slutins AE. All rights reserved. PwC refers t the Greece member firm, and may smetimes refer t the PwC netwrk. Each member firm is a separate legal entity. Please see fr further details.