Tax Alert. New Income Tax Code (Law 4172/2013)

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1 July 2013 Tax Alert New Income Tax Code (Law 4172/2013) Summary of key points: The new Income Tax Code introduces the notion of place of effective management and adopts the definition of Permanent Establishment according to the OECD guidelines. There are four categories of income i) employment and pension income, ii) business income, iii) capital income and iv) capital gains. The tax year is identical with the calendar year and there is no provision for a tax year including more than twelve months. Thin capitalization rules are radically changed. A tax exemption upon receipt or payment of intra-group dividends may apply subject to conditions. Directive 2009/113/EC on the common system of taxation applicable to mergers, spin-offs, transfer of assets and exchanges of shares of companies of different Member States is transposed into the Greek Income Tax Code. The term affiliated entity is introduced with respect to intercompany transactions. The provisions relating to the disallowance of business expenses paid to suppliers tax resident in non-cooperative or countries with a preferential tax regime remain in force. Controlled Foreign Companies (CFC) rules are adopted. Dividends, interest and royalties are subject to a tax withholding of 10%, 15% and 20% respectively exhausting the tax liability for individuals, while income from real estate is taxed according to a tax progressive scale. The 5% tax on the real transfer value of shares of non-listed shares of domestic or foreign corporations acquired until 31 December 2013 remains in force. On 23 July 2013, Law 4172/2013 was published in the Government Gazette replacing the Greek Income Tax Code. The new provisions are in principle applicable for income generated and expenses incurred for tax years starting as of 1st January The new provisions aim to significantly simplify and rationalize the current tax system. They relate to individual and corporate taxation, while more specific provisions regarding their implementation will be included in the Tax Procedures Code, a separate piece of legislation to follow. The new Income Tax Code takes into consideration the definitions and income characterization deriving from international tax law rules and includes provisions relating to cross border transformations, as well as Controlled Foreign Companies (CFC) rules. The main provisions are summarized as follows: Individuals subject to income tax foreign tax credit Individuals having their tax residency in Greece are subject to Greek income tax on their worldwide income, whilst a foreign tax credit is provided on foreign income declared in accordance with the OECD guidelines for the avoidance of double taxation. Foreign individuals employed by local law 89/1967 offices are subject to Greek income tax only for their Greek source income. Individuals having their tax residency outside Greece are subject to Greek income tax on their Greek source income earned during a given fiscal year. The new law provides a detailed but indicative list of income sources deriving in Greece. Foreign income is defined as any kind of income that is not classified under tax law as Greek source income. Tax residency The law introduces and clarifies the definition of tax residency as follows: Individuals: an individual is classified as a tax resident of Greece provided that: a) he maintains in Greece his primary residence or habitual abode or the centre of his vital interests or he is a consular or diplomatic employee or public servant working under a similar regime or a public servant of Greek nationality working abroad or b) is physically present in Greece for a period exceeding 183 days during a given 12-month period consecutively or sporadically for the fiscal year, during which the above 12-month period is completed.

2 The 20% taxation of capital gains from transfer of shares listed on the Athens Stock Exchange and acquired from onwards is abolished. There is a provision for the taxation of non-distributed or capitalized reserves of legal entities, while as of 1st January 2015 it is not allowed to maintain special tax-free reserve accounts. Accumulated capital reflecting insurance premiums of the employee paid until are exempt from the final withholding income tax imposed on insurance indemnities, which are withheld by an insurance company in the course of group insurance policies (private pension schemes). For the fiscal year ending on the transfer pricing documentation file must be prepared and the summary information table should be submitted until August 16, Luxury tax applies for income declared on tax returns filed for fiscal year 2013 onwards. As of , the option to pay taxes in installments is abolished in case of finalization of the tax assessment due to non filing or late filing of an appeal, or settlement agreement with the tax authorities or administrative court decision. As of 23 July 2013, penalties under articles 4, 5 and 6 of L. 2523/1997 in case of an administrative or court settlement are reduced to 1/3 or1/2 depending on the case, provided that 20% or 30% thereof is paid immediately while the residual amount is assessed in a lump sum until the last business day for the public sector of the same or the following month from when the administrative or court settlement takes place. For the period from to , VAT on restaurant services is reduced to 13%. The provisions regarding the taxation of shipping businesses as well as related individuals for their income deriving there from remain in force. Legal persons and legal entities - a legal person or entity is considered to be a Greek tax resident in the following cases: a) it is incorporated or established under Greek law, b) it has its registered office in Greece or c) the place of its effective management is in Greece at any time during the tax year. The effective place of management concept should be reviewed on an ad hoc basis as per the factual background of each case; to this end, indicative criteria are listed (such as the place where the annual General Meeting of shareholders / partners or the Board of Directors takes place) without however excluding additional factors that although they might not substantiate on their own the existence of tax residence in Greece, they are taken into account when determining the place of effective management (such as, the residence of the majority of shareholders or partners). It is clarified that these provisions do not apply to companies subject to tax under Law 27/1975 and Legislative Decree 2687/1953. Permanent Establishment (PE) The concept of PE is defined in accordance with the OECD guidelines. A non-exhaustive list of examples, which may under certain conditions give rise to PE, is also provided for. In any case, the provisions of the various Double Taxation Treaties ("DTTs") override the provisions of domestic law, which is applicable in absence of any DTTs. Taxable income categories Taxable income is determined as income deriving after allowable deductions from the gross income. The following categories of taxable income are defined: Employment and pension income Business income Capital income Capital gains A different tax rate applies for each income category. Tax year The fiscal year coincides with the calendar year. Legal persons or entities keeping doubleentry books may set their tax year to end on June 30th or at any other date following the tax year of their shareholder, foreign legal person or entity, whose participation in the domestic legal person entity exceeds 50%. The option of a tax year exceeding 12 months not provided for. 2

3 Income s acquisition time Income s acquisition time is considered to be the time when the right to collect the income is acquired. Exceptionally, for uncollected accrued income from employment and pensions that has been collected by the beneficiary at a later tax year, the time of acquisition of such income shall be the time of collection, to the extent that it is indicated separately in the annual salary income statement granted to the beneficiary. Corporate Income Tax Taxable and exempt legal persons & object of tax Taxable persons are limited liability companies and partnerships established in Greece or abroad, domestic or foreign non-profit legal persons of public or private law, cooperatives and their unions, civil law societies, civil profit or non-profit companies, joint stock or undisclosed companies to the extent they exercise a trade or business, consortia as well as legal entities. There is definition of tax exempt legal persons. All income of taxable legal persons is considered as business income. The corporate tax rate for legal persons and legal entities with double entry accounting books is 26%. Thin capitalization rules Thin capitalization rules are radically amended: The new rules apply to all loans irrespective of their origin (intercompany or not, banking etc). The amount of redundant interest (interest on debt minus interest income) is now taken into account for the tax deductibility of interest rather than the equity and loans of the borrower as per the previous regime. The amount of net interest paid by a company is tax deductible up to 25% of the earnings before interest, taxes, depreciation and amortization (EBITDA) after tax adjustments; for companies that are not part of a group, the net interest is tax deductible if it does not exceed per year. Subject to conditions, interest expenses can be carried forward in subsequent years. Credit institutions are excluded from these provisions. The new provisions apply for interest expenses realized in tax years beginning as of January 1st, 2014 onwards. 3

4 Inbound dividends received by a Greek tax resident legal person In case specific requirements are not met (e.g. the participation percentage is less than 10%), dividends are taxed pursuant to the general provisions, while the tax that has been withheld is offset against the corporate income tax liability. The participation exemption on the basis of the EU Parent Sub Directive applies to inbound dividends received by a legal person from any subsidiary irrespective of whether it is established in Greece or in an EU member state or a third country except in a non cooperative country. If the legal person receiving the dividends does not participate by at least 10% for 24 months, it could temporarily benefit from the exemption, provided that the latter submits to the tax administration a guarantee equal to the amount that should have been paid if the exemption was not available. If the 24 month holding period is not completed, the guarantee may be forfeited, in any other case though, the exemption is definitive and the guarantee expires. If the distributed profits to the parent company result from the participation of the subsidiary in another legal person, the expenses relating to said participation are not tax deductible. The above provisions apply for dividends received as of January 1st, 2014 onwards. Dividends distributed by a Greek tax resident legal person Dividends (and other relevant payments) distributed to a legal person included in the EU Parent Sub Directive s Annex, are not subject to withholding provided that the relevant requirements are met. If the legal person distributes dividends to its parent company which has not completed the 24 month holding period of at least 10% participation but meets the rest of the requirements, the distribution can be exempt of the withholding provided that the legal person deposits a bank guarantee of an amount that is set based on a specific calculation. The same applies for payments of interest or royalties between affiliated companies pursuant to EU Directive 2003/49/EC. Said provisions apply for payments realized as of January 1st, 2014 onwards. Profits credited or remitted abroad from a branch in Greece Pursuant to the new provisions, it would appear that the branch remittance tax is abolished. Points regarding mergers and spin-offs, transfers of assets for shares and exchanges of shares EU Directive 2009/133/EC on the common system of taxation applicable to mergers, spin-offs, transfers of assets and exchanges of shares concerning companies of different Member States is transposed into the Greek Income Tax Code. 4

5 The aforementioned provisions apply to restructurings among Greek tax resident companies (no cross - border element), while it is not clear whether prior domestic restructuring laws still apply (i.e. Law 2166/1993, Law 1297/1972 and article 16 of Law 2515/1997). Additional provisions are introduced compared to the current regime; in particular: The foreign shareholder of the transferring entity, who exchanges securities of the latter for securities in the receiving entity, appears to be exempt from tax on the capital gains due to the merger or spin-off, as long as he holds both securities through a permanent establishment in Greece. The same applies in case of a share exchange. The receiving entity is entitled to carry forward the losses of previous years of the transferring entity, subject to the same conditions that would have applied to the latter if the merger or spin-off had not taken place. In addition, in case of transfer of the registered office of a European Company (SE) or European Cooperative Society (SCE), the permanent establishment that is created in Greece is entitled to carry forward the losses of previous years of the company that transferred its office. The above provisions apply to restructurings realized as of January 1st, 2014 onwards. Deduction of business expenses Deduction of expenses is in principle allowed under the following conditions, with the exception of certain expenses, which as per legal provision, are explicitly not considered as deductible for tax purposes: They are made to the interest of the business or in the ordinary course of its business transactions. They correspond to an actual transaction, whose value is not considered less or more than the actual one, based on indirect audit methods (crosschecks). They are recorded in the accounting books of the period in which they incur and are duly supported by proper documentation. These provisions apply for expenses related to tax years ending after Depreciations Depreciations performed from the owner of fixed assets and from the lessee, in case of a financial leasing agreement are considered as tax deductible items, whereas the concept of financial leasing is significantly widened for the purposes of this provision. Depreciation is performed by applying a specific depreciation rate on the acquisition or construction cost per asset class of a business. The depreciation of each fixed asset begins the month following the one in which the asset is used or being put into service by the taxpayer. The relevant provision is effective for tax years ending from onwards. 5

6 Valuation of inventory and semi-finished products A time limitation of minimum four years, as of the tax year of first use, is introduced in case of change of the method chosen by a business for valuation of its inventory and semi-finished products. The relevant provision is effective for fiscal years ending from onwards. Bad debts Bad debt provisions and write-offs are deductible for income tax purposes at a rate defined on a case-by-case basis, according to the period of time that the relevant claim remains uncollectible and the amount thereof. Restrictions are introduced as regards formation of bad debt provisions for business shareholder or partner holding at least a 10% participation and for business subsidiaries with a minimum 10% participation; in addition, special rules for the deduction of bad debt provisions are introduced for banks, leasing and factoring companies. The aforementioned rules apply to provisions formed in tax years beginning on onwards. The provisions of Law 2238/1994 apply for provisions of bad debts that have been formed in the tax years Tax losses carry forward Tax losses may be carried forward to be offset against business profits for five consecutive tax years from the tax year, in which they incurred. A new rule is introduced, under which the right to carry forward tax losses ceases to apply, in case of changes in ownership or voting rights exceeding 33% of their value or number, unless it may be proved that the transfer has not taken place for the purpose of tax avoidance or tax evasion. Offsetting of losses incurred abroad against business profits derived domestically is not allowed, with the exception of income arising in other European Union or European Economic Area Member States, which is not exempted based on the applicable Double Tax Treaty concluded and implemented in Greece. The rules governing the deduction of losses (debit balance) resulting from the exchange of Greek government bonds under the PSI remain unchanged. Indirect method of profits determination Business income is determined based on indirect audit methods in case of certain infringements making audit verifications impossible or when the accounting books as well as other supporting documentation are not maintained or disclosed for inspection after two requests from the tax authorities. 6

7 Intercompany transactions The new law defines the term associated person, which extends to legal persons, individuals and any other body of persons. The term encompasses two persons whereby: i) the one of them holds directly or indirectly shares, parts or quotas in the other of at least 33%, estimated on the basis of total value or number, or equivalent profit participation rights or voting rights, ii) another person participates directly or indirectly in them in any of the aforementioned ways, or iii) there is between them, direct or indirect management dependence or control or the possibility for the one person to exercise decisive influence to the other or of a third person to do so in both of them. The old provisions, regarding the documentation of intercompany transactions have been replaced in the new Code by a mere reference to the arm s length rule governing transactions between associated persons. The procedure for the documentation of such transactions will be included in the Tax Procedures Code. Furthermore, the concept of business restructurings is introduced. Specifically, a business restructuring must be effected in accordance with the arm s length principle. It is stated that in the case of an intercompany business restructuring, either local or cross-border, in which there is transferred goodwill or intangible assets or assigned their use, then such transfer should be performed at a price which shall be in compliance with the arm s length principle. Moreover, the reallocation of risks and functions in the context of this restructuring should be performed in accordance with the arm s length principle by taking into account other comparable cases. Preparation of the transfer pricing documentation file and submission of the summary information table With regards to the fiscal year ending the transfer pricing documentation file must be prepared and the summary information table should be submitted until August 16, Non-cooperative countries and countries with a preferential tax regime The provisions relating to the disallowance of business expenses paid to suppliers tax resident in non-cooperative or countries with a preferential tax regime remain in force. Controlled Foreign Companies (CFC) CFC rules are introduced for the first time in the Greek tax legislation with the aim to deal with tax avoidance of Greek companies through shifting revenues to subsidiaries in low tax jurisdictions. Basically, these rules provide for the inclusion in the taxable income of the Greek companies of undistributed passive income (e.g. interest, dividends, royalties etc.) of foreign subsidiaries under the conditions stipulated in the law. 7

8 Taxation of reserves Non-distributed or non-capitalized reserves of companies as depicted in their last balance sheet before deriving from profits that have not been subject to taxation according to an exemption as per Law 2238/1994 or circulars or decisions issued under this law, in case of distribution or capitalization until 31st December 2013 are subject to tax at 15% exhausting the respective obligation of the company, as well as its shareholders or partners. Effective 1st January 2014, the above reserves are obligatorily set-off at the end of each tax year with losses of whichever nature of the last 5 years until exhaustion, unless they are distributed or capitalized in which case they are subject to taxation at 19% exhausting the tax liability of the company, as well as of its shareholders or partners Effective 1st January 2015, it is not allowed to maintain special tax-free reserve accounts. Income tax for individuals Salary income and pension income The new law introduces a definition for salary and pension income according to which oral agreements for the provision of employment services are recognized for tax purposes as employment contracts by means of which the individual employee earns taxable salary income. The new law attempts to introduce a general rule about the requirement to include in the employee s taxable income (as a salary payment in kind) benefits in kind paid to the respective employee or to their relatives. In particular, the market value of benefits in kind received by an employee is included in his taxable salary income, provided that their total value exceeds EUR 300 per year. Salary in kind contains the following indicative examples: 30% of the expenses recorded in the employer s accounting books incurred for the granting of a company car to employees, are considered as taxable salary income of the employee having the right to use such company car for any period during a fiscal year. benefits in kind granted in the form of a loan provided to an employee or shareholder or partner in a partnership (prepayments of salaries exceeding the amount of 3 monthly salaries are considered to be a loan granted by the employer to the employee). rental payments for the employee or 3% of the objective value of a company owned home that is made available by the employer to the employee for housing purposes. Insurance premiums paid on behalf of the employee in the course of group insurance policies are exempt from the calculation of total taxable salary income. Accumulated capital reflecting insurance premiums of the employee paid until is exempt from the final withholding income tax imposed on insurance indemnities, which are withheld by an insurance company in the course of group insurance policies (private pension schemes). Meal coupons of a value up to EUR 6 per workday are not considered as taxable salary income. Unemployment benefits paid by OAED to unemployed individuals are exempt from income tax, provided that the other income of the taxpayer does not exceed the EUR 10,000 threshold annually. The currently applicable provision according to which withholding tax on salary income and pension income is reduced by 1.5% remains in force. 8

9 Taxable income from salaries or pensions is subject to income tax according to the following tax scale: Taxable income (EUR) Tax rate (%) % ,01 έως και % % Alternative ways to assess minimum income tax payable ( deemed income tax provisions ) Under the new provisions the difference between deemed income and total actual income is subject to income tax: a) according to the tax, progressive scale applicable for salaried employees, provided that the taxpayer earns exclusively or mainly salary income and/ or pension income or b) according to the tax progressive scale applicable for business income, provided that the taxpayer earns exclusively or mainly business income. In case of a difference between deemed income and real income of the taxpayer, losses of the respective fiscal year or of previous fiscal years are not deducted from taxable income and cannot be carried forward for offsetting purposes. The following are classified as deemed income under the provisions of the new law: acquisition of a single proprietorship or unlimited liability partnership or limited liability partnership or corporation or limited liability company or private corporation or society of civil law or joint venture, or purchase of company parts or securities. It is confirmed that the deemed income provisions are not applicable in the case of a foreign tax resident who does not earn income from Greek sources. Finally, it is clarified that the deemed income tax provisions of the new law are not applicable in the case of individuals who are representatives of foreign diplomatic missions or individuals employed by institutional organizations of the European Union or International Organizations who have been stationed in Greece according to an international treaty. The provisions of article 10 of law 2019/1992 with regard to expenses made as of are not applicable to cover the difference between actual income and deemed income. Funds that have been taken into account for the purposes of covering the difference between real income and deemed income, are deducted from the capital that is accumulated from earlier years. 9

10 Business profit Business profit is defined as the total revenues from business transactions after deduction on business expenses, depreciation and bad debt provisions taxed according to the following scale: Taxable income ( ) Rate (%) % % Any fortune increase deriving from an illegal, unjustified or unknown source or cause is considered as business profit subject to tax at 33%. Income from capital Income from capital received either in cash or in kind, is introduced as a distinct income category for individuals and includes: Dividends, subject to withholding tax at the rate of 10%, exhausting any further tax liability for individuals. The tax is withheld by the person paying the dividends. The concept of dividends is extended in accordance with the OECD guidelines and includes all distributable profits irrespective of the legal form of the distributing entity. Interest, subject to withholding tax at the rate of 15%, exhausting any further tax liability for individuals. The tax is withheld by the person paying the interest. Interest deriving from Greek State s bond loans and Treasury Bills acquired by individuals and interest deriving from bonds issued by the European Financial Stability Facility within the context of PSI are exempt. Royalties, subject to withholding tax at the rate of 20%, exhausting any further tax liability for individuals. The tax is withheld by the person paying the royalties. Income from immovable property, subject to tax as per the following tax scale: Rents(euro) Rate (%) % % The term income from immovable property has the meaning of income in cash or in kind, deriving from the leasing or self-use or the free of charge grant of use of real estate. Income in kind is computed at market value whereas imputed income from self-use or free of charge grant of use is computed at 3% of the objective value of the real estate. The free of charge grant of residence with surface up to 200 sq.m. to ascendants or descendants, for the purpose of being used as a primary residence, is exempt. 10

11 The above apply for income acquired in fiscal years commencing as of ; the tax withholding obligation applies for payments to be made from onwards. Income from capital gains Capital gain deriving from transfer of capital is taxed at the rate of 15% and refers to: Capital gains from the transfer against consideration of real estate or part thereof or encumbrance on real estate or part thereof or holding attracting more than 50% of its value directly or indirectly from real estate, and Capital gains from the transfer of securities provided that such transfers are not classified as business activities. The above does not apply to capital gains arising from corporate restructuring / transformations. The new provisions apply to capital gains from transfers of real estate and transfers of securities taking place from onwards. In the meantime, the 5% tax on the real transfer value of non-listed shares of domestic or foreign corporations acquired until 31 December 2013, still applies. The 20% taxation of capital gains from transfer of shares listed on the Athens Stock Exchange and acquired from onwards, is abolished. Capital gains tax from the transfer of real estate is withheld by the Notary Public, whereas an exemption applies for capital gains up to Euro 25,000, provided that the respective property has been retained for at least five years and no other transfer of real estate has been effected within the retention period. The exemption of capital gains arising from the exchange of Greek State Bonds or corporate bonds guaranteed by the Greek State with other securities in the context of PSI remains in force. Loss deriving from the transfer of real estate and transfer of securities can be carried forward indefinitely, whereas such loss can only be set off against profits deriving from transfer of real estate and transfer of securities, respectively. The above categories of income are included in income from business activity of legal persons and legal entities and are taxed according to the relevant rates. Special provisions regarding capital gains from the transfer of real estate Transfer of real estate has the meaning of transfer of ownership or bare ownership, of usufruct s constitution, habitation or other easement s constitution, waiver of ownership or of other rights on real estate, expropriation of real estate, the sale of real estate as a result of voluntary or judicial auction, the transfer of a right related to building coefficient ratio. The law recognizes limited exceptions to the concept of transfer. 11

12 Capital gain has the meaning of the difference between the acquisition price paid by the taxpayer and the deflated transfer price paid to him. The acquisition price is considered to be the price as stated in the notarial deed or the actual purchase price as evidenced or, in absence thereof, the value upon which the real estate transfer tax was calculated. In case that the acquisition price cannot be calculated, it is considered as nil. The transfer price is considered to be the consideration as stated in the notarial deed. The i) capital gain from a building constructed with expenses of the lessee and ii) capital gain from bare ownership of real estate are determined in a special manner. The resulting capital gains are adjusted by applying an age coefficient determined as follows: Years of retention Age coefficient From 1 to 5 0,95 More than 5 and up to 10 0,87 More than 10 and up to 15 0,79 More than 15 and up to 20 0,73 More than 20 and up to 25 0,66 More than 25 0,61 Special provisions regarding capital gains from the transfer of securities Capital gains deriving from the transfer of securities include: i) the transfer of the business as a going concern, ii) shares in listed or non-listed companies, iii) parts in partnerships, iv) Greek State and corporate bonds, Greek Treasury Bills and v) derivatives of financial instruments which are listed indicatively. Capital gain has the meaning of the difference between the acquisition price paid and the transfer price received, including any expenses directly connected with the acquisition and sale of securities which are not added or deducted, respectively. As per listed shares, their acquisition and transfer price derive from documentation issued by the intermediary broker or bank or documentation notified to Hellenic Exchanges S.A. As per non-listed shares, the transfer price is the higher price between the contractual price and the net equity (upon transfer) of the company that issues the shares. The purchase price is the lower price between the contractual price and the net equity (upon transfer) of the company that issues the shares. In case that the acquisition price cannot be calculated, it is considered as nil. Submission of tax returns Income tax returns are filed in the period from 1st February to 30 June of the year following the tax year to which they relate. As a rule, individuals file their returns through electronic means, while hard copy submission is allowed in exceptional situations A decision of the Minister of Finance will further regulate the manner, timing, format and content of the income tax returns, as well as the documents and other information to accompany the submission. 12

13 Income tax prepayment For individuals, an amount of 55% of the tax due is assessed against the tax corresponding to the revenues from business activities of the current year. No tax prepayment is assessed in case the amount to be assessed does not exceed 30 or the tax return includes only income from salaries and pensions, as well as residence self-occupation. Special provisions apply with respect to architects, engineers and lawyers. For legal persons and entities, the tax prepayment equals to 80% of the tax corresponding to the revenues of the tax year for which the return is filed. For domestic as well as foreign banks operating in Greece through branches, the tax prepayment is 100%, while for partnerships, non-profit legal persons of public or private law as well as joint ventures of partnerships the tax prepayment is 55%. There are certain cases where a tax prepayment is not assessed on companies transformed or merged under the provisions of L.D. 1297/1972, L. 2166/1993, L.2190/1920 or L. 3190/1955 or special rules, as well as for distributed or capitalized profits of corporations exempt from taxation according to special law provisions. Luxury tax The provisions for the application of luxury tax on the deemed income value of cars, airplanes, helicopters, gliders and swimming pools take effect for revenues declared on tax returns of fiscal year 2013 onwards, as opposed to the original entry into effect envisaged as of fiscal year 2014 according to article 44 of L. 4111/2013. Tax assessment The option to pay taxes in installments is now abolished in case of finalization of the tax assessment due to non filing or late filing of an appeal, or settlement agreement with the tax authorities or administrative court decision and the tax due is paid in an lump sum until the last business day for the public sector of the month following the one when the assessment or signature of the settlement agreement took place. In case of a settlement agreement with the tax authorities or provisional tax audit, it is necessary to pay 1/5 of the assessed taxes, duties and charges upon acceptance of the settlement. The above provisions apply as of and relate to assessments and decisions issued after of

14 Penalty reduction Penalties under articles 4, 5 and 6 of L. 2523/1997 in case of an administrative or court settlement are reduced to 1/3 or 1/2 depending on the case, provided that 20% or 30% thereof is paid immediately while the residual amount is assessed in a lump sum until the last business day for the public sector of the same or the following month from when the administrative or court settlement takes place. This provision applies for penalty assessments issued as of the publication of the Law, i.e. 23 July Reduction of VAT on restaurant services For the period from to , VAT on restaurant services is reduced to 13%. Other provisions The provisions of L. 2778/1999 regarding the taxation of real estate investment companies remain in force. The provisions of L. 3371/2005 and L. 2992/2002 regarding the taxation of venture capital companies as well as venture capital funds remain in force. The provisions regarding the taxation of shipping businesses as well as related individuals for their income deriving there from remain in force. ΕΥ Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EY All Rights Reserved About EY s Tax services Your business will only succeed if you build it on strong foundations and grow it in a sustainable way. At EY, we believe that managing your tax obligations responsibly and proactively can make a critical difference. So our 32,000 talented tax professionals in more than 140 countries give you technical knowledge, business experience, consistency and an unwavering commitment to quality service - wherever you are and whatever tax services you need For more information, please contact: Stefanos Mitsios Head of Tax, EΥ Greece Tel.: Mary Michalopoulou Tax Partner, EY Greece Tel.: This document contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global EY organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.