3842/2010 TAX ACT: Changes to the Current Law on Taxation
The new 3842/2010 Act has introduced numerous amendments to the Greek system of income and capital taxation. This article will summarise the key changes that this Act has brought about.
A new tax scale has been introduced which does not differentiate between the various sources of income. This scale includes more tax categories so as to provide for the more equitable distribution of tax charges. In addition, this scale provides for the biennial adjustment of the scale measurements in accordance with the price index. The tax-free threshold for all taxpayers is set at 12.000 €. The new scale is modified as follows:
Income value Rate
Income value Rate
|Income (€)||Applicable Tax (%)||Income (€)||Applicable Tax (%)|
|0 – 12.000||0||0 – 12.000||0|
|12.001 – 30.000||25||12.001 – 16.000||18|
|30.001 – 75.000||35||16.001 – 22.000||24|
|Above 75.000||40||22.001 – 26.000||26|
|26.001 – 32.000||33|
|32.001 – 40.000||36|
|40.001 – 60.000||38|
|60.001 – 100.000||40|
The new scale is effectively shifting focus from the low and middle incomes towards the high incomes. More specifically, tax-relief for incomes up to 40.000€ is now available. To illustrate the above, we note that income of 25.000€ has a reduction of tax by 310€ (-10%), income of 35.000€ has a reduction of tax by 50€ (-1%), while income of 100.000€ has an increase of tax of 1.350€ (7%).
Incentives have been introduced for the collection of receipts. Furthermore, a segment of the tax-free threshold is guaranteed by the collection of receipts from the market of goods and services. A discount is provided for the declaration of receipts above the requested threshold. Such receipts are for all categories of goods and services except those which relate to goods of substantial value, regular utility bills for telephone service, electricity supply, water supply etc., and up to the extent to which they are accepted for the reduction of income or the tax discount (medical expenses, rent, insurance etc.).
The declaration of receipts of expenditure is not required for personal income up to 6.000€. For income up to 12.000€ the taxpayer is required to declare receipts of up to 10% of his income. For the amount of 12.000 and above he is required to declare receipts up to the value of 10% of his income for the first 12.000 and 30% of the income for the part of the income which is above 12.000€. When the costs exceed the required amount and are up to the amount of 15.000€ for an individual or 30.000€ for a family, the taxpayer is entitled to a tax reduction equal to 10% of the difference between the required amount and the amount that has been declared.
When the costs are less than required amount, the taxpayer is charged with a tax amount equal to 10% of the amount of costs that are outstanding.
The new bill proposes to calculate the minimum income on the basis of the services and property rights which are used by or are in the possession of the taxpayer. In order to calculate a taxpayer’s income, the following will be taken into consideration: homes automobiles, vessels, aeroplanes, swimming pools, private school tuition fees, employment of housemaids etc.
Independent taxation of income is effectively abolished. Such income is now taxed by reference to the regular tax scale. Interest on bank deposits and Greek government bonds are excluded from this category as they are regulated by the current tax provisions.
The following have been abolished: the independent taxation of various benefits and compensations of employees of the civil service, the income generated from the signing of contracts by professional football players, coaches etc, the salaries of those who are elected to the local administration etc.
The exemption from income tax or of incomes with certain factors is abolished. Financially vulnerable groups in society are excluded in certain occasions and on the basis of certain income criteria.
As of 1.1.2011 the determination of income according to actual revenue and generated expenses for all professionals will be introduced. Every specialised form of taxation of certain categories of professionals will be abolished. In particular, the determination of the following incomes will be established:
Taxi, Trucks for Public Use, Public Transport Buses, Rooms for Rent, Camping, Mechanics-Architects, Retailers, lottery agencies, Gas Stations, Kiosks etc.
All of the above were up till now taxed based not on their actual revenues and expenses, but with fixed taxes according to certain criteria i.e. the age of the enterprise. In the future they will be taxed according to actual revenues and expenses.
Dividends and distributed profits collected from natural persons are included in the taxable incomes. Capital gain from short-term trading of shares is taxable while, possible damages also fall under the definition of taxable capital gains.
Income tax statements for the year 2011 and after are to be submitted online. A Ministerial decree defines the type of electronic submission which is to be used and the alternative means by which a statement may be filled out and submitted (immediately, via a tax accounting office, via Citizens Service Centres (ΚΕΠ)).
Deposits with banks abroad which will be transferred within six months to an annual deposit account in Greece are exempt from auditing provided that tax at 5% of the capital value is paid. After the six month period has elapsed the Greek authorities will activate every international or European agreement so as to find out about the deposits made by Greek taxpayers into foreign banks. A certain part of repatriated funds which are invested are returned to the taxpayer.
Special Tax of Real Estate Property is abolished. An annual tax on possession of substantial real estate property is imposed on an individual level on the following scale:
|Property Value (€)||Tax Factor (%)|
|Up to 400.000||0|
|400.001 – 500.000||0,1|
|500.001 – 600.000||0,3|
|600.001 – 700.000||0,6|
|800.001 and above||1,0|
For real estate property above 5.000.000 € a 2% rate will apply for three years.
The current tax on the transfer of real estate property also applies during the transfer of shares or company shares which possess and exploit real estate property.
A tax of 5% applies to donations of real estate property and 10% to cash donations made to Legal Persons under Public Law , Legal Persons under Private Law of a non-profit nature and to other persons who were exempt until today.
The tax rate in respect of property owned by offshore companies is increased from 3% to 15% per annum and every tax duty exception is abolished. At the same times, a time limit is established for the transfer of property to a natural person on favourable conditions. Cadastral offices or land registry offices are required to inform the Central Tax Authorities within six months of all the real estate properties within their competence which are owned by offshore companies. They are also required to notify the Central Tax Authorities of any new registration or other modification in their files. Meanwhile, a special authority referred to as the Research & Price Control Service is established in order to collect information in respect of companies situated in tax preferential regimes where companies, in which an offshore company is a shareholder, are screened.
The taxation of undistributed profits is steadily decreased from 25% to 20% until the year 2013. In 2010 the tax rate is decreased to 24%. The withholding tax on distributed profits (dividends) occurs on the level of a legal person. Care is taken so that the overall tax burden does not exceed the tax on income generated by employed work.
Due to the fact that certain management staff of companies purchase luxury cars in the name of their company so as not to display such purchases in their personal tax statements, provision is made so that the cost of transportation, maintenance and the salaries which are paid as set out in the company books constitute income of the car user (Managing Director, Administrator, Chairman of the Board of Directors, Executive).
The scope of V.A.T. is extended to cover financial activities which are currently not covered or exempted and which are not exempted by the EU directive on V.A.T. Such activities include those of lawyers and notaries whose services were not liable to tax until now.
Statutory auditors and, for smaller companies, certified accountants or tax consultancy offices, will confirm the company’s tax liabilities. In accordance with the new Act, the statutory auditors will issue a certificate which will include comments and violations in respect of the provisions of the tax legislation. The accountants- tax consultants will verify the accuracy and veracity of the reported statements and confirm whether they conform to the financial data which derive from the information and books of the company. Under a system of targeted inspections, the tax authority will carry out random checks. If such checks reveal tax evasion penalties will be imposed on both the companies as well as the audit firms.
A three year tax-free scheme is established for the creation and operation of new businesses run by persons up to the age of 35.
New incentives are introduced in relation to the protection of the environment such as tax incentives for the upgrading of energy use in buildings and the reduction of the environmental footprint caused by businesses. In addition, incentives and concessions are granted for the protection of the constructed environment with allowances for the preservation of unstructured land which are within city plans in densely constructed areas and for the protection of its architectural legacy.
There will be an increase in discount on taxable profits for businesses that incur expenditure from technological innovation as decreed by the Minister for Education, Lifelong Learning and Religion.
The portion of the profits which derives from the sale of goods which incorporate an internationally recognized patent of the business are exempt from tax for three financial years.
The new tax legislation introduces tax exemptions in respect of the preservation of work places for businesses suffering from a decrease in work places.