Executive summary
On 18 May 2021, the Greek Parliament enacted Law 4799/2021 that introduces income tax reductions and other amendments to the Greek Income Tax Code (L. 4172/2013 – referred to as GITC). Specific changes include:
- The rate of income tax prepayment is reduced for legal entities and individuals conducting business activities.
- The corporate income tax rate is reduced to 22% for tax years from 2021 onwards.
- The imposition of the special solidarity tax is suspended for specific categories of income for tax years 2021 and 2022.
- The benefit of pharmaceutical companies and Marketing Authorization Holders (MAHs) of pharmaceutical products, resulting from the offset of the automatic return (claw back) of the pharmaceutical expenditure with research and development expenses, can be distributed in five equal installments.
- The provisions related to the imposition of sales tax on stock exchange transactions are amended.
This Alert summarizes the respective tax measures.
Detailed discussion
Reduction of income tax prepayment
The rate of income tax prepayment for individuals conducting business activities is reduced to 55% (from 100%). The reduced tax prepayment rate applies on the prepayment assessed with the income tax return for tax years 2020 onwards.
The rate of income tax prepayment for legal persons and legal entities is reduced to 80% (from 100%). The reduced rate applies on the prepayment assessed with the income tax return for tax years 2021 onwards.
In addition, the rate of income tax prepayment for legal persons and legal entities is further reduced to 70% for tax year 2020.
Notwithstanding the above reductions, income tax prepayment for Greek banking institutions and branches of foreign banks operating in Greece remains at 100% for tax years 2020 onwards.
Reduction of corporate income tax rate for tax years 2021 onwards
The income tax rate for legal persons and legal entities is reduced to 22% (from 24%), for the income of tax years 2021 onwards. For tax year 2020, the income tax rate remains at 24%.
The corporate income tax rate remains at 29% for credit institutions (banks) provided that they fall within the special provisions of deferred taxation and only for the tax years that such provisions apply (Article 27A of the GITC).
Suspension from the imposition of the special solidarity tax for specific categories of income for tax years 2021 and 2022
For tax year 2021, the special solidarity tax exemption applied to employment income earned by employees of the private sector is extended to business income, income from capital (dividends, interest, royalties and real estate income) and capital gains. The exemption does not apply to employment income earned by employees of the public sector and pension income.
For tax year 2022, the special solidarity tax exemption applies to employment income earned by employees of the private sector.
Distribution of the benefit resulting from the offset of the automatic return (claw back) of the pharmaceutical expenditure with research and development expenses for pharmaceutical companies and Marketing Authorization Holders (MAHs) of pharmaceutical products
For income tax purposes, the benefit resulting from the offset of the automatic return (claw back) of the pharmaceutical expense with research and development expenses, is equally distributed within five tax years starting from the tax year in which the benefit has incurred.
The above benefit distribution applies from tax year 2020 onwards.
Sales tax on stock exchange transactions
Following the licensing of the “Hellenic Central Securities Depository” (AthexCSD) as a Central Securities Depository (CSD), as of 12 April 2021, pursuant to the provisions of para. 1 of art. 29 of L. 4569/2018, the relevant provisions regarding sales tax on stock exchange transactions are amended (0.2% on the shares’ sale value).
In particular, pursuant to the new provisions regarding sales tax, although no substantial changes regarding the scope of the tax are introduced, the context of application of the tax is clarified and certain provisions are introduced regarding the process for the collection and attribution of the tax, as well the imposition of relevant penalties in the case of non-compliance. Specifically, the following are, inter alia, provided:
- For the sale of shares held in omnibus accounts and settled outside the CSD, the relevant procedure is provided for the collection and the payment of tax by each intermediary in the intermediaries’ chain to the next intermediary and to the registered intermediary or to the CSD participant, as the case may be.
- The liable parties for the payment and the attribution of the tax, by case, are provided.
- The imposition of penalties in the case of late, inaccurate or non-filing of tax return for the payment and the attribution of the tax, by case, is provided.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Business Advisory Solutions S.A., Athens
- Stephanos Mitsios
- Konstantina Galli
- Constantina Nicolaou
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
