Law 4936/2022: Greek Climate Law

On 21/09/2022 the Greek Parliament passed a bill, which will enter into force as a law upon its publication in the Government Gazette, that introduces significant amendments in the tax legislation such as among others the provisions of the VAT Code (L.2859/2000), the Income Tax Code (L.4172/2013) and the Tax Procedures Code (L.4174/2013) to streamline the taxation of natural and legal persons and entities, as well as procedures to enhance tax compliance.

A. Stamp duty on Corporate interest-bearing loans and other financing acts 

Reintroduction of stamp duty to interest-bearing loans

The new law amends article 63 of the VAT Code (law 2859/2000) which imposed by virtue of the introduction of VAT, the abolition of stamp duty on transactions subject to article 2 of the VAT Code (object of the VAT) and on their associated agreements. In particular, a new paragraph is added which, exceptionally, revives the imposition of stamp duty on interest-bearing loans and other financing as well on the resulting contractual interest.

Retroactive effect

The provision has retroactive effect from 1/1/2021, whereas for loans, other financing acts and the resulting interest covered by the new provisions, stamp duty is timely paid until 31/12/2022.

Key points and scope of the new provision

• Introduction of a new regulation
• The new provision introduces a new regulation which allows, from the date of its entry into force, the imposition of stamp duty on interest-bearing loans/other financing acts and the resulting contractual interest, regardless of whether the transactions in question also fall within the scope of VAT.
• Given that the financing in question falls under the scope of stamp duty in accordance with the new provision, the possibility of their exemption in the context of territoriality should be examined on a case-by-case basis, taking however into account the existing jurisprudence of the Administrative Courts and the  Dispute Resolution Committee, which has been strongly influenced by the substance over the form principle limiting that way the possibility of exemption.
• Compatibility of the provision with Community law

The amended form of Article 63 of the VAT Code seems to be in line with the corresponding Article 401 of the EU VAT Directive, as jurisprudentially interpreted by the CJEU.  In particular, based on the criteria examined by the CJEU to assess whether an indirect tax has the characteristics of a turnover tax and therefore cannot be applied parallel to VAT for the transactions it covers, it follows that in the case at hand the imposition of a stamp duty could be applied parallel to the VAT provisions.

• Effect of the provision on pre-existing loan/financing relationships
  It should be further explored:
  • Whether the interest-bearing loans concluded before 1/1/2021 that were disbursed and/or repaid after 1/1/2021, may be exempt from the stamp duty.
  • Whether the interest-bearing loans concluded before 1/1/2021 which are amended after 1/1/2021, are subject to stamp duty depending on whether the clauses that are amended constitute a new loan.
  • Whether stamp duty is imposed on balances transferred after 1/1/2021 in case of current account loan agreements concluded before 1/1/2021.
  • the stamp duty treatment of interest-bearing cash pooling agreements concluded before 1/1/2021 depending on whether these agreements will be regarded as loan agreements or current account loan agreements.
  • Interest paid after 1/1/2021 on interest-bearing loan agreements concluded before 1/1/2021

It should be further explored whether stamp duty is imposed on interest paid after 1/1/2021 arising from loan agreements concluded before 1/1/2021.

• Stamp Duty refund request for interest-bearing loans concluded before 1/1/2021

The possibility of a stamp duty refund request for interest-bearing loans concluded before 1/1/2021, should be further explored.

B.      Special solidarity tax

• The imposition of the special solidarity tax is abolished for any income acquired from 1/1/2023 onwards.
• For tax year 2022, all types of income are exempt from the special solidarity tax with the exceptions of employment income earned by employees of the public sector and pension income.

C.      Taxable income for individuals

The extra-institutional allowance and any related amount paid to certain categories of people with disabilities is excluded retroactively as of 1/1/2022 from the calculation of taxable income from salaries and pensions, regardless of the providing entity.

D.      The concept of donation or parental grant of cash

The concept of donations or parental grants of cash, that are paid through credit institutions and are donation tax exempt up to the amount of 800.000 € includes donations and parental benefits carried out within the period from 1/10/2021 to 9/9/2022 by withdrawing money from the donor’s/parent individual or joint bank account and depositing the same amount within three (3) working days in an individual account of the donee/child or in a joint account of the donee/child with the same donor/parent or third party.

E.       Deadline for payment of debt

Extension until 31/05/2023 of the deadlines for the payment of debts and installments of arrangements to the Greek State (Tax Authorities /Audit Centres/ Centres for the Assessment and Collection of Debts (Κ.Ε.Α.Ο.)) of certain categories of natural and legal persons and entities that have been affected by the war in Ukraine and fall under the provision of art. 118(1) of Law 4964/2022.

F.       Transfer Pricing Issues

• If, following a tax audit, profits from intragroup transactions that have been subject to tax in Greece are included in the profits of a legal entity, the related party that is subject to tax may request a corresponding adjustment to its taxable profit. This is carried out by means of a filing of an amending tax return, accompanied by the audit report issued by the tax authorities within a deadline of 3 months from the notification of the act of the corrected tax assessment to the audited legal person.
• The refund or offsetting of tax at the level of the related party is conditional upon the payment by the audited legal entity of the tax assessed in the context of the correction of the profits from the intra-group transactions entered into between the two related parties.
• Insofar as an amending tax return is filed by the related party in line with the above, while the corrective tax assessment is contested by the audited legal person, there being issued a decision pursuant to article 63 or article 63B of the Tax Procedures Code (L. 4174/2013) or a record of the Extra-judicial Dispute Resolution Committee or a court judgment which (partially or fully) annuls the corrective tax assessment, the corresponding correction in the profits of the related party being carried out with the initiative of the Tax Administration.
• The above applies as of the date of entry into force of the law and also covers pending cases (for which the three-month deadline for the filing of an amending tax return begins from the entry intro force of the law). Specific provisions have been enacted governing both the right of a tax refund following the filing of an amending tax return as well as the extension of the statute of limitations, in cases where the amending tax return for a particular year is submitted during the last year before the lapse of the statute of limitations of that particular year.

G.    Penalties for non-transmission of data pertaining to retail sales documents, issued via FIM, to the "myDATA" digital platform

• In case of non-transmission of summaries of retail sales documents, transmitted to the “myDATA” digital platform through the Information System of Electronic Tax Mechanisms (FIMs) of the Independent Authority for Public Revenue (IAPR), the following penalties will be imposed:
  • For transactions subject to VAT: The penalty is equal to fifty percent (50%) of the VAT indicated on each non-transmitted document. This penalty, aggregated per tax audit, may not be less than five hundred (500) euros, where a double-entry accounting system is maintained, or two hundred and fifty (250) euros, where a single-entry accounting system is maintained.
  • For transactions not subject to VAT:
    The penalty, per tax audit, amounts to one thousand (1,000) euros, when a double-entry accounting system is maintained, or five hundred (500) euros, when a single-entry accounting system is maintained.
• Furthermore, apart from the above penalties, the suspension of the operation of business establishments is stipulated. In detail:
  • Failure to transmit to the FIM Information System of the IAPR, more than ten (10) retail sales documents issued through FIM, or, regardless of the number of such documents, in case the value of goods or services not transmitted exceeds five hundred (500) euros, shall result in the immediate suspension for forty-eight (48) hours of the operation of the business establishment where the audit was carried out.
  • If, within the same or the following tax year after the detection of the above violations, it is found again, by the same partial on-site audit, that at least three (3) retail sales documents issued through FIM, regardless of their value, have not been transmitted to the FIM Information System of the IAPR at the same or another business establishment of the liable person, the operation of the business establishment where the audit was conducted shall be suspended immediately for ninety-six (96) hours.
  • In the event of any subsequent finding by the same partial on-site audit of a relapse within two (2) tax years of its discovery in any business establishment of the liable person, the operation of the business establishment in which the audit was carried out shall be suspended immediately for ten (10) days.
  • The above apply to violations committed from 31 October 2022 onwards.

H.      VAT exemption

The delivery of goods or the provision of services carried out by Greek and foreign legal bodies or persons, including the Federal State Republic of Germany to the legal entity of the public sector "Jewish Community of Thessaloniki" for the purpose of building the Holocaust Museum of Greece is included in the special VAT exemption of article 27(1)(ist) of the Greek VAT Code (Law 2859/2000). 

On May 26, 2022, the Greek Parliament passed law 4936/2022 entitled "National Climate Law - Transition to climate neutrality and adaptation to climate change, urgent provisions to address the energy crisis and protect the environment" (Government Gazette 105 / A / 27-05-2022).

The Greek Climate Law is part of the Greek and European climate change legislation. 

At European Union ("EU") level, Regulation (EU) 2021/1119 ("European Climate Law") has been enacted, obliging member-states to implement the European Green Deal, to achieve climate neutrality i by 2050 n respect of their national emissions of net greenhouse gases and to reduce them by 55% as intermediate target until 2030.

Furthermore, as of July 2021, the European Union is gradually adopting the Fit for 55 package of legislative initiatives, which consists of sectoral measures and policies to achieve the objectives of the European Climate Law in the areas of the EU Emissions Trading System, emissions from land use, change of land use and forestry activities, renewable energy sources, energy efficiency, alternative fuels infrastructure, transport, energy taxation and the carbon border adjustment mechanism (“CBAM”).

At the national level, law 4414/2016 already provides for a National Strategy for Adaptation to Climate Change ("ESPKA"), which is further implemented by means of Regional Climate Change Adaptation Plans ("PeSPKA"), the exact content specifications of which were determined by MD 11258 (Government Gazette 873 / B / 16.03.2017), but without them ever being issued.

In addition, ministerial decision M.D. 34768/2017 (Government Gazette B/3246/15.7.2017) established the National Council for the Adaptation to Climate Change.

Furthermore, in December 2019, the National Energy and Climate Plan (NECP) (Government Gazette 4893 / Β / 31-12-2019) was adopted, setting out the detailed roadmap until the year 2030, on the one hand, for the reduction of national net greenhouse gas emissions by 42% and, on the other hand, for the increase up to 35% of the share of RES participation in gross domestic energy consumption.

The Greek Climate Law significantly strengthens the foregoing institutional and legislative framework to address climate change, establishing national climate goals, governance institutions and tangible measures of implementation.

Purpose & Scope

The National Climate Law sets as its long-term goal the gradual transition of the country to climate neutrality by the year 2050, in the most environmentally sustainable, socially fair and cost-effective way.

In order to achieve the long-term objective of climate neutrality, intermediate climate objectives are set out for the reduction of net anthropogenic greenhouse gas emissions compared to 1990 levels by at least:

• Fifty-five percent (55%) by the year 2030.
• Eighty percent (80%) by the year 2040.

According to the definitions of the Law, climate neutrality is defined as the balance of anthropogenic greenhouse gas emissions from sources and their absorptions by carbon sinks. A carbon sink is defined as any process, activity or mechanism that absorbs greenhouse gas, aerosol or greenhouse gas precursor from the atmosphere. Net emissions are, therefore, greenhouse gas emissions from sources after absorption from carbon sinks.

In order to pursue the goal of climate neutrality, the Law intervenes with legislative measures in the following areas:

• The drafting and adoption of a national strategy and regional plans for adaptation to climate change as well as sectoral carbon budgets.
• The establishment of governance institutions for the transition towards climate neutrality, in particular the creation of a carbon budgeting mechanism for the key sectors of the economy and a system of governance and citizen participation for climate action.
• Policies and measures to mitigate emissions from electricity generation, the building sector, transport and businesses.

Strategies

The National Strategy for Adaptation to Climate Change ("ESPKA"), which according to the law is issued by the Ministry of Climate Crisis and Civil Protection, covers a period of at least ten (10) years, is evaluated and / or revised every five years and has the following content: 

• Objectives and guidelines.
• Assessment of the expected climate changes in the country and analysis of vulnerability of economic sectors and social activities.
• Priority areas requiring climate change adaptation measures based on the above vulnerability analysis.
• Preliminary estimate of adjustment costs.
• Integration of adaptation policies into broader policies.
• International dimension of adaptation policy.
• Proposals for awareness-raising, education and research actions.

ESPKA is implemented by Regional Plans for Adaptation to Climate Change (PeSPKA), which determine and prioritize the necessary adaptation measures and actions at regional level and include, among others, for each region the targets for the reduction of net anthropogenic greenhouse gas emissions, an assessment of climate changes and their impact on the region as well as proposed measures and actions.

ESPKA and PeSPKA are complemented by the institution of five-year sectoral carbon budgets in the following sectors: (a) electricity and heat production, (b) transport, (c) industry, (d) buildings, (e) agriculture and livestock farming, (f) waste, (g) land use activities, (e) land use change and forestry.

The sum of the total sectoral carbon budgets is necessarily equal to the total carbon budget of the country for the corresponding period of time. Sectoral carbon budgets are approved by an Act of the Government Committee on Climate Neutrality.

Finally, the National Climate Law provides for a procedure for the revision of climate targets as well as for the adoption of new actions and measures to adapt to climate change at national and regional level, if required on the basis of the latest
available scientific data and the annual progress reports of the country's transition towards climate neutrality.

General Policies and Measures

The National Climate Law provides for general and specific ('sectoral') measures to achieve the objective of climate neutrality.

The general measures are incorporated each time in the ESEK, the ESPKA and the PeSPKA and concern: 

1. The greatest possible energy saving and the increase of energy efficiency in all sectors of the economy;
2. The greatest possible penetration of Renewable Energy Sources ("RES");
3. The gradual elimination of all fossil fuels and their substitution by RES, through the interconnection of the non-interconnected islands with the electricity grid of the mainland and the installation of RES systems, as well as energy storage systems;
4. The gradual substitution of natural gas by renewable gases such as biomethane and green hydrogen, in particular in transport and industry;
5. The promotion of electromobility;
6. The promotion of sustainable urban mobility and the use of public transport;
7. The improvement of the carbon footprint of buildings and infrastructure;
8. The reduction of greenhouse gas emissions from waste management and the promotion of the circular economy;
9. Τhe increase of greenhouse gas absorption by natural ecosystems or through their storage in geological formations or by their reuse;
10. The establishment of policies to mitigate the effects of climate change and to improve air quality at local and national level.

Sectoral Policies and Measures

The specific ("sectoral") measures of the National Climate Law to achieve the goal of climate neutrality are the following :

• Electricity Production.
•  As of 31 December 2028, the production of electricity from solid fossil fuels, such as lignite, is prohibited.
• Zero-Emission Vehicles.
• As of January 1, 2026, within the administrative boundaries of the Region of Attica and the Regional Unit of Thessaloniki of the Region of Central Macedonia, the new Public Use Passenger Cars (TAXI) with registration certificate, as well as one third (1/3) of the new vehicles registered for the purpose of leasing to third parties will be required to be zero-emission vehicles.
• As of January 1, 2024, at least one quarter (1/4) of new private company cars, classified by company cumulatively, will be required to be exclusively electric vehicles or hybrid electric vehicles with external pollutant charging, up to fifty (50) grams of carbon dioxide, per kilometer (CO2 / km).
• The National Plan for Electromobility sets specific targets to ensure the adequacy of publicly accessible electric vehicle recharging points.
• As of 1 January 2030, new passenger and light commercial vehicles registered will be required to be exclusively zero-emission vehicles.
• The legal framework for the static data about electric vehicle recharging points is upgraded and obligations for free disposal to third parties and disclosure to E / V users are established.
• The legal framework for the preparation of municipal Electric Vehicle Charging Plans (“EVCP") is specified and the licensing and / or installation of E / V recharging infrastructure is facilitated.
• In the procedures for the award of public supply and service contracts, requirements are reinforced for a minimum quota on the total fleet of bidders of five percent (5%) for pure or hybrid electric vehicles.
• Municipal Emission Reduction Plans (“MERP").
• By March 31, 2023, each municipality prepares a DHSME with an inventory and net emission reduction targets of at least ten percent (10%) for the year 2025 and thirty percent (30%) for the year 2030, compared to the base year 2019 for the buildings, equipment and infrastructure that consume energy, used by the Local Authority as well as the legal entities supervised by it. Absorptions shall also be taken into account for the purpose of calculating the target.
• The elaboration of the MERP and its updates, as of January 1, 2024, are a prerequisite for the evaluation of proposals from municipalities for the implementation of aid schemes through financial tools in the field of energy saving and climate change.
• Reduction of Emissions from Buildings.
• As of January 1, 2025, the sale and installation of heating oil burners is prohibited under the threat of sealing the burner and imposing a fine at an amount three times the selling price of the burner.
• As of January 1, 2030, the sale of heating oil is only permitted on the condition that it is mixed at least by thirty percent (30%) with renewable liquid fuels, under the threat of a fine of three times the value of the fuel sold to the end-consumer.
• As of January 1, 2023, non-domestic buildings are required to install power generation systems from photovoltaic or thermal solar systems at a rate corresponding to at least thirty percent (30%) of their consumption.
• As of January 1, 2023, the Energy Performance Plan for Buildings includes the calculation of the carbon footprint of buildings.
• Environmental Permits.
• With regard to the description of the possible significant effects they may cause on the environment, the content of the environmental impact assessment ('EIA') files for projects included in sub-indents (f1) and (f2) of c. 5 of para. B' of Annex II of Law 4014/2011, necessarily includes, on the one hand, the assessment of the impact of the project on the climate, such as the nature and quantity of greenhouse gas emissions from the project and its participation in the objectives of the EU and the NECP, and, on the other hand, the vulnerability of the project to climate change. The relevant Article 18 of the Law will enter into force on January 1, 2024.
• Reduction of Emissions from Installations.
• Projects and activities of category A' of article 1 of law 4014/2011, which are classified in the groups of article 19 of the National Climate Law, such as industrial activities and tourist facilities, are obliged to reduce emissions by at least thirty percent (30%) by 2030 compared to year 2019.
• For these projects and activities, a report is required be submitted to the competent authority for the issuance of environmental permits, in order to reflect how they comply with their emission reduction targets. In order to achieve its emission reduction target, each project or activity operator may offset emissions by purchasing green certificates.
• From 2026 onwards, each project or activity operator will be required to submit to the environmental licensing authority by 31 October of each year, a report on the emissions of the previous year. In case of failure to comply with the emission reduction target provided for in its Environmental Permit, an administrative fine will be imposed with the main criterion being the deviation from the target, which may not exceed half a percent (0.5%), of the total turnover of the last financial year of the project or activity operator, based on the turnover in the income tax statement last submitted.
• Reduction of Emissions from Businesses.
• With the exception of small and very small enterprises, the National Climate Law establishes obligations in relation to the reduction of the carbon footprint for public limited companies with shares or other securities listed on a regulated market in Greece as well as for companies in important sectors of the economy or utilities and, in particular, for credit institutions, insurance undertakings, investment firms, fixed and mobile telephony providers, water and sewerage companies, courier companies, electricity and gas supply companies, retail chains employing more than five hundred (500) employees, supply chain service companies and urban transport companies.
• In this context, the foregoing companies have the obligation to submit annual reports on their carbon footprint in a publicly accessible electronic database of the Natural Environment and Climate Change Organization ("OFYPEKA").
• By 1 January 2025, the Ministry of Environment and Energy will examine the possibility of setting binding targets for the reduction of emissions per sector of activity in line with national targets, taking into account the relevant sectoral carbon budgets and the projections of the ESEK.
• Transition of Islands to Climate Neutrality.
• A Development Strategic Framework is established for the Greek islands "GR-eco islands", in the actions and programs of which individual islands may be included after evaluation and issuance of a joint ministerial decision.
• In order to reduce the emissions of the non-interconnected islands by eighty percent (80%) by 2030 compared to year 2019, measures will be promoted as a matter of priority to: a) accelerate the interconnection with the mainland's electricity grid and replace the power plants with liquid fossil fuels, RES and storage systems, b) the promotion of electromobility, c) energy saving and d) the electrification of maritime transport.

Governance Institutions

For the implementation and supervision of the transition measures towards climate neutrality, the following institutions and structures will be established with the following responsibilities:

• The National Observatory for Adaptation to Climate Change, which is part of the Ministry of Climate Crisis and Civil Protection and has, among other things, as responsibilities the monitoring of actions and policies for adaptation to climate change, through a system of indicators and other appropriate methods and tools and the προωισιον in electronic and public access of the National Information Website for Adaptation to Climate Change, which will constitute the national climate database.
• The Climate Dialogue Forum, which is implemented on a website by the OFYPEKA and in which representatives of municipalities, regions, universities, environmental non-governmental organizations, businesses, professional organizations and trade unions participate, for the consultation on sectoral carbon budgets, the evaluation of the country’s trajectory towards climate neutrality and the annual progress report on issues of mitigation and adaptation to climate change.
• The preparation of an Annual Progress Report on climate change mitigation and adaptation issues, which is prepared by the Ministry of Environment and Energy, in collaboration with the Ministry of Climate Crisis and Civil Protection and the OFYPEKA and includes, among others, the data on the country’s greenhouse gas emissions, emission indicators in key sectors, assessment of the annual progress of emission reduction, by sector of the economy in relation to the achievement of the respective sectoral carbon budgets, projections of the emission trajectory, description of progress in relation to climate transition actions as well as possible additional or corrective measures.
• The National Council for Adaptation to Climate Change (“NCA"), which is the central advisory body of the state for the coordination, monitoring, adoption and evaluation of policy actions for adaptation to climate change and is supervised by the Ministry of Climate Crisis and Civil Protection.
• The Scientific Committee on Climate Change («SCCC»), under the Ministry of Environment and Energy and is responsible, inter alia, for providing its opinion on the five-year carbon budgets in all sectors of the economy, on the need or not to update the long-term and intermediate climate objectives, on the actions and methods of achieving them as well as on any issue related to tackling climate change.

Finally, by a joint decision of the Ministers of Environment and Energy and Finance, intermediate climate objectives may be strengthened, or new intermediate targets may be established. This decision is issued following an agreement by the Government Committee on Climate Neutrality, based on the annual progress reports, on the basis of a detailed impact assessment for each sector of the economy.

Subsequently, by decision of the Minister of Environment and Energy, emission reduction targets may be established per sector of activity.

Conclusions

The Greek Climate Law institutionalizes national climate targets, provides for the means of achieving them and establishes the institutions for the implementation, supervision and monitoring of the country's transition to a climate-neutral society by the year 2050.

The transition instruments and policies, provided for in Law 4936/2022, constitute a combination on the one hand of general policies of a binding nature, still without consequences in case of default, and, on the other, of specific and targeted measures accompanied by the threat of sanctions.

It also sets out a flexible framework of institutions to monitor and readjust adopted transition measures to climate neutrality.

The Greek Climate Law sets out the conditions under which Greece will deal with the impact of climate change in the next thirty (30) years.

Whether its implementation will be effective or not will determine the pace and essence of our country's transition towards climate neutrality.

In this light, our national climate law is a decisive piece of legislation for the future of Greek society.