Tax Alert

October 2018
Greek Court rules share premium not subject to capital duty

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A recent judicial decision of the Greek Council of State (Supreme Administrative Court) confirms that the issuance of shares above par (share premium) is not subject to capital duty, contrary to the position of the Tax Administration.

Whether the issuance of shares above par (share premium) is subject to capital duty has been an area of significant controversy in the course of tax audits performed during the last several years.

More in detail:

  • Capital duty (1%) is imposed, among others: a) on the increase in the capital of a company and b) on the increase in the assets of a company, in consideration not of shares in the capital or assets of the company, but of rights of the same kind as those of members, such as voting rights, a share in the profits or a share in the surplus upon liquidation.
  • The Tax Administration, by virtue of circular POL. 1230/1994, has clarified in the past that the capitalization of share premium into share capital is the triggering event for the imposition of capital duty, whereas said share premium is not subject to capital duty at the time of the issuance of shares and payment of above par value.
  • The Tax Administration’s position has been consistently applied. Also, the Council of State has similarly ruled in the past that the share premium is not subject to capital duty at the time of the issuance of shares above par and payment of the above par value, whereas capital duty is imposed and due upon the capitalization of the share premium into share capital, given that, at the time of the issuance of shares above par and payment of the above par value, no rights of the same kind as those of members, such as voting rights, a share in the profits or a share in the surplus upon liquidation are granted. (Council of State decision No. 3015/2009).
  • This interpretative position of the Tax Administration has subsequently shifted by virtue of circular POL. 1044/2014, adopting the No. 113/2009 Opinion of the Greek Legal Council of State, the latter opining on the issue of imposition of capital duty on the share premium of a Greek Single-Member Limited Liability Company. It is noted that the previously applicable position of the Tax Administration in the context of circular POL. 1230/1994 has never been explicitly repealed.
  • The recent decision of the Council of State (issued following an appeal of a Greek Société Anonyme before the Greek Administrative Courts) finally confirms that the issuance of shares above par (share premium) is not subject to capital duty at the time of the issuance and payment of the above par value, whereas capital duty is imposed and due upon the capitalization of the share premium into share capital, given that, at the time of the issuance of shares above par and payment thereof, no rights of the same kind as those of members, such as voting rights etc., are granted.
  • We have the view that this recent decision of the Council of State is of significant importance, given that:
  • It finally resolves the issue of imposition of capital duty on share premium in a correct –in our opinion –interpretation and application of the Greek capital duty legislation and the Directive 69/335/1969/ΕEC(as recastedby Directive 2008/7/ΕC).
  • It provides an incentive for the capital funding of Greek companies.
  • Greek companies that have already paid capital duty on the above par value (share premium) upon share issuance may examine the possibility of requesting a refund, on the basis of undue payment.

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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.

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