Investing In... 2021

Last Updated February 04, 2021

Greece

Trends and Developments


Author



Kelemenis & Co. is a leading Athens-based law firm providing quality legal services in the key corporate and commercial areas. The firm advises a varied client base that includes corporations, governments, large institutions and high net worth individuals. Kelemenis & Co. has built a reputation for acting on complex, high-volume cross-border transactions for a range of corporate and financial institution clients. The firm’s track record spreads across an array of sectors, including energy, infrastructure, hotels, leisure, real estate, retail and technology. Although Greece has been the focal point of the firm’s activities, the firm has been active in Southeast and Eastern Europe, where it advises local governments on legal approximation with the EU acquis communautaire and international investors on their cross-border ventures. The firm is the Greece member of Multilaw, a leading global law network consisting of more than 70 law firms worldwide and over 7,000 lawyers in over 150 commercial centres.

The Investment Landscape in Greece Following the Outbreak of COVID-19

Despite the fiscal crisis that left the country in disarray between 2010 and 2018, Greece maintained certain advantages as a destination for inward investment because of its geo-strategic position and investment opportunities arising from the financial crisis itself.

Restructuring and reform processes in both the private and public sectors have been under way over the past decade. Although these processes have developed more slowly than anticipated, they have been contributing to an increase in the economy's competitiveness. However, the COVID-19 pandemic has posed new challenges to the Greek economy due to the country’s dependence on the services market. The country’s GDP is estimated to have fallen by more than 10% in 2020.

The Impact of the Pandemic

Tourism has always been the driving force of the Greek economy, even in the years of recession. Until the outbreak of COVID-19, its growth was remarkable. Of late, investments in real estate had become noteworthy after a long period of stagnation until the pandemic hit real estate hard. Other sectors, such as retail and the food industry, have been involved in various entrepreneurial and restructuring activities and the food industry has not been impacted by the pandemic.

The privatisation programme, which started in 2010 (see www.hradf.com), had also produced some worthwhile results, although critics say that a lot more could have been done if higher efficiency and a clearer political agenda had been secured. Again, the pandemic has halted most processes that had been under way.

Until the arrival of COVID-19, the ongoing increase in foreign direct investment in Greece in the previous three years looked set to continue. Once the impact of the pandemic settles down, there is still a good case for foreign investors to position themselves in the country sooner rather than later. Indeed, there is a good deal of optimism that the pandemic will only be a temporary interruption to the country's economic growth.

Foreign Ownership and Investment in Greece

Greece is generally open to foreign ownership and investment. There are no restrictions on foreign ownership and investment and there are no minimum capital requirements for foreign investment. As far as large-scale investments under Law 4146/2013 are concerned, licensing procedures can be expedited in the sectors of industry, energy, tourism, transport, telecommunications, health services, waste management and technology.

Nonetheless, two factors have been consistently discouraging foreign investors from entering an otherwise investment-friendly country: high tax rates and a bureaucratic public administration. Tangible progress has made in both fronts recently: tax rates have been going down for the last couple of years and the digitisation of the public administration continues apace.       

Various laws that are intended to support foreign investment, foster development and reduce bureaucratic obstacles are relevant:

  • Law 4608/2019, Hellenic Development Bank and Attracting Strategic Investments, which inserts notable changes with respect to strategic investments;
  • Law 4399/2016, Statutory Framework for the Establishment of Private Investments Aid Schemes for the Regional and Economic Development of the Country, which is currently the main investment incentives law;
  • Law 4146/2013, Creation of a Business-Friendly Environment for Strategic and Private Investments, which introduces investment incentives;
  • Law 3908/2011, which provides incentives in the form of tax relief, grants and allowances on investments in all key economic sectors;
  • Law 3389/2005, which regulates public private partnerships (PPP).

Investment incentives are set out in Law 3908/2011, as amended by Law 4605/2019, which provides for:

  • exemptions from the payment of income tax;
  • state grants for an amount that covers a portion of the cost of investment;
  • leasing subsidies for a period of up to seven years, where the state pays a portion of the instalments payable under leasing agreements for new machinery and other equipment.

The latest investment incentives of Law 4399/2016, as amended by Law 4684/2020, include:

  • exemption from payment of income tax, resulting from the current tax legislation, on the profits realised before tax from all the activities of the company;
  • funds to cover part of the eligible expenses of the investment plan, determined as a percentage of the total investment cost;
  • leasing subsidies offered by the state which covers part of the payable instalments;
  • salary subsidies which cover the cost of the new jobs that are created and that are associated with the investment plan;
  • financing instruments;
  • fixed corporate income tax rate;
  • fast-track licensing procedures.

The country has also developed a residence permit programme which by early 2020 had produced noticeable results. The rule is that a renewable five-year Greek residency visa is granted to foreign citizens who invest a minimum of EUR250,000 in Greek real estate (Article 20, Immigration Code, as amended by Law 4686/2020).

Legal Forms of a Business Operating in Greece

There are several legal forms that a business established to operate in Greece can take. The following entities are all subject to a uniform corporate income tax at the rate of 24%:

  • joint stock company (Société Anonyme Ανώνυμη Εταιρεία);
  • limited liability company (Εταιρεία Περιορισμένης Ευθύνης);
  • private company (Ιδιωτική Κεφαλαιουχική Εταιρεία);
  • general partnership (Ομόρρυθμη Εταιρεία);
  • limited partnership (Ετερόρρυθμη Εταιρεία);
  • Greek branch of a foreign company.

There are no restrictions on the participation of foreign individuals or entities in Greek entities.

The straightforward, fast and easy manner of setting up private companies, together with their limited liability character, has made them a highly popular choice, including with foreign investors, since their inception seven years ago. 

In late 2018 a new law was introduced on joint stock companies (Société Anonyme Ανώνυμη Εταιρεία) (Law 4548/2018, reform of the law of Sociétés Anonymes, Government Gazette Α, 104/13.06.2018) resulting in the société anonyme becoming simpler and more appealing to foreign investors.

Tax Provisions on Corporate Restructurings

The Income Tax Code (Law 4172/2013 – ITC) has incorporated the provisions of Directive 2009/133/EC on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different member states. The ITC includes all relevant provisions on corporate restructurings and, in particular, the following:

  • contribution of assets in return for shares (Article 52, ITC, as amended by Law 4685/2020);
  • exchange of shares (Article 53, ITC, as amended by Law 4685/2020);
  • merger and spin-off of companies (Article 54, ITC, as amended by Law 4685/2020);
  • transfer of registered seat of a SE (Article 55, ITC).

These provisions apply to any company that:

  • has one of the forms listed in Annex, I Part A of Directive 2009/133/EC (ie, Greek sociétés anonymes and limited liability companies);
  • is tax-resident in Greece or another EU member state; and
  • is subject to any of the taxation listed in Annex I, Part B (corporate income tax for Greek companies).

The capital gain resulting from the above restructuring is not subject to Greek income tax, and nor is the capital gain resulting from a division subject to Greek income tax at the time of the division (tax deferral). In addition, no taxes and stamp or other duties are imposed on any of the following:

  • the division agreement;
  • the contribution and transfer of all assets and liabilities from the company being divided to the recipient companies;
  • any act, deed or agreement regarding the contribution and transfer of all assets and liabilities, including rights, real rights and obligations, from the company being divided to the recipient companies;
  • decisions of the companies participating in the division and any other decision, act or deed required for the completion of the division or the incorporation of a new company;
  • the transfer or registration of the above acts.

According to the provisions of the ITC, the sale, transfer and registration of real estate passing from the company being divided to the recipient companies are exempt from all Greek taxes, stamp duties or other duties payable to the Greek state, if the real estate is used by recipient companies for at least five years from the division.

Tax Provisions on Dividends Distributed by a Greek Legal Entity

Under Law 4646/2019, dividends distributed by a Greek legal entity are now subject to withholding tax at a rate of 5%. This is a substantial change when considering that only a couple of years ago the rate stood at 15%. No withholding tax applies, if the receiving legal entity satisfies all the following requirements:

  • it directly owns shares that represent at least 10%, by value or number, of the share capital or rights to profits or voting rights of the Greek legal entity;
  • it has directly owned the 10% shareholding for at least 24 months; however, if all other requirements are met, save the 24-month rule, the Greek legal entity can temporarily choose not to withhold the 10% Greek tax, if it makes available to its tax office a bank guarantee that is equal to the amount of the withholding tax (Income Tax Code, ITC);
  • it is established in one of the legal forms set out in Annex I Part A of Directive 2011/96/EU;
  • it is a tax resident of an EU member state and cannot be deemed to be a resident of any third country;
  • it is subject to one of the taxes set out in Annex I Part B of Directive 2011/96/EU.

Conclusion

In the beginning of 2020 – after a decade of recession, fiscal consolidation and painful (but fruitful) reform, much of which was enforced by EU institutions – Greece was set to enter into a lasting period of economic growth and foreign inward investment. The position in which the country found itself was no longer a product of optimism or scattered financial indicators but was an economic reality. 

By early 2020, Greece had fostered an investment environment that had overcome several setbacks and dysfunctions after a decade of fiscal consolidation, and had made real progress, including: noticeably modernising its public administration apparatus; reducing its high taxation; completing an impressive overhaul of tax and company legislation; setting an ambitious privatisation programme in motion; and developing incentives schemes that could attract foreign investment. Furthermore, it had been in the process of reforming its banking system that had been severely hit by NPLs, and had been enjoying political stability after a long period of turmoil.

Given the above, foreign investment had been gaining traction and the country was set to enjoy a long period of growth. The pandemic put much of this on hold and has presented the economy with new, unexpected challenges. It is reasonable to predict that the process will resume once the turmoil of the pandemic eventually settles down. 

Kelemenis & Co.

5 Tsakalof Street
Melathron Centre (2nd, 3rd & 4th floor)
106 73 Athens
Greece

+30 210 3612800

+30 210 3612820

enquiries@kelemenis.com www.kelemenis.com
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Trends and Development

Author



Kelemenis & Co. is a leading Athens-based law firm providing quality legal services in the key corporate and commercial areas. The firm advises a varied client base that includes corporations, governments, large institutions and high net worth individuals. Kelemenis & Co. has built a reputation for acting on complex, high-volume cross-border transactions for a range of corporate and financial institution clients. The firm’s track record spreads across an array of sectors, including energy, infrastructure, hotels, leisure, real estate, retail and technology. Although Greece has been the focal point of the firm’s activities, the firm has been active in Southeast and Eastern Europe, where it advises local governments on legal approximation with the EU acquis communautaire and international investors on their cross-border ventures. The firm is the Greece member of Multilaw, a leading global law network consisting of more than 70 law firms worldwide and over 7,000 lawyers in over 150 commercial centres.

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