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:
Investment incentives are set out in Law 3908/2011, as amended by Law 4605/2019, which provides for:
The latest investment incentives of Law 4399/2016, as amended by Law 4684/2020, include:
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%:
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:
These provisions apply to any company that:
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:
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:
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.