GREEK LAW DIGEST

197 Dryllerakis & Associates Law Firm What are the territoriality rules? The Greek income tax system taxes Greek SAs on their worldwide income provided that a) they are established or incorporated according to Greek law, or b) they have their registered seat in Greece or c) they have their “place of effective management” 1 in Greece for any pe- riod during the tax year. Income tax payable in Greece is reduced by the amount of tax paid abroad for the same income. However, such reduction cannot exceed the corresponding amount of tax for said income in Greece. Foreign SAs are solely taxed on their income deriving from a source in Greece (actual or deemed). Foreign SAs are also taxed on their income from their “permanent establishment 2 ” (“PE”) in Greece. There is a number of cases listed indicatively in the Law, under which a foreign SA is considered to have a PE in Greece. If the foreign SA’s country of origin has entered with Greece into a Bilateral Treaty for the Avoidance of Double Taxation (“DTT”), provisions of such Treaty regarding PE shall prevail. What is the applicable corporate tax rate? All income of taxable legal entities (including SAs) is considered as business income. From tax year 2015 onwards, the corporate income tax rate for SAs is 29%. Under the condition that Greece meets the medium-term budget targets under the financial adjustment pro- gram, the corporate income tax rate shall be reduced from 29% to 26%, from tax year 2019 onwards, credit institutions being exempted from such reduction. In any case, due to the financial situation of Greece, extraordinary taxes and special contri- butions are also imposed. 1. The determination that the “true place of effective management” is located in Greece is made on the basis of the actual facts and circumstances of each case and by taking into account: a) the place of ex- ercising day-to-day business, b) the place of taking strategic corporal decisions , c) the place where the annual shareholders’ meeting is held, d) the place where accounting books and records are being kept, e) the place where the BoDmeetings are held, f) the place of residence of the BoDmembers or any other executive directors. The residence of the majority shareholders or partners may potentially be taken into account as well along with the abovementioned factors. 2. The definition of a PE for foreign legal entities is similar to the one included in OECD Model Convention on the Double Tax Treaties for the Avoidance of Double Taxation (Article 6). SOCIETE ANONYME - TAX ISSUES Sophia K. Grigoriadou, Attorney at Law, Senior Partner at Dryllerakis & Associates Law Firm Nikolaia-Anna L. Lepida, Attorney at Law, LL.M., Senior Associate at Dryllerakis & Associates Law Firm John M. Papadakis, Attorney at Law, LL.M., Associate at Dryllerakis & Associates Law Firm