Further to the adoption by the Greek Parliament of Law 4336 of 2015 under the title Pension Provisions- Ratification of the Draft Agreement for Financial Assistance by the European Stability Mechanism and provisions for the implementation of the Financing Agreement on 14th August 2015, the withholding tax on corporate expenses paid from Greek corporate entities to, among others, tax residents of three member- states of the European Union, namely Cyprus, Bulgaria and Ireland, has been abolished.
THE PRE-EXISTING REGIME REGARDING 26% WITHHOLDING TAX ON EXPENSES IN TRANSACTIONS OF GREEK CORPORATE ENTITIES WITH CERTAIN PERSONS
On March 2015 the Greek Parliament, introduced amendments to the Greek Income Tax Code – Law 4172 of 2013 – (“the Law”), including an amendment to article 23 of the said Law regarding nondeductible business expenses.
Pursuant to the aforementioned amendment, the total expenses paid to a natural person or legal person or entity falling within one of the following categories, were not deductible:
- Persons which at the time of issuance of the invoice or at the date of the transaction were tax residents in a non- cooperating country (as per article 65 of the Law)
- Person which at the time of issuance of the invoice or at the date of the transaction were tax resident in a country with a preferential tax regime (as per article 65 of the Law)
- Persons which were in fact associated companies, and had not complied, before the issuance of the invoice or the performance of the transaction with the obligations set by the Tax Procedures Code (regarding transfer pricing documentation rules)
- Person s which did not have at the place of their registered office or at an affiliate business, the requisite organization and infrastructure in order to carry- out similar transactions as the one for which the invoice was issued, regularly and professionally.