Zusammenfassung
Interestingly, in the years of the crisisGreece R&D spending marked an upward trend, which started in 2014 and continues ever since. Already in 2015, the relevant amounts had surpassed the amounts spent in the same activitiesin the years before the crisis.Based on most recent data the amount of R&D spending reached € 2,17 billion in 2018 or 1.18 % of GDP, reflecting an increase by € 130 mil from prior year and ofa cumulative increase of € 420 mil during the last two years.
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Notes
- 1.
Kathimerini newspaper of 23 October 2019 publishing the preliminary data of the National Center of Documentation.
- 2.
30 % tax allowance, as opposed to the 25 % tax allowance announced by the Bundesregierung.
- 3.
However, unlike government announcements about a further reduction of the corporate taxation for the fiscal year 2020 profits to 20 %, the relevant provision has not been included in the draft tax bill published (the tax bill replacing the income tax law provision on the corporate tax rate makes only reference to the corporate tax rate for the FY 2019 profits). Hence, if the relevant tax bill provision is enacted as it currently stands, there will be no law provision stipulating what the level of the corporate tax will be for the profits generated after fiscal year 2019.
- 4.
This is how the relevant joint ministerial decree 100335/2019 (of the minister for education, research and religions and the minister of finance)defines the activities of scientific and technological research in contrast to other scientific, technological and industrial activities. Moreover, as examples of eligible/non- eligible projects it lists the following:
a) The planning and creation of a prototype and the carry-out of the relevant tests. On the other hand, the creation of prototypes which depend on the pending successful completion of the trials of another prototype is excluded from the incentive;
b) Pivotal projects carried out during an experimental phase in order to gain expertise to enable the completion of the technical specifications of new products, the design of special devices and structures and the preparation of operational and technical method manuals;
c) Industrial design to the extent it is required for the performance of scientific or technological research. Design relating to the production process does not qualify;
d) The development of original and innovative software insofar as it results to a substantial scientific or technological progress and provided the aim of the relevant project is the systematic solution to a scientific or technological uncertainty.
Excluded from the scope of this incentive are: activities whichapply common methods and software tools for the development of enterprise software; the upgrades, additions or changes to existing programs or systems; themodifications or configurations of programs; the spotting and removal of errors to existing programs;
e) The clinical trials of phase 1, 2 and 3 for new vaccines and treatments. Clinical trials of phase 4, during which the trials of medicines, vaccines or therapies continue after they have received production and circulation approval, qualify only to the extent they entail further scientific or technological progress.
- 5.
For illustrative examples of how the eligible depreciation and operating expenses are calculated, please refer to the document in Greek titled: “Documentation and clarifications for the certification of expenses of scientific and technological research pursuant to art. 22Aof L. 4172/2013”. This document can be found at the relevant section of the following site of the General Secretariat of R&D: gsrt.gr.
- 6.
Art. 3 of the aforementioned ministerial decree.
- 7.
Affiliated entities are determined according to the definition of the term “related parties” contained in art. 2 of the Greek Income Tax Code, namely entities which are related with the subject entity on the basis of a minimum 33 % direct or indirect participation of the one entity into the other or of the same person in both entities or entities in which there is common control of the management or the possibility of exercising dominant influence by the same person.
- 8.
According to the law on Greek Generally Accepted Accounting Standards, partnerships are obliged to keep double entry accounting books and prepare Balance Sheet when they exceed for two consecutive fiscal years the threshold of € 1,5 mil turnover. The same rule applies to corporate entities regardless of turnover.
- 9.
Indeed, Art. 47 of the Income Tax Code distinguishes between entities that keep double entry accounting books, in that they are also taxed for the amount of profits capitalized or distributed to the extent the underlying profits have not been previously taxed and entities which keep single entry accounting books (i.e. revenue and expense book), the taxable profits of which are determined according the rules applicable to sole proprietors. This rule is made especially available to partnerships, which under Greece’s tax system are tax opaque structures and are, nevertheless, permitted to keep single entry accounting books as long as they do not exceed for 2 consecutive fiscal years the aforementioned threshold (see previous footnote).
- 10.
See also my article, co-authored with AlikiLambropoulou, about the new tax regime of Shared Service Centers in Greece at: Tax Notes International, 2006.
- 11.
Ministerial Decree IE/4488/467/2006.
- 12.
The initial version of law 89, which was first enacted in 1967, provided that foreign companies can operate their office or branch and be tax exempt in Greece provided the scope of the branch activity is outside the country. In 2001 the European Commission informed Greece that the tax exemptions provided to commercial and industrial enterprises covered by law 89/1967 constitute illegal state aid and that Greece should adopt measures in order for the businesses to cease benefiting from the tax regime of the old l. 89/1967 version (please refer, among others, to the accompanying report of the amending bill of law 89/1967 filed with the Greek Parliament). As a result, Greece enacted with the provisions of art. 31– 35 of law 3427/2005 a new law 89/1967 regime which provides to companies operating intra-group service centers in Greece predictability and certainty regarding their domestic tax obligations at a minimal tax compliance cost.
- 13.
Art. 2.2 of law 89/67.
- 14.
Service items (i)-(m) have been added by law 4605/2019 enacted in April 2019.
- 15.
According to the general tax residence rules, individuals are considered tax residents and are subject to taxation on their worldwide income in Greece when their permanent home or habitual abode or center of vital interests, i.e. their personal, economic and social links, is in Greece. Moreover, an individual who has spent more than 183 days of stay in Greece, including short breaks abroad, is considered Greek tax resident. Hence the worldwide income taxation on the basis of any of these links of the person with the country are not relevant for foreign personnel of law 89/67 entities. Indeed, this is also confirmed by the circular of the minister of finance with number 1155/2011 referring to the relationship between law 3943/2011, which introduced the 183-day tax residence rule and law 89/1967 and to the override of the former by the latter when it comes to the offshore income of the foreign personnel of law 89/1967 offices.See also the more recent circular E 2086/2019 of the governor of the Independent Authority of Public Revenues, which confirms that such income is out of scope of Greek taxation.
- 16.
With the exception of Controlled Foreign Company rules, Greece’s tax system does not include group taxation rules for either domestic or international groups.
- 17.
The term “affiliates” of law 89/1967 is not determined by reference to the relevant definition of the Income Tax Code. On the contrary, it refers to the relevant definition of the company law and specifically art. 42e of the codified law 2190/1920, which since 2014 is replaced by art. 32 of the accounting law 4308/2014 (Greek GAAPlaw). This definition is narrower than the one of the Income Tax Code (i.e. participations of more than 50 %, as opposed to 33 % or fulfilment of some additional criteria of control).
- 18.
Pursuant to ministerial decree IE/4488/467/2006, the relevant benchmark should be based on a sample consisting of at least 5 comparable (in terms of industry, geographic reach, size) companies, which arenot associated with the applicant, render similar services to third parties and have their seat in an EU or other OECD country. Their financial data should be retrieved from relevant commercial databases and should cover the 3 most recent fiscal years for which such companies have published their financial data. Based on their average profit margins of the three years there shall be created the relevant interquartile range and the relevant figures shall be converted into operating cost mark-ups. In case the application applies covers more than one intra-group service items, there shall be created the weighted average interquartile range from the comparables of all service items by reference to the total payroll cost of the applicant corresponding to each of its service items.
- 19.
The above documentation threshold for entities not having the law 89/1967 status is € 200,000 when the turnover in Greece exceeds € 5 mil (so art. 21 of the Tax Procedures Code, i.e. Law 4174/2013).
- 20.
See circular POL 1093/2015.
- 21.
However, in my view the same does not apply with regards to the Country-by-Country Report (CBCR), which Greece has introduced with law 4484/2017, thereby implementing into Greek law Council Directive 2016/881. Hence, in case the entity or permanent establishment in Greece belongs to a multinational group with consolidated revenues equalling or exceeding € 750 mil (on the contrary, no CBCR obligation exists below this group turnover threshold) and it is the reporting entity for CBCR purposes (i.e. ultimate parent entity, surrogate parent entity or in case no CBCR is exchanged between the jurisdiction of the ultimate parent company or of the surrogate parent entity and Greece and no CBCR reporting entity has been assigned already by the group to an entity in another EU country), it will have to provide to the competent authority in Greece the CBCR (containing information, per jurisdiction of where the group has presence, on revenue, profit before tax, income tax paid and accrued, stated capital, accumulated earnings, tangible assets other than cash and number of employees) and this must be donewithin 15 months from the reporting fiscal year end. Alternatively, it must file by the end of the reporting fiscal year a notificationabout the identity and country of tax residence of the reporting entity, covering also Greece.
- 22.
So also circular POL 1093/2015, which confirms that in the case of the law 89/1967 entities the transfer pricing documentation obligation is met by the simplified benchmark analysis filed upon their application for inclusion in the law 89/1967.
- 23.
POL 1093/2015.
- 24.
This disclosure requirement applies for approvals issued from 1 January 2012 onwards.
- 25.
Art. 39 of law 4605/2019.
- 26.
So the wording of this law 89/1967 amendment.
- 27.
So ministerial decree 67.738/2019, implementing the new cash grant incentive regime for law 89/1967 services. As already stated, a separate decree must be issued (jointly with the ministry of education and research) for the relevant requirement details pertinent to R&D.
- 28.
See art. 10– 14 of law 4608/2019, as amended by law 4635/2019.
- 29.
Art. 71 A of the Income Tax Code added by law 4512/2018. The same provision existed previously in art. 71 of law 3842/2010, so in essence nothing has changed in this regard with law 4512/2018.
- 30.
So the ministerial decree 52.738/2018.
- 31.
It seems that this already an area identified as including potentially harmful tax practice features; see the Harmful Tax Practices—Peer Review Results as at July 2019 at: oecd.org.
- 32.
General Court Judgement of 24 September 2019 in cases T-760/16 Netherlands v. Commission and T 636/16 Starbucks and Starbucks Manufacturing EMEA v. Commission.
- 33.
Transactional Net Margin Method, being one of the 5 accepted OECD transfer pricing methods and one of the two transactional profit methods.
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Karakitis, A. (2021). Tax Aspects of the Establishment of R&D Centers in Greece. In: Kraft, W.W., Striegel, A. (eds) WCLF Tax und IP Gesprächsband 2019. Springer Gabler, Wiesbaden. https://doi.org/10.1007/978-3-658-32073-7_10
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