The Law 3427/2005 (L. 89/67) framework which provides for certain incentives for investors in Greece
The purpose of this report is to provide you with the essential information regarding the basic legal information as regards the Law 3427/2005 (L.89/67) framework which provides for certain incentives to multinational entities that they are interested in investing by incorporating an entity/office in Greece. Nothing on this report or any external hyperlink should be considered as a legal advice or as a substitute for legal advice.
COMPANIES INCORPORATED UNDER Law 2190/1920 (“the rule”) and Law 3427/2005 (ex L.89/67)
|LAW 2190/1920 – SOCIETES ANONYMES||LAW 3427/2005 (ex LAW 89/67)|
|Companies providing all types of services||Only companies providing only consulting services, centralization of accounting services, quality control of production, products, procedures and services, preparation of studies, designs and contracts, advertising and marketing services, data processing, receipt and supply of information and research and developmental services to other entities of the same group of companies.|
|No restrictions on the employees of the company||The company has to employ at least 4 employees at the end of the 12 month period following the date of the decision for the submission.|
|No restrictions on the annual operating expenses||Annual operating expenses incurred in Greece will not be less than 100.000 Euros.|
|No restrictions on the income of the company||The company may only invoice connected companies.|
|No special approval is required – in general||Α special approval is required, granted by the Ministry of Economy, which then is published in the Government’s Gazette.|
|No special incentives for foreign employees||Pursuant Article 17 L. 4251/2014 (Immigration Code), employees and legal representatives of companies submitted to L. 3427/2005 can enter the country under a permit license of 2 years or of equivalent period of time to their staying in the country, that can be renewed every 3 years. This provision applies after the submission of the company to the respective tax regime.|
As an exemption, foreign (i.e. non-Greek citizens) employees of a Law 89 entity are taxable in Greece on their Greek-source income only. Whether an individual is subject to the favourable regime of Law 89 is a matter of legal status. The nationality of the employees makes no difference, as long as they do not hold the Greek citizenship.
Foreign employees of a Law 89 company are subject to taxation only on their Greek-source income, even if they are physically present in Greece for more than 183 days per year or if their center of vital relations is Greece. This favorable regime is a matter of legal status and therefore the criteria of corpus and animus are not scrutinized.
|Income tax rate: 29% on the company’s profits (2016’)|
The gross income of the companies of article 1 deriving from the services they provide and which is compulsory collected through bank remittances is reached with the application of a profit percentage on their total expenses and depreciations, excluding corporate income tax (cost plus method). The profit percentage is determined on an ad hoc basis by the criteria of the Ministerial Decision and it is set with the decision of the Minister of Economy and Finance further to the review of a Committee formed in the Ministry.
For the determination of the profit percentages, which cannot be less than 5% are taken into consideration, mainly, the nature of the services provided, the field of activities and the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
For the determination of the mark up, all expenses on which the profit percentage applies shall be tax deductible for corporate income tax purposes, on the condition that they are supported by fiscal documents in compliance with the provisions of the Code of Books and Records.