The Greek Parliament has adopted the amendment of the provisions of the Income Tax Code, more specifically, case m of Article 23, Law 4172 / 2013, which concerns the non-deductible business expenses from the taxable results of each financial year.

Upon this article amendment, there are certain limitations set concerning the purchases of goods and services from non-cooperating states or those having a privileged tax regime, as defined in Article 65 of the Income Tax Code (hereto see relevant attached table of states).

Article 23 of Law 4172/2013 mentions, as already aforesaid, the non-deductible business expenses. The amended case m (ic in Greek numbering methodology) of Article 23 mentions the following:

m) The total amount of expenses to be refunded (paid) to a natural or legal person or entity classified to one of the following cases, are not deductible from the income tax:

 Α)  At the time of the document / invoice issuance or the transaction performance, the natural or legal person/ entity is tax resident in a non-cooperating state.

 Β) At the time of the document issuance or the transaction performance, the natural or legal person is tax resident in a state which is subject to a privileged tax regime.

 C)  The legal person is a de facto affiliated company, without having complied, before the transaction performance or the document issuance, with the obligations set by the Code of Tax Processes (Article 21 of Law 4172/2013).

 D)  The person / entity does not possess, neither in its registered offices in these states nor in an affiliated company, the necessary administrative organization and infrastructure required for the performance of similar business  transactions, as they are performed usually according to the normal business processes for transactions, for which the document has been issued.

Concerning the above cases C and D, in order for the tax payer not to be subjected to the non-deductibility of the expense, and before the performance of the tax audit, the tax payer is obliged to present full proof of the fact that the aforementioned circumstances are not fulfilled for the specific company.

Concerning the above cases A, B, C and D, in order for the tax payer not to be subjected to the non-deductibility of the expense, the tax payer has to pay withholding tax concluded from the income tax rate applicable in Greece related to business activity (today's applicable rate 26%), on the total amount of the related expense.

Provided that the tax payer proves within a three months period after the transaction, that the relevant transaction is a customary one to current market / purchase prices, then the withholding tax will be refunded to the tax payer without any losses for the Fiscal Authorities.

The Minister of Finance is expected to provide a relevant decision, for the definition of the processes for the implementation of the aforementioned, more specifically, the audit procedure foreseen in the above cases C and D. 

NOTE: This article does not cover advisory, but only informational purposes, and cannot serve, as a basis for further actions, on the part of   the reader. Reception of specialized advice is required.

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