Taxation of offices established pursuant to Emergency Law 89/1967 (Law 3427/2005)
Article 2 of Emergency Law 89/1967, as amended by Law 3427/2005 and Law 3752/2009, states that the gross income of such companies from the services they provide, which must necessarily be collected via bank transfers, must be computed by adding a mark-up to all manner of expenses and depreciation, other than income tax (the cost-plus method).
The mark-up applied by each company is determined based on the criteria contained in the regulatory decision of the Ministry of Economy & Finance following an inspection by a Committee established by the Ministry, whose members are appointed by the Minister himself. That mark-up is re-examined every 5 years, or earlier if market conditions change significantly.
To compute the mark-up, which cannot be less than 5%, particular regard is had to the type of services provided, the sector of activity and the OECD Transfer Pricing Guidelines.
To determine the company’s taxable income, all expenses to which the mark-up is applied are deducted from gross income, provided they are backed up by lawful receipts and invoices. If, for any reason, the company’s income based on its accounting books, is above the income computed using the cost-plus method, the income shown in the accounting books is taken into account. It should be noted that according to Circular No. ΠΟΛ.1004/2013, foreign companies established pursuant to Emergency Law 89/1967 are exempt from the obligation to keep double-entry accounting books and can keep simple accounting books.
Moreover, trading and industrial companies which have established themselves in Greece under the provisions of Emergency Law 89/1967 may, in accordance with Circular No. ΠΟΛ.1220/2013, be exempted from the obligation to document their transfer pricing arrangements.
Given that the purpose of Emergency Law 89/1967 is to provide incentives to attract foreign companies to establish offices in Greece and to increase employment in Greece, thanks to the obligation to employ at least 4 people at the offices established in the country, any taxation of foreign salaried employees for the income acquired outside of Greece would result in counterincentives to the setting up of such businesses in Greece and consequently foreign salaried employees working at the offices established pursuant to Emergency Law 89/1967 are only taxed in Greece for the income acquired in Greece and not for any other income acquired abroad (Circular No. ΠΟΛ.1155/2011).
The foreign staff of Emergency Law 89/1967 companies who are not permanently resident in Greece, who enjoy the preferential tax regime referred to above because of the special, developmental nature of the relevant provisions, are obliged, though, to provide justifications for their bank transfers. In other words, the fact that such salaried employees are only taxed for the income they acquire in Greece does not mean they are exempted from the obligation to justify amounts they send abroad. In this case they are obliged to either submit late income tax returns, if none have been submitted, or supplementary ones with all the necessary supporting documents (Circular No. ΠΟΛ.1033/2013).
They are also given an exemption from the lump-sum vehicle registration charges, including cases where exemption from those charges is coupled with an exemption from road tax for cars and vehicles on the roads under the scheme allowing them to be temporarily imported and used in Greece, which also covers those vehicles picked up on the basis of the provisions of Emergency Law 89/1967.