Greek CFCs rules
The New Income Tax Code (Law 4172/2013 hereinafter “ITC”) introduced in Greek Tax legislation provisions pertinent to Controlled Foreign Corporation Rules (“CFCs rules”). Controlled Foreign Corporation are legal persons or legal entities which are tax residents in different countries with such links between them, leading to effective control of one company (“Foreign Company”) over the other (“Controlled Company”). The CFC rules are features of an income tax system designed to limit artificial deferral of tax by using offshore low taxed entities.
Pursuant to Article 66 ITC, taxable income shall include the non-distributed income of a legal person or legal entity (which is tax resident in another country) provided all the following conditions are met:
a) The taxable person, on his own or together with related parties, directly or indirectly holds shares, units, voting rights or holdings in the capital over 50% or is entitled to collect more than 50% of the profits of the said legal person or legal entity.
b) The said legal person or legal entity is taxable in a non-cooperating state or state with a preferential tax regime, namely a special regime which allows a materially lower level of tax than the general regime.
c) More than 30% of the net income before tax generated by the legal person or legal entity falls within one or more of the categories specified in paragraph 3.
d) It is not a company whose main class of shares is traded on a regulated market.
The above shall not apply to cases where the legal person or legal entity is a tax resident of a Member State of the European Union or a tax resident of a country which is a party to the EEA Agreement, unless the legal person or legal entity’s establishment or economic activities are an artificial arrangement devised for the real purpose of avoiding the corresponding tax.
The categories of income which shall be taken into account for the purpose of applying the aforementioned, provided that more than 50% of the corresponding category of income of the legal person or legal entity comes from transactions with the taxable company or its related parties, are the following:
a) interest or any other income generated by financial assets,
b) royalties or other income generated by intellectual property,
c) dividends and income from the transfer of shares,
d) income from moveable assets,
e) income from real estate property unless the taxable legal person or legal entity’s State would not be entitled to tax the income based on an agreement which has been concluded with the third country,
f) income from insurance, banking or other financial activities.
The above categories of income shall be calculated based on the tax year and at the tax rate which applies to profits from the business activities of natural persons (Article 29 ITC) or at the tax rate which applies to profits from the business activities of legal persons or legal entities (Article 58 ITC), whichever is appropriate.