“Permanent establishment” of foreign undertakings in Greece
According to Article 6 of the Income Taxation Code (hereinafter: “ITC” – Law 4172/2013), as in force, “Permanent establishment” means a specific place of business through which an undertaking carries out all or part of its operations.
Moreover, according to the Explanatory Memorandum of the same Law, the concept of “permanent establishment” is used primarily to determine the jurisdiction entitled to impose taxation on the profits of an undertaking according to Articles 3 and 4 ITC, in line with the OECD (Organisation for Economic Cooperation and Development) model Conventions for the Avoidance of Double Taxation and all related guidelines.
In particular, “permanent establishment” includes primarily the following:
(a) the place of management;
(b) any branches,
(c) offices,
(d) factories,
(e) laboratories and
(f) mines, oil or gas resources, quarries or other facilities where natural resources are extracted.
Work sites, construction or assembly sites and all relevant supervisory activities are considered as a permanent establishment only if they have carried out operations for a term exceeding three (3) months. In fact, according to the Law’s Explanatory Memorandum, the regulation applies exclusively to work sites located in countries with which Greece has not signed a Double Taxation Treaty (DTT), otherwise the provisions of such Treaty will prevail.
By exception, “permanent establishment” does not include the following:
(a) the use of installations exclusively for the storage, display or delivery of goods or merchandises owned by the undertaking;
(b) the preservation of inventories of goods or merchandises owned by the undertaking exclusively for storage, display or delivery purposes;
(c) the preservation of inventories of any goods or merchandises owned by the undertaking exclusively for processing thereof by another undertaking;
(d) the preservation of a specific place of business exclusively for the purpose of purchasing goods or merchandises or collecting information on behalf of the undertaking;
(e) the preservation of a specific place of business exclusively for the purpose of carrying out any other preparatory or auxiliary operations on behalf of the undertaking;
(f) the preservation of a specific place of business exclusively for the purpose of carrying out any combination of activities among those set out in sections (a) through
(e) above, provided that the overall operations of the specific place of business arising from such combined activities are preparatory or auxiliary in nature.
g) business operations limited to activities that are carried out through an agent, a commissioned representative or any other independent agent, provided that these persons are carrying out regular business activity.
However, where a person is acting on behalf of an undertaking and is authorised to conclude business deals on its behalf, and carries out such authorised activities primarily in Greece, then the undertaking is considered to have a permanent establishment in Greece in respect of the operations that are undertaken by such person on its behalf, save where the activities of such person are limited to those set out in the preceding sections [(a) through (g)], which, even if carried out through a specific place of business, do not render such place of business a permanent establishment.
Lastly, the fact that an undertaking which is a tax resident of Greece controls or is being controlled by another undertaking which is a resident of another state or carries out operations, either through a permanent establishment or otherwise, in such other state, does not render per se the former undertaking a permanent establishment of the latter.