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Tax incentives for “angel investors”

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Tax incentives for “angel investors”

In the context of recent initiatives to render Greece a more investment-friendly jurisdiction for businesses, and particularly for the startup and high-tech digital economy ecosystem, new article 70A of the Greek Income Tax Code (L. 4172/2013), which was enacted by virtue of article 49 of L. 4712/2020 (GG A’ 146), introduces the concept of “angel investors” in Greece and grants them with tax incentives in the form of an income tax deduction equal to an amount of 50% of the capital contributed to startups that are registered with the “Elevate Greece” Startup Platform of the General Secretariat for Research and Innovation (GSRI).

To this end, the recently issued Ministerial Decision K.Y.A. 39937/5.4.2021 stipulates the conditions and requirements for the qualification of an individual as an “angel investor” in one or more startups, the type, timing and characteristics of the capital contribution, the income tax deduction procedure at the level of the angel investor as well as any other matter associated with the application of the new tax incentive provision.

Angel Investor

The definition of an “angel investor” is met by an individual who is tax resident in Greece or abroad, holds a Greek tax registration number and contributes monetary funds to startups for the purpose of their overall development.

Startup

Any corporation in the legal form of a Societe Anonyme (SA), a Limited Liability Company (LLC) and a Private Capital Company (IKE) that is established in Greece and is registered with the “Elevate Greece” Startup Platform upon the time of the capital contribution qualifies as a “startup” for the purposes of the tax incentive provision.

Tax incentive – Income tax deduction for capital contributions

The angel investor is entitled to an income tax deduction equal to 50% of the capital contributed to eligible startups. The deduction is granted proportionally per class of income declared in the tax year within which the capital contribution was effected.
The income tax deduction is granted for capital contributions up to a total contributed amount of Euro 300,000 per tax year, which can be made to up to three (3) different startups and up to a contributed amount of Euro 100,000 per startup.

Capital contribution procedure

The capital contribution is performed through a relevant share capital increase with issuance of new shares or parts, pursuant to the applicable capital increase procedure on the basis of the legal form of the startup.
The deposit of the contributed amount is made in cash, through a bank transfer from the angel investor’s bank account held in Greece or abroad to the startup’s bank account held in a Greek financial institution and can only be evidenced by the relevant bank statements.
The capital contribution is declared by the startup to the “Elevate Greece” electronic platform through the submission of the supporting documentation that is explicitly stipulated in the Annex of the Ministerial Decision and includes the following:

  • Certification by the legal representative of the startup regarding the capital increase, the angel investor’s details, the amount and date of the contribution, the number and nominal value of the shares/parts obtained as well as any corresponding share premium reserve that has been formed;
  • Decision of the competent corporate body of the startup regarding the capital increase and its purpose;
  • Certificate issued by the General Commercial Registry (G.E.MI.) for the registration of the capital increase decision;
  • Bank statement that evidences the deposit of the capital contribution;
  • Certificate issued by the General Commercial Registry (G.E.MI.) for the certification of the deposit of the capital increase;
  • In case of a capital return, the corresponding documentation that evidences the returned amount per each angel investor.

The abovementioned declaration is submitted by the end of the following month after the date of registration with G.E.MI. of the certification of the capital increase deposit and contains the company name and tax registration number of the startup, the details of the angel investor, the amount of the capital contribution and the deposit date. Especially in cases where the above certification has been registered with G.E.MI. prior to the publication of the relevant Ministerial Decision (9.4.2021), the declaration is submitted until the end of the following month after the publication.

Income tax deduction procedure

The income tax deduction is claimed by the angel investor by including the amount of the contributed capital in the income tax return of the tax year within which the contribution was effected, provided that the contribution has been completed by the final date of submission of said income tax return for the corresponding tax year.
In case the capital contribution is completed after the above date, the deduction is granted in the tax year within which the contribution has been completed.
In case of a total or partial return of the capital contributed as per above but not utilized for the development of the startup, the angel investor is required to file an amending income tax return for the tax year within which he had obtained the tax benefit, deleting, in total or in part accordingly, the capital contribution amount. On the condition that the above amending income tax return is filed before the notification of a tax audit order, the penalty provided by the Ministerial Decision is not imposed.

Penalties

In case it is evidenced, following a tax audit of the tax authorities, that the capital contribution has been made solely with the aim of obtaining a tax benefit by the angel investor and not for the purposes of the overall development of the startup, a penalty equal to the amount of the intended tax benefit is imposed on the angel investor, according to the provisions of article 62 of the Greek Tax Procedures Code (L. 4174/2013), which can be disputed by the angel investor by submitting an administrative recourse according to the provisions of article 63 of the Greek Tax Procedures Code.

Effective date

The provisions stipulated by the Ministerial Decision are applicable for capital contributions made as of 29/7/2020, date of publication of L. 4712/2020 that introduced the relevant tax incentive regime.

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