Law 27/1975 offices of ship management companies – dividend distribution
(Memo on the tax obligations of a foreign shipowner company in Greece related to distribution of dividends to individuals-Greek tax residents through their foreign ship management Company which established an office under law 27/1975”)
- tax obligations
1.a. As regards companies established an office in Greece under law 27/1975 and engaged in ship management, the following applies:
If that companies have not signed the New Memorandum on Voluntary Grant between the Greek State and the Shipping Community ratified by Law 4607/2019, the tonnage tax on vessels flying foreign flag, which are managed by foreign companies established in Greece pursuant to Article 25 of Law 27/1975, exhausts any tax liability, fee, levy for the shareholders of the above mentioned shipowner companies, up to the ultimate UBO/individual, related to the income earned by distribution of dividends or net profits, either directly or through holding companies, regardless of the number of holding companies interposing between the shipowner and the final shareholder (article 26 par. 11 law.27, as amended by article 60 law 4646/2019 and entry into force from 1.1.2020).
However, a special solidarity levy of Article 43A of Law 4172/2013 will be imposed on the aforementioned dividends (E2121 /2019). More specifically, the levy shall be imposed on the total of the individual’s income as derived from the aggregation of its income from wages and pensions, from business, from capital, from capital gains, taxable or exempt based on the following rates:
|Income (euro)||Special solidarity levy|
|12.001 – 20.000||2,2%|
|20.001 – 30.000||5,00%|
|30.001 – 40.000||6,50%|
|40.001 – 65.000||7,50%|
|65.001 – 220.000||9,00%|
Any income derived from dividends should be included in the income tax return of the individual tax year 2020, as the individual is liable for the payment of the special solidarity levy. Specifically, pursuant to the Decision of the Governor of IAPR regarding the submission of income tax returns tax year 2019 (A1041/2019) and the relevant Circular (E2121/2019), as regards companies of Article 25 of Law 27/1975 dealing with management of vessels flying Greek of foreign flags by foreign and domestic shipowners, the dividends which are imported into Greece by the aforementioned shipowners and are distributed to individuals, tax residents of Greece, are declared by the beneficiaries on the Code 659-660 of E1, under the option called “imported dividends of shipowners companies not taxed by Law No 4607/2019 and dividends of domestic shipowners companies”.
1.b. If the foreign company established in Greece under article 25/1975 of Law 27/1975 is a shipbroker, namely engages in the chartering, settlement of cargoes, insurance and/or brokerage of vessels flying Greek or foreign flags, where the gross tonnage of the vessel exceeds 500 shipping tons, excluding passenger ships, in that case:
The dividends paid to a shareholder, individual- Greek tax resident, are subject to a tax of 10%, which is payable by the beneficiary in one lump sum (Article 43 of Law 4111/2013). The above said withholding tax exhausts any tax liability of the beneficiary- shareholder of the aforementioned companies (individual) regarding the income received by a distribution of net profits or dividends, either directly or through holding companies, regardless of the number of holding companies interposing between the company and the ultimate shareholder. The tax of 10% imposed on the dividend is paid by the beneficiary- individual upon the submission of tax return, within the month which follows the one when the payment or credit was made abroad (Article 43 of N.4111/2013). Accordingly, the office under Law 27/1975 through its legal representative is liable for submitting the declaration of foreign exchange importation and paying the relevant contribution.
To sum up, if the management company engages in the ship management (case A.), provided that the company has not signed New Memorandum on Voluntary Grant, the dividends are exempt from income tax pursuant to the provisions of Law 27/1975, yet are subject to the special solidarity levy under Article 43A of Law 4172/2013 and satisfy the needs of the law for the setting off of any income deemed from expenditure or ownership of assets (“tekmiria”).
However, if, based on the Establishment decision of the office under Law 27/1975 of the said shipowner, that office is a charterer (case B.), these dividends are subject to a 10% tax, exhausting any the tax liability of the beneficiary- individual.
- tax returns
2.a. If the management company has established an office under Law 27 in Greece and is engaged in the management of its ship, then the office under Law No. 27/1975 of the management company should submit (via Taxisnet) the dividends statement for each beneficiary – individual (code 5 of the relevant application) in relation to the dividends distributed during the previous tax year (ie if the dividend was paid within 2019, this statement must be submitted by 13.3.2020), based on A.1025/2020.
Furthermore, the managing company is liable to submit the annual declaration and to pay the tonnage tax on behalf of the shipowner (Article 26 par. 5 n. 27 as amended by article 60 of L. 4646/2019). The Joint Decision of the Ministers of Finance and Maritime defining the type and content of the tax return as well as the Decision of the Governor of Independent Authority of Public Revenue (IAPR) defining the procedure of submitting the annual aggregate declaration have not been issued yet.
2.b. If the management company established in Greece is a shipbroker, namely the office engages in the chartering, settlement of cargoes, insurance and/or brokerage of vessels flying Greek or foreign flags, where the gross tonnage of the vessel exceeds 500 shipping tons, excluding passenger ships, the management company has to pay the special contribution on the imported foreign exchange of article 43 of law 4111/2013 and to submit the relevant return via “Taxisnet”.
- Supporting documents in case of a tax audit
Greek taxpayers who receive dividends paid by a foreign shipowner companies of vessels flying the Greek or foreign flag don’t have to submit any document together with the submission of their income tax return. In case they wish to justify their personal expenditure (in relation to the calculation of their “deemed income”) or in case of tax audit by appealing the income derived from dividends, they are obliged to submit before the competent tax authority the following:
(a) Foreign certificate justifying the receipt of the dividend by the management company, which replaces the certificate of the shipowner, the following:
- The personal details of the taxpayer as a shareholder of the shipowner company;
- the amount of dividend received;
- the name of the ship (registration number and port, IMO number) and;
- the name and company seat of the shipowner company.
(b) A copy of the relevant establishment permit in Greece, in accordance with article 25 of Law 27/1975, of the management company and a statement by the competent authority of the Ministry of Maritime that the management of the ship concerned has been declared and undertaken.
(c) A copy of the unique Foreign Exchange Income Certificate (ΒΑΣ) of the relevant amounts or a Foreign Assignment Certificate.
(d) The payment of the dividend to the beneficial shareholder shall be proved by either credit of the beneficiary’s bank account or by a with bank document (check or remittance).
(e) A solemn declaration by the beneficiary of the dividend proving the relationship between the beneficiary – individual and the legal entity.
Accordingly, the aforementioned supporting documents should be issued, and their originals should be available in the file of the individual- beneficiary in the case of them being requested by the tax authority later than the time of submitting the tax return.
* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.