1. Taxation of Profit Distributions
The fundamental change in the taxation of companies consists of differentiating the taxable profits between distributed and retained profits.
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The taxation of retained profits is being reduced incrementally from 25% to 20%
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In 2010, the tax rate for retained profits will be reduced to 24%.
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The tax withholding on distributed profits (dividends) is carried out at the legal entity level.
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However, the total tax burden must not exceed the tax burden on income from dependent employment (salaries).
2. Taxation of Benefits in Kind to Company Members
Due to the fact that many entrepreneurs acquire luxurious cars in the name of the company without listing them in their own tax returns, the following change is introduced:
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The costs of use, maintenance, and rental fees for such assets are treated as income of the user (the managing director, the chairman of the supervisory board, or the partner).
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The business books of the company serve as the basis for assessment (taxable base).
3. Expansion of Value Added Tax (VAT)
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The expansion of VAT is planned for economic activities where neither coverage nor exemption currently exists.
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Furthermore, for such activities, no VAT exceptions will be provided according to the European Union directive.
4. Criteria for Self-Control
To prevent tax evasion, self-control incentives in the form of indicators, conditions, and application requirements are being introduced for small businesses.
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A company that meets or acknowledges the requirements is initially considered to have fulfilled its tax obligations for the respective financial year.
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However, if based on the collected data, it falls into a random sample determined by a risk analysis, it will be subject to an audit in exceptional cases.
5. Abolition of Favorable Tax Exemptions
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The abolition of favorable tax exemptions for companies will take place.
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Bonuses paid by banks and financial companies will be taxed at 90%.
6. Tax Certificates Issued by Certified Public Accountants (CPAs) and Certification of Accountants/Tax Consultants
This point establishes a system where external professionals verify a company’s tax compliance:
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Certified public auditors and certified tax consulting and accounting firms will confirm the tax law obligations of smaller companies.
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CPAs will issue a certificate containing remarks and violations of tax law regulations.
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Accountants and tax consultants will confirm the precision and honesty of the submitted tax returns regarding their compliance with the economic data as presented in the company’s business books.
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The Tax Authority (Finanzamt) will still conduct random sample audits based on targeted actions.
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If tax evasion is discovered during these audits, the corresponding penalties will be imposed on both the company and the financial auditors/consultants.
(Disclaimer: This text reflects the tax framework and proposed changes as of May 2010. Current tax law in Greece may differ significantly.)