Number of days required for a fast-tracking licensing process (Nov. 2019)
Corporate income tax rate (effective 1 Jan. 2019)
Number of procedures required to start a business (at May 2019)
Greece’s ranking in the World Bank’s Doing Business 2020 report
Doing business in Greece is easier today than a decade ago when the economic crisis began. More state services have come online, investment incentives are kicking in, and reforms are boosting the labour market.
Baffling investors for years, Greece’s byzantine bureaucracy has now been cut significantly, with costs and taxes slashed and procedures streamlined, making starting a business faster, simpler, and less costly to set up.
“The obstacles are well known to everyone. They have been there for years. Greek red tape, the ever- changing Greek tax framework and one of the slowest court systems in Europe. Nevertheless, we witnessed significant reforms over the second half of 2019 that tackled these obstacles. The state is very willing to enable foreign direct investment into the country,” says Nicholas Papapolitis, Managing Partner of Papapolitis & Papapolitis.
Greece ranks 79th out of 190 countries in the World Bank’s Doing Business 2020 report, up from the country’s poor showing in 2010 – in the early crisis years – when it bottomed out at 109th place out of 183 economies, far below any other eurozone economy.
Though challenges remain, and more reforms are needed, analysts point to Greece’s promising initiatives to attract investors. They include the creation of a unified social security system, the introduction of more flexible labour laws, changes to the intricate legal framework regulating business affairs, and the boosting of investment incentives such as lower corporate and personal income tax – all signs to investors that Greece is open for business.
Other changes introduced to the operating landscape include the online One-Stop-Shop to register a company, a 45-day fast-track licensing process for key investments, plus the Golden Visa scheme for non-EU residents that offers a residency permit to investors and their families.
Greece also recently strengthened minority investor protections “by requiring greater disclosure and an independent review before the approval of related-party transactions as well as greater corporate transparency of executive compensation,” notes the World Bank’s Doing Business 2020 report, in addition to streamlining its construction permitting process.
“Incentives to attract significant strategic investments in Greece and to improve the business environment have been granted. Examples include fast-tracking licensing and approvals within 45 days, Golden Visas for non-residents, tax incentives in specific investment sectors, wage cost subsidies, and site-specific and spatial development incentives including immediate expropriation of property,” says Kyriakos Andreou, Advisory Leader at PricewaterhouseCoopers (PwC) Greece.
“At the same time, a variety of projects, in infrastructure and hospitality, have great potential for investments,” he says.
Enterprise Greece – the organisation tasked with facilitating large, strategic investments in Greece as well as exports – has identified key investment opportunities in the areas of tourism, energy, IT, life sciences, food and agriculture, logistics, and more.
A recent decision allowing businesses to do all their bookkeeping with the tax office online, is also seen as a key change helping reduce tape.
The President of the Piraeus Chamber of Commerce and Industry, Vassilis Korkidis, says that this change has been a demand of businesses for many years and that the simplified procedures will help give a push to the economy. “This is a substantial reform and a technological change for businesses,” he says.
A key development has been the abolishment of the remaining capital controls in September 2019.
Greece’s geographical position, in particular, makes it an attractive regional hub for many multinational companies, such as Microsoft, for example, whose Athens office serves as a mini-hub for its Malta and Cyprus offices, and other neighbouring areas.
“Greece has always been an important market for Microsoft, which started operating in the country in 1992, within a totally different socioeconomic framework,” says Vangelis Morfis, Director of Marketing and Operations at Microsoft Hellas, Cyprus, and Malta.
“There have been many challenges through these years, and although there is still need for more consistent taxation as well as operating and regulatory environment, significant progress has been made, such as the development of the Ministry of Digital Governance, which was a constant request by the technology sector,” says Morfis.
Microsoft Hellas is now a hub for the region, showcasing the company’s commitment to “sustainable economic growth for the entire region through technology,” adds Morfis.
Reflecting palpable confidence in news out of Greece, Foreign Direct Investment (FDI) has picked up for the third year in a row. According to the latest figures from the Bank of Greece, FDI inflows in 2018 reached pre-crisis levels at 3.3 billion euros, a 9.1 per cent increase from 2017. However, FDI inflows are still at only 2 percent of GDP, compared to the European average of 5 percent.
Significant changes can also be observed in merger and acquisition activity. Andreou says these changes show a “prominent shift from deals lower than 10 million euros towards higher value transactions – between 50 million euros and 100 million euros.”
“The competitive position of Greek companies coming out of the crisis has improved with more than 2,000 showcasing high investment interest, solid growth prospects and sustainable debt,” he adds.
With its strategic location, educated workforce, and a commitment from political leaders to support investor-friendly policies, Greece’s business prospects look brighter than they have in a long time.
“The fact that the Greek economy seems to be stabilizing and that there is a consensus between political parties on the necessity of an investment-friendly environment, alongside with the liberalisation of several sectors, appear to be the most important elements in shaping expectations for development and growth,” says Georgia Stamatelou, Partner, Head of Tax and Legal at KPMG Greece.
The Mitsotakis Government also introduced a slew of reforms in October to boost Greece’s investment environment, through a new Invest in Greece law, amending its legal framework with an eye to boosting growth.
The new law opens up the pool of eligible strategic investments that can benefit from incentives, and streamlines the environmental licencing procedure for projects developed by strategic investors.
It also “creates a unified digital archive for investors, speeds up investment approvals through the use of outside auditors, accelerates the licensing of telecommunications antennae to promote 5G services, sets out safeguards to prevent undeclared employment, establishes electronic voting processes for labour unions, accelerates judicial proceedings through the adoption of new technologies, and also abolishes outdated decrees constraining manufacturing activities,” says Enterprise Greece.
The legal framework governing business parks was also overhauled through the law.
A new tax bill passed by the Greek parliament in December 2019 brought more good news for investors. It slashed the corporate income tax rate from 28% to 24%, effective as of 1 January 2019, and reduced the withholding tax on dividends from 10% to 5%, also effective as of 1 January 2019. The new bill lowers the advanced payment of income tax on legal entities and persons to 95%. This amount will be calculated on the tax assessed for the 2018 fiscal year (tax returns submitted in 2019 for the 2018 fiscal year), notes Yannis Seiradakis, Partner, Head of Energy & Environment and Joint Head of the Privatisations departments at Bernitsas Law.
There are other provisions outlined, explains Seiradakis. For real estate investment companies (REICs), undertakings for the collective investment in transferable securities (UCITS), investment funds, and real estate funds, a reduction of the annual asset-based corporate income tax is provided. Also outlined is the abolition of capital gains tax (under certain conditions); and a special real estate tax at the rate of 15% sees exemptions for alternative investment funds (AIFs) and other institutional investors.
Additional incentives include a tax deduction of corporate social responsibility expenses; income tax exemption for interest on specific listed corporate bonds; the suspension of the 24% value-added tax (VAT) imposed on newly-built properties until 31 December 2022; a tax deduction of written-off debts up to the amount of €300, “even if the creditor has not taken all the legal actions required for their collection,” adds Seiradakis, as well as a 5% reduced rate for the capitalisation of certain tax-free reserves.
Furthermore, Seiradakis explains that the Mitsotakis government has outlined a non-domiciled regime and lump-sum taxation for individuals residing, for tax purposes, outside of Greece for the last seven out of eight years, that is applicable under certain conditions. They have also ushered in a new reduced tax bracket for personal income applicable as of 1 January 2020.
The introductory bracket is reduced from 22% to 9% for income up to €10,000, and the maximum rate is reduced to 44%. The new measures also include deductions from income tax of expenses related to the renovation and upgrading of buildings. They also envisage an easing of the taxation of fringe benefits such as loans to employees, business cars with zero or low emissions, and increased value for the tax exemption of certain kinds of company cars.
“Recognizing the importance of getting business regulations right, the Greek government has taken significant action to improve the business environment, attract investment and set the country on a path of economic recovery from its decade-long crisis,” note the authors of the December 2019 report on Doing Business in the European Union 2020: Greece, Ireland and Italy, adding that
The authors also compare six Greek cities’ regulations and conclude that if the whole country were to adopt the best practices from each of these, Greece could potentially move 18 spots upward in the overall rankings for the ease of doing business, which is based on Athens’ measurements alone.
To boot, in its preliminary economic outlook released in November 2019, the OECD forecast that Greek GDP is set to grow by around 2% in 2020-21 and that the “recovery will firm,” reflecting increased confidence in the Greek economy and the measures the new conservative government has enacted to propel growth, jobs and investments.
1. Corporation / S.A. (Société Anonyme, Anonymous Eteria-AE) is a company limited by shares, separate from the people who own it. Its shareholders are only anonymous if the shares are on the stock market. Otherwise, the shareholders have to be registered. They are not liable for any debts the company incurs, and their maximum liability is their investment. A minimum initial capital of 25,000 euros is required for the formation of a company limited by shares, to be paid entirely or partially.
2. Solo Trader /Freelance Professional This formation offers flexibility to the trader as regards the type of activity involved, but the entrepreneur is liable for taxes and debts overall.
3. Limited-Liability Company (Eteria Periorismenis Efthinis—EPE). An EPE is type of company where the partners are known by name and are not liable for any debts incurred by the company. One or two partners are required for its formation. This enterprise is liable for its debts with its assets, and personal partner liability is limited to the amounts contributed by each partner.
4. Private Capital Company (Idiotiki Kefalaiouhiki Eteria-IKE). This is a relatively new company formation and features a private capital company, where the liability of its members for the company debts – except for those with a guarantee contribution – is limited. This company is established by one or more people, who are required to acquire one or more company shares. The minimum capital requirement here is 1 euro.
5. General Partnership (Οmorrythmi Eteria-OE - This type of partnership holds all partners personably liable for any debts incurred by the partnership. The company is defined by law to be the association of two or more (natural or legal) people.
6. Limited Partnership (Eterorrythmi Eteria-EE). This partnership provides for the participation of two types of partners: general partners, who are liable for the company’s obligations and limited partners, whose share of responsibility is equal to the percentage they have invested in the company (i.e. limited). Limited partners are not allowed to manage or work in the company, but can provide advice.
There are also branches of foreign companies, joint ventures, EU-wide companies, and more partnership formats available.
Konstantinos Bitsios, Vice Chairman of SEV Hellenic Federation of Enterprises (SEV), sees more favourable investment opportunities ahead. Enhancing Greece’s industrial production is a priority for the federation, and their target is for it to reach 12% of GDP to create jobs and close the gap with the EU average.
