Legal System Being Refined

As of 2010, numerous laws have been enacted to attract investment in strategic sectors of the Greek economy, says Yannis Seiradakis, Partner, Head of the Energy & Environment, and Joint Head of the Privatisations departments at Bernitsas Law.


GIG:What are the top legal tips you give foreign investors about investing in Greece?

Seiradakis: As part of our services, we work closely with foreign clients to ensure the viability of their investments by helping them build effective tax planning schemes and select a suitable financing mix. We also evaluate the special needs of each client on a case-by-case basis and assist them in selecting a flexible and cost-saving corporate form, while offering proper guidance through the regulatory framework and the various licensing procedures that are central for the speedy set-up of a foreign business in Greece.

Smooth and productive interaction of the project developers with the various local authorities and the establishment of useful contacts has proven to be of high importance for foreign investors, as is the forging of a reliable relationship with key people in both the private and public sectors.

In order to avoid timely and costly judicial procedures, given the delays arising from the heavy workload of the Greek courts, we strongly advise foreign clients to opt for alternative dispute resolution (ADR) mechanisms, such as international arbitration or mediation.

Finally, the selection of capable local management and a well-established relationship with reputable and internationally acknowledged business-oriented legal and financial advisers is always a decisive factor in the success of the investment.

GIG: What would you identify as being the key legal challenges for foreign business in Greece?

Seiradakis: Depending on the sector, investors may be required to obtain licences from various governmental and independent authorities, which is particularly true of highly regulated industries (e.g. energy, banking, insurance, and health).

An additional delay factor that investors may encounter is the merger clearance from the Hellenic Competition Committee, which, if applicable, is necessary for Mergers & Acquisitions (M&A) projects to move forward.

The wide range of fragmented rules and regulations, in combination with the complexity of the Greek tax legislation, requires careful tax planning and advice from a reputable tax law adviser.

Where equity financing is not available or desirable, an investor will have to undergo credit approval procedures set by the banks. In this case, a well-structured and financially sound business plan must be prepared, while satisfactory collateral must be provided to the lenders.

As far as public tenders are concerned, whether procurement or privatisations, certain jurisdictions may be excluded based on a list of non-cooperative states – mainly tax havens – published by the Ministry of Finance from time to time.

Furthermore, acquisition of real estate rights in regions designated as border areas is only allowed to Greek or EU nationals, while third-country investors have to obtain a relevant authorisation by the Minister for National Defence.

The labour regime in Greece is currently uncertain despite the ongoing efforts to liberalise labour relations. Increased protection measures on discharges of employees, together with a burdensome social security framework, are the top challenges an investor has to deal with when engaging personnel in Greece.

GIG: What are the most common mistakes foreign investors make in Greece?

Seiradakis: In our view, building an effective team is essential for foreign investment to succeed.

Conversely, the selection of non-reliable business or consortium partners, particularly where joint and several liability is statutorily established such as in public projects; poor or over-promising business contacts; limited knowledge of the local investment environment, including the applicable legal framework; or lack of a pro-active financial and developmental approach, may jeopardise the investment.

Moreover, taking into account the continuous refinement of the Greek legal system, the positive economic conditions, and the extremely promising investment opportunities, the prospective investor should not get discouraged when first entering the Greek market without first having obtained all available information and advice from experts.

GIG: Are there any reforms relating to Greece’s legal framework that investors should be aware of?

Seiradakis: As of 2010, numerous laws and regulations have been enacted in an effort by the Greek government to attract significant investment in strategic sectors of the Greek economy.

In this context, a series of provisions were introduced granting substantial incentives to high-scale investors, aiming at the same time to abolish certain perennial obstacles such as bureaucracy and lack of transparency (most importantly Laws 3894/2010, 4146/2013, and recently Law 4608/2019). In addition to the above, we note Law 4399/2016, introduced to provide a general framework of tax incentives for private investment in Greece.

Furthermore, interaction with public authorities, and the complexity of various administrative procedures, have been significantly mitigated through root-and-branch reforms in company legislation – including an important simplification of the incorporation process – making the establishment of a company in Greece a fast and more straightforward process.

A significant development enhancing the investment climate in Greece is the gradual loosening and upcoming abolishment of the capital controls introduced in late June 2015. An emergency measure in the midst of the financial crisis imposed limitations on cash withdrawals and the transfer of capital abroad. As a result, capital transfer restrictions no longer apply to fresh money that has been transferred to Greece from abroad.

An equally important development is the enactment of special legislation granting provisional residence permits to non-EU nationals who own property of a certain value in Greece, as well as to investors in projects that qualify as strategic investments, following a decision by the Interministerial Committee for Strategic Investments.

GIG: Are there any key differences between Greece’s legal framework and those seen in other European countries?

Seiradakis: As far as the sectors falling within the EU’s area of competence are concerned (e.g. competition, banking, environment, trade, energy, employment and social affairs, transport, and consumer protection), there are no major regulatory differences in Greece, as the EU states’ legal frameworks are gradually becoming harmonised.

Sectors where foreign investors may expect to encounter different legal conditions, as compared to those applied in other EU countries, are those of national and public interest such as taxation, real estate, and corporate affairs.

Finally, it is worth mentioning that even large-scale public projects are materialised based on documents aligned with international standards, with the involvement of international financial advisers and lawyers, which creates a familiar framework for foreign investors.

GIG: What effect will the recent investment and tax legislation passed in parliament have in terms of attracting long-term investors and reducing red tape?

Seiradakis: Greek Law 4635/2019, Invest in Greece and other provisions, passed by the Greek Parliament on 24 October 2019, significantly transformed the Greek investment environment with various amendments to the legal framework aiming to attract investment and boost the country’s economic growth. Some of the most investor-friendly provisions of the new law are included below:

  • Law 4608/2019 offering various incentives to qualifying strategic investments was amended with the broadening of the pool of eligible investments, while the environmental licensing procedure – for projects developed by strategic investors – was streamlined, and the process followed for the granting of financial incentives was enhanced and clarified.
  • Law 4399/2016 establishing a state-aid scheme for eligible investments – such as tax exemptions and cash grants – was amended with the broadening of qualifying sectors (e.g. investments in condo hotels are now eligible) and the transformation of the investment’s realisation process. Implementation of the investment from now on can be verified by certified auditors instead of the competent public authorities, a new alternative which is expected to expedite payment of the subsidies to the project promoters.
  • The licensing process and requirements for a wide range of projects and commercial activities was simplified, particularly with the elimination of various bureaucratic barriers. Most importantly – as regards environmental permits and installation and operation licenses –  certain restrictions prohibiting the operation of industrial plants within the region of Attica were lifted to motivate the industrial and manufacturing sectors.
  • The legal framework governing the business parks was overhauled – with the simplification of the establishment of new businesses in organised areas holding environmental permits – with the view to render such parks attractive to new investors.

The new tax bill that was passed by the Greek parliament on 6 December 2019 introduces investment-friendly measures. In particular, the tax bill provides for:

Incentives for legal entities and entrepreneurs:

  • Reduction of the corporate income tax rate from 28% to 24%, effective 1 January 2019;
  • Reduction of the withholding tax on dividends from 10% to 5% effective for tax years commencing from 1 January 2020 onwards;
  • Reduction of the advanced payment of income tax on legal entities and persons to 95%. This amount will be calculated on the tax assessed for fiscal year 2018 (tax returns submitted in 2019 for fiscal year 2018);
  • For real estate investment companies (REICs), undertakings for collective investment in transferable securities (UCITS), investment funds, and real estate funds, the reduction of the annual asset-based corporate income tax is provided;
  • Participation exemption on capital gains tax under certain conditions;
  • Special real estate tax, at the rate of 15%, and exemptions for alternative investment funds (AIFs) and other institutional investors;
  • Tax deduction of corporate social responsibility expenses;
  • Income tax exemption for interest on specific listed corporate bonds;
  • Suspension of VAT (24%) imposed on newly built properties until 12 December 2022; 
  • 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; 
  • Reduced rate for the capitalisation of certain tax free reserves (5%).

Tax reductions for individuals:

  • Introduction of non-domiciled regime and lump-sum taxation for individuals residing, for tax purposes, outside of Greece for the last seven out of eight years (under certain conditions);
  • 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%; 
  • Deductions from the income tax of expenses related to building renovations and upgrades;
  • Improvement of taxation of fringe benefits such as loans to employees, business cars with zero or low emissions and increased value for the tax exemption of tool cars.
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