Investment
incentive allowances have the following characteristics:
- Regional
Variation:
The extent of the fiscal benefits available depends
on the region in which the investment is made and
for these purposes Greece is divided into 4 regions.
Larger tax incentives have traditionally been given
to investments made in regions which have high unemployment
rates, are remote or have a dwindling population.
- Promote
Economic Development: Irrespective of the region
in which the investment is made the more the investment
is deemed to promote economic development the higher
the tax incentives granted.
- Activities:
Investment allowances are available for any investment
that promotes the private sector, creates jobs, boosts
regional development or promotes business competitiveness.
Thus allowances are granted for investments that involve
the construction of business premises, the expansion
or modernization of manufacturing or other installations,
the purchase and installation of modern machinery
& the introduction and application of modern technology
and know how.
- Fiscal
Incentives: The fiscal incentive consists of the
right to deduct from taxable profits a sum representing
a percentage of the cost of the investment which sum
must be transferred into a non-distributable tax-exempt
reserve which has the following characteristics:
- Value
of the Reserve: Into the reserve can be transferred
an amount equivalent to between 40%-100% of the cost
of the investment. This sum is deductible from taxable
profits and the allowable percentage that can be transferred
depends on the region in which the investment was
made and the value which the investment has in terms
of economic development. Investments which greatly
contribute to economic development and which are made
in remote areas with high rates of unemployment attract
a higher percentage allowance.
- Limit
: The sum deducted from taxable profits and transferred
into the tax-exempt reserve cannot currently exceed
60%-100% of annual profits in the year in which the
transfer is made. Consequently the transfer of a sum
into the reserve which would leave a taxable trading
loss is forbidden. If the value of the investment
exceeds the annual profits figure it can be carried
forward and set off against future profits for up
to 10 years. The percentage figure depends on the
region in which the investment is to be made with
a higher percentage being allowed where the investment
is to be made in a remote area with high unemployment.
- Depreciation:
The right to transfer the cost of the investment into
a tax exempt reserve is additional to the legal right
of a business to depreciate capital assets over their
useful life and set off the same against taxable profits.
Thus a company with annual corporate profits of Euros
12m which invests Euros 1m in manufacturing machinery
which is to be depreciated over 10 years using the
straight-line method, and which has been granted the
right to create a 40% investment tax reserve will
be able to set off against its first year's taxable
profits the sum of Euros 100,000 representing depreciation
and an investment allowance of Euros 400,000.
- Distribution
of Tax Exempt Reserve: Funds transferred into
the reserve must not be distributed as dividends i.e.
they must be used to strengthen the liquidity and
asset base of the company.
Greece
is committed to improving its tourism product, and as
such is offering attractive incentives for new tourism
projects, as well as for upgrading.The Investment Incentives
Law 2601/98 outlines the legal framework for the tourism
sector. These incentives have traditionally taken the
form of either cash grants of up to 45% of eligible
expenses depending on the area in which the investment
is located and depending on what kind of investment,
or of tax allowances ranging from 40%-100%. In both
cases an interest subsidy of up to 45% of the long-term
loan used for the financing of the investment cost is
also provided. The disbursement of the cash grant is
in three stages; 60% (in two installments) during construction,
20% upon completion of construction and 20% upon operation.
The cash grant cannot exceed the amount of 45,000 EUR
per job created by the investment (including seasonal
jobs appropriately adjusted). This limitation does not
apply to investments in the modernisation of integrated
hotels. Equity provided by the investor cannot be less
than 40% of eligible expenses.
In the case of investments of at least 75 million EUR
with the creation of at least 300 permanent jobs, both
incentive options (i.e. cash grants or tax allowances)
are alternatively applicable. Also, exceptions to the
limitations in minimum equity, the procedure for disbursement
of the grants, size of the grants, interest subsidy
(duration and percentage), maximum amount of the bank
loan, percentage of tax allowances and allowances in
the leasing of equipment, conditions for transferring
company shares, as well as the possibility of public
corporations assuming part of the cost of the investment.
However,
a spects of the Greek regional investment incentive
regime were included on the list of 'Harmful Tax Practices'
issued by the EU's Code of Conduct Committee. The government's
new 2005 investment incentive programme have had an
impact on the size and nature of regional investment
incentives. The incentive provisions under the new Investment
Incentives Law highlight the three main categories of
investment incentives: cash grants, subsidies or tax
allowances. The objectives of the new law, according
to government officials are:
-
To challenge and reinforce new entrepreneurial activities,
e.g. theme parks, broadband networks, renewable energy
sources, environmental protection, desalination plants,
warehouses, logistics and distribution centres; and
-
To give special emphasis to capital intensive investments.
Cash grants under the new law are available up to 55%.
A new committee has been formed to facilitate and simplify
administrative investment procedures and to check whether
the following requirements
are met:
-
Minimum own equity contribution required is 25%. Evaluation
time for business plans within two months. Upon approval
of the investment incentives application, the
incentives payment plan is predetermined and scheduled.
Investments located in industrial and business areas,
investments for the development of four and five star
hotels etc., receive an additional 5% subsidy.
-
Small and medium size companies are eligible for up
to 15% cash grants.
The Incentives Law is applicable to enterprises having
business activities in the following sectors:
-
Primary (e.g. greenhouses, animal farms, fisheries
etc). Secondary (e.g. manufacturing, energy etc).
-
Tertiary: Tourism (hotel units, conference centres,
marinas, theme parks, golf courses, development of
mineral springs, thalassotherapy centres, health tourism
centres, centres for training-sports tourism etc);
-or other services (e.g. applied industrial research
laboratories, commercial centres, software development,
supply chain services, logistic centres etc.).
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