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LOWTAX
ONSHORE
GREECE:
MUTUAL FUNDS AND PORTFOLIO INVESTMENT
COMPANIES
N.B.
The Greek mutual fund taxation regime was included on
the list of 'harmful tax practices' issued by the EU's
Code of Conduct Committee in 1999. The following describes
the regime prior to the 2004 mutual funds law. See below
for a description of the 2004 regime.
Greek mutual
fund and portfolio investment companies qualify for
special fiscal incentives. To qualify as a Greek mutual
fund or portfolio investment company an entity must
have the following characteristics:
Its
business activities must consist exclusively of holding
securities (e.g. shares, bonds, titles of participation
in mutual funds, bank deposit certificates & Government
treasury bills).
The
minimum capital of a Greek mutual fund or portfolio
investment company is EUR1bn euros at the time of
writing.
The
portfolio investment company must be listed on the
Greek stock exchange.
Mutual
funds are currently taxed at 0.3% of the semi-annual
average net asset value of the fund. The tax is calculated
daily and paid in the first 15 days of July and January.
This tax is final for both the fund and the investors.
There is also a withholding tax for certain types of
interest paid to mutual funds.
Capital gains on the sale of mutual fund units are exempt
from tax, and mutual fund real estate holdings are also
tax-exempt.
As from 2002, closed-end mutual funds investing in other
companies were brought within the regime applying to
publicly-held mutual funds.
An
incentive put in place in 2001 was that 25% of the cost
incurred for the acquisition of units in Greek mutual
funds investing in listed shares would be deducted from
the total income of the unit holder in the third year
following the acquisition of the units.
When a resident individual participates in a resident
fund, the distributed profits are tax free. Income that
has not been distributed yet but remains with the fund
is deemed to arise for the holder when the profits are
approved by the MFMC. Such profits as well as reinvested
profits are tax-free for the unit-holder.
Capital gains arising from the sale of units at a price
higher than the acquisition price are also tax free.
Furthermore, inheritance tax is levied on the value
of units acquired through the inheritance. This tax
is based on a graduated scale of rates that calculate
the tax on the basis of the value of the property as
well as the family relationship.
Income from foreign mutual funds is deemed to arise
when it is collected. Capital gains and distributed
profits are currently subject to a 20% withholding tax
in the hands of the investor which is offset against
his annual final tax liability. The withholding tax
is levied at the time the investor receives the profits
from the bank in Greece. If the capital gains/profits
are not imported into Greece, but are reinvested abroad,
no withholding tax is imposed.
There are no special incentives available for fund managers
in Greece.
A mutual fund is not entitled to the benefits of Greek
tax agreements, as it does not constitute an entity.
Its individual unit holders may be entitled to claim
such benefits under their own relevant double tax agreements
in view of the transparency of the mutual fund.
The
Greek mutual fund taxation regime was included on the
list of 'harmful tax practices' issued by the EU's Code
of Conduct Committee; it is likely that changes will
result although these remain somewhat unclear.
In 2004, Greece introduced rules for closed-end mutual
fund companies in an effort to promote investment
in emerging companies. Below are the most important
provisions:
The close-end Mutual
Fund investing in companies is a combination of
assets consisting of securities, company share parts
and cash and it is established for a certain period
of time that cannot exceed 15 years. The assets
of the close-end Mutual Fund are divided into equal
parts and belong to the unit holders (co-ownership).
The close-end Mutual
Fund invests exclusively in shares or share parts
of companies that have their registered seat in
Greece and are not listed in the Stock Exchange
and also in convertible and/or profit participating
bonds of the above mentioned companies.
The close-end Mutual
Fund can participate in the capital of listed companies
only if such participation has taken place before
the approval of the listing of the company and this
participation is disposed of within 5 years following
the date of the listing of the company.
Manager of a closed-end Mutual
Fund can be:
a. A Corporation with share capital of at least EUR100,000
having as exclusive object the administration of close-end
mutual funds.
b. A business that is licensed by the competent authorities
of a member-state of the European Economic Area to
manage similar venture capital vehicles.
c. An Investment Company of L. 2396/1996.
The minimum assets of a close-end Mutual Fund upon
establishment must be at least EUR3 million and the
minimum participation of each holder should not be
less than EUR150,000.
The investment of the assets of the closed-end Mutual
Fund is subject to restrictions.
The closed-end Mutual Fund is not subject to any kind
of taxation. Any income the unit holders realize in
their capacity as co-owners of the Fund's assets is
subject to tax in their hands. The transfer or other
transaction in the units is treated for tax purposes
as a transfer/transaction on the related ownership
on the fund's assets.
The contract for the formation and management of the
closed-end Mutual Fund as well as the payment of the
holders' participation are not subject to any kind
of tax, fee, stamp duty, contribution, right or any
other charge imposed by the State, or any other third
party.
N.B.
In 2008, the Greek government presented legislation
to parliament which calls for a new 10% tax to be
imposed on capital gains made from selling shares,
and a new 10% tax on stock dividends, both applicable
from January 1, 2009. Under the proposal, the existing
0.15% share transaction tax will be gradually phased
out.
Mutual
funds are established under Law 3283 of 2004
The creation of a mutual fund,
as well as the purchase and sale of units, are, under
this law, exempt from any kind of tax, duty, stamp
duty, contribution, right or any other charge. Mutual
funds, however, are taxed at a rate equal to 10% of
the Euribor rate increased by:
0.25 points
for bond funds.
0.5 points
for mixed funds.
One (1)
point for stock funds and real estate mutual funds.
In case either the intervention
rate or the classification of the fund changes,
the new tax base applies from the first day of the month
following the month
in which the change was effected. The tax is calculated
daily on the semiannual
average net asset value of the fund and is payable in
the first 15 days
of July and January. This tax is final for both the
fund and the investors.
Withholding
tax on interest no longer applies, with the exception
of interest
on bonds if the bonds are acquired at least 30 days
prior to the day
which is set for interest payment. No other taxes or
duties are applicable.
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