According to legislation and information from the cooperating states, it will attempt to “close” the tax frontier with the Ministry of Finance to stop the phenomenon of fleeing businesses and traders in countries with lower tax rates and to frighten those who have transferred their activities abroad.
Oversupply and high insurance contributions force more and more taxpayers and businesses to turn to countries like Cyprus and Bulgaria where tax rates are at 12.5% and 10%, respectively. Contrariwise, in Greece, the corporate tax rate has reached 29% (with the IMF proposing to reduce it to 10% while the advance tax payment is 100%). Taking into account the increased contributions, as well, the operation of an entity is now required. At the same time, thousands of taxpayers’ applications are pending from foreign tax residences, who have decided to look elsewhere for their fortune.
According to information, the volume of applications has surpassed every precedent, but bureaucracy and excessive excitement, to the detriment of circumvention of European legislation, create big issues to the taxpayers. According to legislation, for those who live abroad for over 183 days, the income which is taxable in Greece, is this which received in Greece and not for worldwide. A basic requirement is to declare the change of their residency in the Register of the WHO and in the corresponding authorities of the country where they are now residing. They also have to designate a tax representative in Greece.
However, a lot of companies have set up offices in neighboring countries without having any activity or employees. Most of them are service companies and aim to reduce tax burdens.
Finance Minister, Mr Euklidis Tsakalotos, answering a relevant question, emphasizes that when business activities remain in Greece and there are no changes in ownership and administration, migrations seem to involve fictitious transfers. Obviously, these are unlawful business practices that seek to benefit from a favorable tax regime and abuse the freedoms granted by the law of E.E. In this context, it is expected that the relevant controls will be stepped up while legislative regulation is being prepared. Based on this a new information is required in the tax declarations for the tax year ended 31 December 2018, where the tax payer has the obligation to declare the expenses from Non-Member States or from countries with preferential tax legislation.
Mr. Tsakalotos noted that the relevant departments of the Ministry of Finance are paying particular attention to the phenomenon of moving Greek businesses to neighboring countries with low tax rates.
In order to prevent tax competition among Member States, initiatives have also been taken at EU level, such as CbCR (Country by Country Report), for example the exchange of information on taxation between Member States, which allows national tax authorities to identify tax evasion systems
Officers from the Ministry of Finance mentioned that transnational agreements with Bulgaria and Cyprus will be signed shortly so that all these companies can be scrutinized. The same executives say that fines will be imposed on those companies that have been found to have set up businesses in Bulgaria, but in essence their business activities are in Greece. On the other hand, the Greek government will send data to all Bulgarian people working in Greece in order to find out if the Bulgarian authorities are receiving an indemnity from their country.