Security Alert
We recently welcomed two long-awaited Circulars issued by the Tax Administration. Our newsletter summarises key clarifications provided, which are expected to contribute towards uniform application of the relevant legislative framework, while at the same time it highlights certain gaps that continue to warrant attention and areas that still create ambiguity.
A. Circular 2088/2025: Tax incentives on corporate transformations (L. 5162/2024 – “L. 5162”)
Key clarifications
L. 5162 cannot apply in parallel with tax incentives under L. 4935/2022. It’s one or the other.
Domestic entities subject to the same tax regime are within scope, even if they enjoy income tax exemption under the Income Tax Code (ITC) or other special provisions.
L. 5162 applies regardless of the shareholders’ tax residence, on the note that foreign legal entities not maintaining a Greek PE are in any case exempt from capital gains tax on the disposal of shares.
Valuation obligations are determined exclusively by corporate law.
For the receiving entity: a) capital gains on assets will be taxed upon a future disposal or its dissolution and tax depreciations performed up to that point are taken into account; b) any further transformation of the receiving entity should not trigger tax subject to the anti-abuse rule; c) upon capitalisation of the net equity of the contributed capital no CIT is due [i.e. ITC Article 47(1) does not apply].
For shareholders: a) if exemption is overturned for one shareholder due to the disposal of shares within two years from the transformation completion, exemptions for other shareholders and the participating companies are not affected; b) the two‑year clawback does not apply to conversions; c) where the shareholder is a legal entity, the uplift arising from the transformation is not subject to CIT upon later distribution or capitalisation [i.e. ITC Article 47(1) does not apply], unless it takes place within the two-year clawback period.
The clarifications provided under POL.1185/2018 on the carryover of PSI, unused bad‑debt provisions, investment‑law reserves and special untaxed reserves continue to apply.
The continuity of the 24-month holding period in transformations involving (quasi‑) universal succession, as considered for the application of the EU Parent-Subsidiary dividend withholding and participation exemption, the EU interest/royalties withholding exemption (POL. 1185/2018) as well as the capital gains exemption under 48A ITC (Ε. 2057/2021), is confirmed under L. 5162 and it is further clarified that: a) this principle applies equally to cross‑border cases and demergers irrespective of whether the transformed entity is the recipient or the payer; b) the tax-exempt capital gain under 48A ITC that passes to the recipient entity via universal succession is not subject to CIT upon distribution or capitalisation.
Open issues requiring further guidance and attention
Branch of activity: While it is clarified that for the tax benefits to apply one should adhere to the new tax statutory definition under L. 5162 (and not the corporate one), no further interpretation guidance on this new definition’s functional elements was provided. Absent examples or interpretive criteria on what minimum composition and functional cohesion qualify as an “autonomous exploitation”, uncertainty on qualification remains.
No option for retroactive tax effect: Corporate law (L. 4601/2019) allows the merger/demerger plan to designate an “effective date” from which transactions are deemed, for accounting purposes, to have been carried out on behalf of the recipient. The Circular, however, vests tax effects strictly to legal completion. The lack of a retroactive tax‑effect option could be problematic in cross‑border restructurings, where synchronised effective dates are needed to avoid mismatches and conflicts with the corporate‑law flexibility.
Partial consolidation: While the Circular makes an effort to consolidate prior guidance, important aspects might remain outside its codification, e.g. as per Circular Ε.2004/2021, any non‑deducted exceeding borrowing costs under Interest Limitation Rule (Article 49 ITC) are carried forward, while in demergers they are allocated to the recipient in accordance with the demerger plan.
B. Circular 2094/2025: Digital Transaction Duty – “the Duty” (L. 5177/2025 – “L. 5177”)
Digital Transaction Duty has been introduced as of 01.12.2024 replacing the applicable until then stamp duty. The Duty applies to specific transactions exhaustively enumerated in L. 5177, provided that one of the contracting parties is a Greek tax resident or a Greek permanent establishment and the transaction relates to the activity of the permanent establishment.
Key clarifications
For conditional, contingent, or term-based agreements, tax liability arises when the condition is fulfilled or the term lapses.
No Duty shall apply to transactions not expressly included in L. 5177, such as loan for use (χρησιδάνειο), capital increases by not-for-profit entities, forfeiture of a bank guarantee in favour of the State.
Renewals of agreements are not subject to the Duty if, cumulatively: a) they are agreed before the term of the original agreement expires; b) there is no increase of the economic value and no change of the contracting parties; and c) the original agreement has been duly subject to stamp duty or the Duty, lawfully exempted, or outside their scope.
Ancillary Agreements (παρεπόμενα σύμφωνα) are subject to the Duty only if the applicable Duty on the main contract has not been paid. Conversely, where the main contract falls outside the scope of the Duty or it is exempt, no Duty is imposed, e.g. if a loan between foreign legal entities is secured by a third-party guarantee through a mortgage over Greek real estate, mortgage registration is not subject to the Duty.
Specifically, in case the main contract was concluded before 01.12.2024 and it was exempt from stamp duty but the transaction to which it corresponds now falls within the scope of the Duty, any Ancillary Agreement executed after 01.12.2024 will be subject to the Duty, e.g. for a loan concluded abroad in March 2023 by a Greek tax resident which fell outside the scope of stamp duty on territorial grounds, the registration of a mortgage in December 2025 to secure that loan will be subject to the Duty.
Apart from loans, the Duty applies to credits assimilated to loans and to credit cards, not to all forms of credit. Transactions within the scope of VAT or property transfer tax are excluded, such as financial leasing, factoring, derivatives, repos, securities lending, and sales on credit.
Bond loans issued by foreign companies (within or outside the EU/EEA/EFTA) are exempt from the Duty, similarly to bond loans issued by Greek companies, under the fundamental EU law principle of free movement of capital.
For closed-term loans, the Duty is calculated on the contractual principal and is due upon execution of the loan agreement, irrespective of disbursement timing.
For revolving or open credit lines, each drawdown is treated as a separate loan subject to the Duty. The €150k Duty cap that applies to loans, applies per draw-down as well.
Cash pooling arrangements fall within the notion of credit and, depending on their economic characteristics, are subject to the Duty either as loans, cash facilities, or current accounts.
It is only the assumption of debt with discharge of the original debtor that falls within the scope of the Duty (not the co-assumption without discharge).
The Duty of 3‰ to cheques recorded on mandatory bank registers does not extend to cheques presented to banks for immediate payment.
Open issues requiring further guidance and attention
Interest bearing loans & VAT: The Circular adopts the position that interest-bearing loans fall within the scope of the Duty, because they are outside the scope of VAT. This approach is not consistent with VAT legislation - as per which interest-bearing loans are withing the scope of VAT. Given that as per L. 5177 the Duty should not apply to transactions within the scope of VAT, there is room for taxpayers to challenge the Duty application.
Amounts intended for future capital increase: The Circular clarifies that shareholder deposits intended for future share capital increase do not bear the Duty, in line with the approach established under case-law, since amounts are subject to capital concentration tax. Yet the Circular sets the condition that “the funds are not used for any other purpose”. Although the wording does not seem appropriate, we would assume that this is an effort to capture a requirement that the share capital increase has to eventually take place. One should also consider the timeframe set by Greek GAAP for such capitalisation.
Settlement agreements: As per the Circular, where mutual claims are settled, each settled claim is examined autonomously for Duty purposes. Again, wording is ambiguous, and it could result in multiple amounts paid under settlements attracting Duty, thus creating an unjustified burden for contracting parties.
Assignment of receivable/assumption of debt: Although the Circular recognises that the assignment of receivable/assumption of debt trigger the Duty provided they are not concluded for consideration, from the example it uses it is not certain what the tax authorities deem as consideration for such transactions that would allow the non-imposition of the Duty.
Debt forgiveness: Whereas L. 5177 provides for the imposition of the Duty in all cases where such forgiveness takes place, the Circular appears to suggest that the Duty is eventually applicable only in case the underlying transaction from which the debt was created was subject to the Duty, but the latter has not been paid.