The Greek Independent Authority for Public Revenue (IAPR)
published on July 24 2017 a decision (POL. 1114/2017) to
provide administrative guidance on the Greek tax treatment of
foreign trusts and foundations.
Greece is a civil law jurisdiction and has not ratified the
Hague Trusts Convention. Consequently, such legal arrangements
and fiduciary relationships (especially trusts) that originated
and are still primarily governed by common law jurisdictions
were always treated ambiguously in the Greek tax legislative
framework. However, historically, the use of such legal
arrangements has grown to be popular amongst Greek nationals,
given the special ties of many Greeks with common law
jurisdictions, such as the Greek shipping community's ties with
Cyprus and the UK.
The abovementioned decision provides comprehensive guidance
on several kinds of transactions and flows of funds that may be
effected through the use of trusts and foundations by applying
both the Greek Income Tax Code and the Code of Gift and
First of all, it is clarified that distributions from a
trust or foundation to its settlor (trustor) or founder (when
he is a beneficiary, as well) are treated as dividend
distributions. Moreover, for income tax purposes, it is
stipulated that trusts and foundations are considered as legal
entities, as per the latest Greek Income Tax Code, and are
subject to the Greek corporate tax rate of 29% for any Greek
real estate property income they acquire, while the usual Greek
withholding tax rates on royalties, interest and dividends also
apply to them. In this context, it is recognised that they are
entitled to treaty protection, if they are tax resident in a
country that has signed a double tax treaty (DTA) with Greece.
In addition, it is stipulated that they are subject to Greek
controlled foreign companies (CFC) rules.
On the contrary any income or assets received by a
beneficiary (who has not contributed assets in a trust or
foundation) is treated according to the Greek Code of Gifts and
Inheritance. The decision refers to cases of both living
(inter vivos) trusts and to testamentary trusts.
Therefore, depending on if the settlor/founder is still alive
or not at the time of the payments or transfers to the
beneficiary, these will be respectively regarded as either
donations or inheritance and the beneficiary will be burdened
with the relevant Greek donation or inheritance tax. This
look-through approach is in general congruent with the approach
taken by most civil law jurisdictions on the subject issue.
Finally, several relevant tax issues are clarified,
including the application under the previous Greek Income Tax
Code, which was effective up to December 31 2013. To this end,
taxpayers may still benefit from the Voluntary Disclosure
Programme (VDP) Law 4446/2016 and comply for any past tax years
by filing the relevant tax returns by September 30 2017 (expiry
date of the VDP Law).
In general, the decision clears that each case should be
looked into separately, depending on the actual facts and
arrangements and there are still issues that may cause
conflicts of law and may need further clarifications. Overall,
however, it cannot be argued that this long-awaited
interpretative guidance provides, for the first time, a
comprehensive explanation of the Greek tax treatment of foreign
trusts and foundations.
Ilias Sakellariou (firstname.lastname@example.org),
Tel: +30 210 2886 000