By means of a pilot trial, Greece's Supreme Administrative
Court (SAC) has ruled (No. 2465/2018) on the nature of the
special solidarity tax and whether it falls within the scope of
the double tax agreements (DTAs) signed by Greece.
The case at hand concerned an appeal of an individual, who
is a tax resident of the UK, who requested annulment of the
special solidarity tax assessment imposed by the Greek tax
authorities on income realised in the 2015 tax year. The
applicant alleged that since their income was exempt from Greek
income tax (pursuant to the provisions of the Greece-UK DTA),
imposition of the special solidarity tax was unlawful.
In contrast, the tax authorities, who were operating on the
basis of Opinions No. 130/2017 and 13/2018 (issued by the Legal
Council of State, which had been accepted by the Greek tax
authorities though Circulars POL 1100/2018 and 1099/2018,
respectively), were of the opinion that the special solidarity
tax is not regulated by DTAs.
The court rejected the tax administration's position,
accepted the appeal, and held that the special solidarity tax
falls within the scope of Article 1 of the DTA, as a tax
imposed on income or, at least, a tax of a "substantially
similar character" to an income tax.
Furthermore, the aforementioned ruling applies irrespective
of whether the above financial burden is of an "extraordinary"
nature (the DTA does not differentiate between ordinary and
extraordinary taxes). It also does not include a conceptual
definition for their distinction based on objective and
predictable criteria, thus creating vagueness, which is not in
compliance with the principle of legal certainty.
Consequently, an interpretation that excludes extraordinary
taxes from the scope of the DTA would in general provide the
contracting countries with the ability to circumvent its
provisions, and not preserve their effectiveness.
Moreover, the provisions of the DTA also cover a tax burden.
While this is initially provided as extraordinary or temporary,
it becomes ordinary. During the disputed tax year (2015), the
tax in question had already been imposed for six consecutive
tax years, and consequently could not be classified as
"extraordinary" or temporary. Besides, the nature of such tax
as "ordinary" or regular is confirmed by its later integration
in the Greek Code of Income Tax and its imposition for the
following tax years, without a time limit.
The recent decision of the SAC is of great importance as it
establishes a correct interpretation of the scope of Article 1
of the DTA, and protects the legal supremacy of the DTAs by
denying to Greece the possibility of circumventing the DTA and
altering taxing rights, as these have been agreed and allocated
through the agreed DTA between the two states.
Greek tax authorities have already recalled their previous
administrative guidance and have complied with the said
decision by issuing Circular E.2009/2019, confirming that the
special solidarity tax falls within the scope of all 56 DTAs
that Greece has signed.
Ilias Sakellariou (email@example.com), Marousi
Tel: +30 210 2886 000