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Greece rules that the special solidarity tax falls within the scope of double tax conventions

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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

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.

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