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Greece introduces enhanced tax incentives for research and development

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Further tax incentives for R&D aims to attract more foreign investment

Stella Saritzoglou of EY in Greece explores the enhanced tax incentives granted for research and development, which are expected to boost research activities in the country.

In an effort to attract new investments in research and development (R&D), additional tax incentives for R&D expenses were incorporated into the Greek tax legislation. L.4712/2020, passed on July 29 2020, amended the Greek Income Tax Code (GITC) by providing an increased tax deduction of R&D expenses, and an alternative procedure for the review and certification of such expenses by the General Secretariat for Research and Technology (GSRT).

According to the Explanatory Memorandum of L.4712/2020, despite the upward trend of the last 10 years, Greece is still lagging in total R&D expenditure, compared to the EU average. According to OECD data, tax incentives in Greece are lagging compared to most EU member countries, as well as to most OECD member countries. In such a competitive environment, any country perceived as being less attractive, runs the risk of losing a significant part of business and economic activity. Therefore, granting more attractive tax incentives for R&D was deemed necessary, aiming to attract more foreign direct investment by increasing the research activity of multinational groups of companies, through their Greek subsidiaries.

In view of the above, by virtue of the most recent legislative developments, R&D expenses effected from September 1 2020 onward – including the depreciation of equipment used in R&D – are tax deductible from legal entities’ revenues at the time of their realisation, increased by 100%. The intention of attracting more investments in R&D is evident, taking into account that, before the recent legislative amendment, the relevant super tax deduction amounted to merely 30%.

Another point of concern for the market was the significant delay in the audit and certification process of R&D expenses, due to their increasing volume over the past years. To this end, the provisions recently incorporated into the GITC will speed up the audit and certification process. Specifically, legal entities can submit the required documentation for R&D expenses to the GSRT, along with an audit report signed by a certified auditor and/or audit firm, certifying the realisation of such expenses and their amount. In case companies opt for such process, the GSRT will focus solely on whether the realised expenses actually relate to R&D activities and will not proceed to a full-scope review.

The audit and certification of R&D expenses through this alternative procedure will be finalised within six months – instead of the general 10-month rule when there is no audit report. In addition, if the six month deadline lapses without any action by the GSRT, the respective R&D expenses will be deemed to have been approved. Such an alternative process may also apply to R&D expenses, which had already been submitted to the GSRT up to the date when the new legislative provisions were enacted (i.e. July 29 2020).

The newly enacted procedure aims to decrease the administrative costs of legal entities and strengthen the perception of tax certainty at the time of the preparation of their annual financial statements. The underlying rationale is for the Greek state to benefit from the private sector’s know-how and significantly reduce the GSRT’s workload, since the reports of the certified auditors will certify the validity of the accounting entries. Such a process is expected to accelerate R&D expenses certification, thus reducing the bureaucratic burden and upgrading the quality of the audits conducted by the GSRT. 

It is also worth noting that, with a view to establishing a more comprehensive framework, some additional tax incentives are also granted for R&D expenses, as well as for the development of internationally recognised patents. In more detail, starting from December 18 2018, any share capital increase effected through cash injections intended to be used exclusively for R&D expenses is exempted from capital concentration tax. Furthermore, by virtue of the GITC, profits deriving from the sale of self-manufactured goods via the use of an internationally recognised patent developed by an entity itself, can be exempted from income tax (tax free reserve) for three consecutive years, starting from the year in which revenues from such products were firstly realised. The incentive also covers profits deriving from the provision of services relating to the exploitation of such internationally recognised patents.

In conclusion, the new legislative provisions are heading towards the direction of making Greece more attractive for R&D activities, since it is expected that the enhanced tax incentives will contribute to attracting new investments and reversing the ‘brain drain’ phenomenon through the creation of high-end employment opportunities. 


Stella Saritzoglou

Senior manager, EY in Greece


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