TAXATION

Economy gets attractive again

Cuts to income and dividend taxation for firms and solidarity levy suspension help investors

economy-gets-attractive-again

Next year Greek taxation will cease to be an investor repellent: The drop in corporate income tax to 22% will bring it 1.65 percentage points below the 2021 global average of 23.65%.

That will also be 0.81 percentage points below the average rate of Organization for Economic Cooperation and Development member-states, and 1.29 points above the European Union mean rate.

The Greek environment is also becoming increasingly favorable as regards the distribution of profits: After the reduction of the dividend tax to 5%, the suspension of the solidarity levy has been extended to 2022, meaning that if an enterprise decides in 2022 to distribute all its profits, the final tax rate will come to 25.9%, while just three years ago the rate could reach up to 40%, depending on the dividend level. The permanent improvement in the taxation of corporate profits will also be bolstered by the permanent reduction of the corporate income tax deposit to 80% (with the exception of this year when the deposit has been brought further down to 70%). Candidate investors and new corporations will continue to enjoy the reduced deposit rate of 50%, so their liquidity outflows to meet tax obligations will shrink further.

Consequently Greece is significantly reducing the distance between it and other countries in terms of competitiveness due to overtaxation, one of its main drawbacks. At the start of the bailout period, in 2011, corporate tax had stood at 20%, below the global average (24.52%) and those of the EU (22.58%) and OECD states (25.42%). The rise of the tax rate to 26% in 2013 and then 29% in 2015 led to 2018 being the worst year for Greece, which stood five percentage points above the global average rate then.

On top of that, with the hike in the corporate income tax deposit to 100%, the dividend tax rate at 15% and the solidarity levy rates up to 10% after 2016, the state practically became a partner in corporate activity profits in Greece. That will soon seem like a bad dream vanishing at the break of dawn.