ECONOMY

Ministerial decision on tax exemption of offshore companies

Offshore companies wholly owned by foreign entities and which are building office or other installations for their own industrial, tourism or commercial activities, as well as shipping firms, must submit a host of documents in order to be exempted from the special 3 percent tax that will be apply shortly. According to legislation passed last year, offshore companies, irrespective of their gross revenue and for a period of seven years after the issuing of a building license for such installations, are exempted from the tax. A decision issued by Deputy Finance Minister Apostolos Fotiadis yesterday said the exemption from the tax only ends if the industrial, commercial or tourism company does not begin operations within seven years of the issuing of the building permit or if the property is transferred or leased to another person or company within 10 years of the building permit’s issue. The decision also exempts shipping firms for property acquired before January 1, 2003, on condition that the funds for the acquisition were imported and originated in shipping activities. Also exempted from the 3 percent tax are public benefit foundations wholly owned, directly or indirectly, by foreign entities or nationals and set up by a will. The documents required under the ministerial decision include a photocopy of the company’s income declaration for the current fiscal year showing that the sum of its gross revenue in Greece is larger than its gross property income, a certified copy of the initial building license, a copy of the license for establishment in Greece in the case of shipping firms, and copies of the charter, will and shareholders’ register in the case of public benefit foundations. The law has been criticized as ineffective and for the numerous exemptions it offers. Critics cite the possibility for an offshore company owner to set up, say, a commercial enterprise that engages in some activity, such as the import of artwork; he or she may declare an extremely low amount in turnover and avoid paying taxes altogether because his or her property would be named as the commercial company’s headquarters. Countless other schemes could be found along the same lines in which taxes could be avoided – unless, of course, tax inspectors decided to check on the company’s headquarters. It is argued that if the government really intended to promote entrepreneurship, it should have excluded all residential properties.