Tax incentives for mergers

A draft bill on strengthening entrepreneurship, unveiled yesterday by Economy and Finance Minister Nikos Christodoulakis, provides generous incentives for company mergers. The bill, which will become law by year’s end, reduces taxes on the profits of merged companies by 10 percent in the year of the first consolidated statement following the merger, and by 5 percent in the second year. The incentives are being offered for mergers that will take place by December 31, 2004. The bill is in line with the government’s intention to create stronger companies, able to compete more effectively in the new euro environment. The merged companies are allowed to form new capital reserves from their net profits. These capital reserves will be tax-exempt. Christodoulakis said the above incentives also hold for agricultural cooperatives. There is a catch in the bill, namely, that the capital of the smaller of the two companies should be at least one fifth of that of the larger company. In no case do these incentives apply to merger between a parent company and its subsidiaries, said Christodoulakis. One such merger is the recent one between telecommunications equipment company Intracom and its software subsidiary Intrasoft. The bill is not just about companies, but also deals with other taxation matters. Income tax brackets for salaried employees and pensioners are reduced to four, from the current six, and to five for other taxpayers. Also, the tax-exempt portion of income rises to 8,400 euros for salaried employees and pensioners and to 7,400 euros for other taxpayers. These measures apply to incomes earned in 2002. Corporate taxes are reduced to 32.5 percent from 35 percent, for companies creating jobs. In a measure designed mostly for offshore firms, all legal entities registered abroad which own property in Greece are obliged to file an income declaration, even though they may not earn any income from the property.

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