New tax for offshore firms

Greece yesterday unveiled a new tax regime for offshore companies as part of efforts to cut down on tax evasion by the wealthy. Presenting a draft bill on personal and corporate income changes due to come into effect next year, Economy and Finance Minister Nikos Christodoulakis said the imposition of taxes on offshore companies is designed to stop the «present scandalous phenomenon whereby owners of luxurious homes and properties avoid paying inheritance and transfer taxes [by utilizing offshore companies].» The new tax regime slaps a 3-percent tax rate on offshore companies with real estate. The companies will also no longer be able to enjoy tax breaks previously allowed for acquisitions of office equipment and services. Firms will not be allowed to select certain expenditure and invoice it to offshore companies as the practice had led to deliberately large invoices. The draft bill also specified a 10-percent tax rate for households subletting out rooms to tourists visiting Greece for the 2004 Olympic Games. Organizing committee Athens 2004 had originally requested a 5-percent tax in order to encourage more Athenians to help out with accommodation during the Games. Tax changes to be implemented next year include a higher tax-free threshold for wage-earners and pensioners, with the amount contingent on the number of offspring in each family. The draft bill also sets out more generous tax exemptions for hospitalization charges, life insurance, house rent and mortgage loans for first residences. Inheritances and parental gifts will also be simpler and easier next year under the new tax regime. Small enterprises also benefit from easier book-keeping rules and two amortization rates. The total package of tax reforms is expected to cost the State 1.4 billion euros, equivalent to 1 percent of gross domestic product.