ENFIA is abolished for properties valued at up to €400,000

The tax bill entitled «Measures to boost income, tax incentives for innovation and business transformation and other provisions» was submitted to Parliament yesterday with additional positive regulations.

The main additional provisions concern the following:

* Extension of VAT suspension for new buildings until 31.12.2025.

* Permanent exemption from ENFIA for listed buildings worth up to 400,000 euros.

* Increase of the salaries of students of the Armed Forces Schools in order to equalize them with the corresponding salaries of students of the Security Corps Schools.

* Exemption of liable legal entities or natural persons engaged in business activity from the payment of the corresponding income tax for those debts that were partially or fully written off in the framework of the out-of-court settlement. This is a reinstatement of a relevant provision that was in force until the end of 2020 and aims to contribute to their return to a sound business path. It concerns income tax due from 1 January 2024 onwards.

- The possibility is given to jointly liable persons (e.g. members of a legal person with debts) to service a lost debt arrangement of the legal person in which they participate. This enables individuals to repay the debt under the same conditions as the legal person would have done, by reviving the arrangement.

In addition to the above, the tax bill includes 12 tax reductions and measures to boost citizens' income, as well as provisions to modernise tax legislation and the administrative model governing the AADE in order to make it even more effective. In addition, provisions are included for:

* providing incentives for mergers and acquisitions, boosting innovation and empowering start-ups,

* the extension of tax incentives for scientific and technological research and the introduction of new deductible expenditure limits for growth and innovation for businesses and investors,

* its modernisation,

* the introduction of a tax-free allowance of up to 300 euros per month for tips and exemption - in their entirety - from social security contributions,

* strengthening the resilience of the Greek economy to the impacts of climate change.

Submission of the 2024 Supplementary Budget

At the same time, a supplementary Budget 2024 of €400 million is also submitted in the context of the bill to finance important infrastructure and projects currently underway. In particular, the 2024 Public Investment Budget is increased by €100 million for the national component to cover expenditure due to the rapid pace of implementation of the National Development Programme (NDP) projects, particularly at regional level, and by €300 million for the co-financed component for the repayment of projects of the previous NSRF 2014-2020 programming period.

The Minister of National Economy and Finance, Kostis Hatzidakis, said: «With this bill we prove, once again, that what we say is what we do. Following the Prime Minister's announcements at the Thessaloniki International Trade Fair and our commitment that a significant part of the revenue from tackling tax evasion will be returned to citizens through the strengthening of the welfare state and tax cuts, we are moving forward with a series of important reforms. A further 12 taxes are being reduced - in addition to the 60 taxes that have already been reduced or abolished; measures are being implemented to boost the income of citizens, especially the vulnerable; incentives are being provided to strengthen businesses through mergers and acquisitions; start-up innovation is being boosted; and our tax legislation is being further modernised by changing the tax return filing system and the administrative model of the AADE. At the same time, additional positive provisions are added to the bill, such as the permanent exemption from ENFIA for listed buildings worth up to 400,000 euros and the equalisation of the salaries of students of the Armed Forces Schools with those of students of the Security Corps Schools. And all this while proceeding to the immediate financing of infrastructure projects by submitting a supplementary budget of 400 million euros for 2024. Without jeopardizing the country's fiscal stability, we continue with the same dynamism and perseverance the important reforms aimed at strengthening the incomes of citizens and improving their daily lives.».

Deputy Minister of Economy and Finance Christos Dimas said: «12 new tax cuts and 12 pay increases are included in the tax bill. We are steadily pursuing our policy of tax deceleration and promoting reforms aimed at further boosting the income of citizens, households and professionals. The bill includes - among other things - tax incentives to support businesses investing in research and innovation, start-ups and interventions to facilitate transactions between citizens, professionals and businesses and the State. We are also promoting tools that modernise tax administration and make the State more effective in reducing tax evasion, thereby significantly increasing State revenues. As a reminder, since 2019 to date, more than 60 taxes have been abolished or reduced. The fact that our economy is growing at a steady pace, achieving a performance well above the European average, allows us to implement a policy of measured tax reductions and this is the path we will continue to follow in the coming years. Our goal is to continue with faster reforms so that Greece becomes even more investment-friendly, more digital, with more and better quality jobs, less unemployment and lower taxes.».

A) 12 tax cuts in 2025

The draft law includes measures announced by the Prime Minister at the Thessaloniki International Trade Fair and specifically provides for the following interventions:

1) A reduction of 1 additional unit in insurance contributions. Recall that insurance contributions have already been reduced by 4.4 percentage points in recent years by the current government. This additional reduction will benefit both employers (through a further reduction in non-wage costs) and private and public sector employees through an increase in their net earnings.

2) Abolition of the business tax for all natural persons (freelancers, self-employed persons as well as employees who are paid on a «blockchain» basis).

3) Income tax exemption for 3 years for properties to be rented which were previously declared as vacant or made available for short term rental. Specifically, it relates to residential properties:

a) up to 120 sq.m,

(b) for which leases of at least three years will be concluded between 8 September 2024 and 31 December 2025,

c) which the tax years 2022, 2023 and 2024 (if the lease is drawn up in 2025), were declared as vacant properties (form E2) or were not declared as leased properties or as main or secondary residences of the lessors or as owner-occupied or free-of-charge leased properties (forms E1 and E2) or were made available exclusively for short-term leasing and the concluded short-term leases have been declared to the Tax Administration.

4) Exemption from premium tax (15%) on health policies for children up to 18 years of age. In the case of a family or group policy, the tax is reduced in proportion to the number of minor members covered.

5) Double reduction of ENFIA from 2025 (from 10% to 20%) for residences of natural persons, taxable value up to 500,000 euros, which are insured for natural disasters (fire, earthquake, flood). A condition is that the insurance must be for the previous year with a duration of at least 3 months. If the duration of the insurance of the previous subparagraphs is less than 1 year, the reduction of the ENIAC shall be adjusted proportionally.

6) Abolition of fixed telephony fee (5%) for fibre connections (≥ 100 Mbps).

7) Tax exemption for voluntary business benefits for new parents. Specifically, exemptions from the calculation of earned income are provided:

a) an allowance of up to EUR 5,000 for each child acquired by the worker and paid within 12 months of the birth, plus EUR 5,000 for each additional child,

(b) a benefit of up to EUR 5,000 per year granted by employers to employees to cover the cost of crèches and nurseries.

8) Taxation of remuneration for on-call physician services at a rate of 22%. The average monthly net benefit for physicians is estimated at EUR 150 and in many cases exceeds EUR 200.

9) Incentives for mergers and acquisitions of businesses related to «small» entrepreneurship, at a total cost of €40 million (see below).

10) For 2025, a law that has already been passed also provides for stamp tax reductions on a number of transactions (interest on corporate loans, building permits, usufruct, marriages, insurance policies, etc.), at a total fiscal cost of €30 million.

11) It is recalled that a law recently passed by the Parliament has made permanent the refund of the VAT on agricultural oil, a measure with a total fiscal cost of 100 million euros per year.

12) Extension of the VAT suspension for new buildings until 31.12.2025. The aim of the provision is to stimulate the real estate market and attract investment, while the regulation also works for the benefit of property buyers, including natural persons who intend to use the property for private residential use

In addition to the above, the bill provides for:

* Extension until 31 December 2026 of the suspension of the imposition of capital gains tax on the transfer of real estate.

* Reduction 50% of the minimum amount of net income from business activity for self-employed persons who carry out their activity and have their main residence in municipalities with a population of less than 1,500 inhabitants.

* The annual increase in the limits of each scale of the Pensioners’ Solidarity Contribution (PSC) in a manner corresponding to the increase in the level of pensions.

* Permanent exemption from ENFIA for rights in rem on listed buildings worth up to 400,000 euros. This provision aims to help owners of listed buildings who bear a significant burden for their maintenance.

B) Measures to boost citizens' income

Following the Prime Minister's announcements at the TIF, the following are adopted:

1) Extraordinary financial support to pensioners with a personal difference of more than €10. It is granted until 31 December 2024 as follows:

* €200 for a pension of up to €700.

* EUR 150 for pensions from EUR 700.01 up to EUR 1,100.

* EUR 100 for pensions from EUR 1,100.01 up to EUR 1,600.

2) Extraordinary financial assistance of €200 until 31 December to vulnerable social groups, namely:

* to the beneficiaries of disability benefits in the e-EFKA,

* beneficiaries of the absolute disability allowance for pensioners of the former OGA who receive only the basic pension if they have a lifetime disability rate of 100%,

* to the beneficiaries of the sickness and disability allowance for state pensioners,

* to the beneficiaries of the extra-institutional allowance granted by the e-E.F.K.A,

* to the beneficiaries of the OPEKA's allowance for the disabled,

* uninsured seniors,

* Especially the beneficiaries of the OPEKA child allowance will receive an extra instalment,

* Provision of an additional 50% of the monthly allowance to beneficiaries of the minimum guaranteed income.

In total, 1.9 million citizens will benefit from the above exceptional aid amounting to €243 million.

In addition, it is foreseen:

- Increase of 20% in special night work allowance for uniformed personnel from 1 January 2025.

- Reform of the salary framework for students of the Armed Forces Schools from 1 January 2025. The aim is to enhance the income of students of the Armed Forces Schools and to harmonise it with the salaries of students of the corresponding schools of the Security Corps. Specifically, it is provided that the salary classification of students of Higher Military Educational Institutions (HEEI) is increased from 10% to 37% of M.C. 25 of Category A and that of students of Permanent NCO Schools is increased from 8% to 16% of M.C. 17 of Category B.

- Payment of a Financial Targets Achievement incentive to employees of the Hellenic Statistical Authority based on the achievement of specific quantitative targets set upon the recommendation of the President of the Hellenic Statistical Authority. The incentive may also be paid to civil servants and uniformed personnel. The SNE is calculated on the basic salary and the responsibility allowance, is not offset against the personal difference and may not exceed, per year, 15% of the sum of the annual basic salary and the responsibility allowance of each official and is subject to the insurance contributions and other deductions of the additional remuneration.

C) Clear and predetermined deadlines for tax returns, discounts for those who are punctual and sanctions for government officials in case of negligence

For the first time, a clear and pre-defined timeframe for the submission of tax returns is established. In this way, the issues of pending returns, tensions and extensions are dealt with in practice, primarily by taking advantage of the suggestions of the main stakeholders, namely the Economic Chamber of Greece. Specifically:

- Tax returns will be submitted from 15 March to 15 July each year, for both individuals and legal entities.

- A deduction is provided for those who pay the full amount of income tax by 31 July and submit their tax return, as follows:

* 4% discount for anyone filing a return from March 15 to April 30.

* 3% discount from 1 May to 15 June.

* 2% discount from 16 June to 15 July.

- The tax is paid in 8 equal monthly instalments, the first of which is payable by 31 July.

- Penalties are established for the governors of organizations, the secretaries of the State and the general secretaries of the municipalities as well as the payroll managers for any delays in sending data to the AADE that are necessary for the timely completion of tax returns. In particular, an Electronic Register of Persons Subject to the Annual Income File is created by the AADE for the pre-completion and submission of tax returns. Registration in the Register is compulsory and concerns public sector organisations and services that are obliged to send data to the AADE for the purposes of completing tax returns. Through the new electronic register, all data necessary for the completion and submission of tax returns (e.g. wages and salaries, pensions, fees from business activities, taxes withheld, etc.) will be transmitted to AADE. Each institution should transmit the data from 16 January to the last working day of February.

- In case of untimely, inaccurate transmission of the above data to the AADE or non-registration in the Register, a fine of 2,500 euros is foreseen for the persons responsible. Such persons are considered to be the heads of legal persons of the State (e.g. EFKA, EOPYY etc.), for the State the service secretaries, for the municipalities the general secretaries and horizontally the heads of the payroll. In case of late transmission, the fine is increased by EUR 50 for each day of delay. Finally, in the event of late activation of the digital platform by the AADE, the fine will be imposed on the Governor and the Deputy Governor of the AADE in charge of digital transformation, as well as on the head of the respective organisational unit, who are individually responsible for the payment of the fine.

- In addition, it is foreseen that fines will be imposed on persons other than public sector entities (e.g. banks, listed companies, servicers, educational institutions, etc.) that are obliged to transmit or submit annually to the Hellenic Central Securities Depository data for the cross-checking and supplementation, where applicable, of the declared income from interest and dividends of companies listed in the Hellenic Central Securities Depository and the expenses incurred in the taxpayers' income tax returns as follows:

o A fine of EUR 20,000 for the infringement of late initial transmission/submission of data.

o A fine of €20,000 which can reach up to double the amount for the violation of the late submission of supplementary and/or corrective information.

If the gross income of the liable parties exceeds the amount of 1 million euros, then the above fines of 20,000 euros rise to 50,000 euros.

D) Incentives to businesses for mergers, acquisitions and scientific research and startup visas

The draft law also includes provisions aimed at:

- incentivising mergers and acquisitions, boosting innovation and empowering start-ups,

- the extension of tax incentives for scientific and technological research and the introduction of new deductible expenditure limits for growth and innovation for businesses and investors.

Specifically:

1) A single framework is established for business transformations (mergers, demergers, divisions, contributions of branches, exchange of securities, business conversions), domestic or cross-border (within/outside the EU under certain conditions), replacing relevant laws currently in force and maintaining the relevant tax advantages, while being compatible with the relevant Greek company law and EU Directives.

2) With regard to «small-scale» entrepreneurship - micro, small and medium-sized enterprises - of Law No. 4935/2022:

* The minimum threshold of the new company's share capital resulting from a partnership/transformation is reduced to 100.000Euro from 125.000Euro currently in force to ensure 30% tax exemption on profits.

* The possibility of transferring tax losses of transformed companies is introduced.

3) Provision is made, from 1 January 2025, for the granting of a special residence permit for an investment of 250,000 euros to a startup company registered in the National Register of Startups (Elevate Greece), provided that it leads to the creation of at least 2 jobs within the first year and that it maintains the same total number of jobs for at least 5 years after the investment is made.

4) Incentives for scientific and technological research expenditure are extended. Interventions are introduced that build on the existing incentive of the 200% horizontal global deduction for scientific and technological research expenditure. In particular, it is envisaged that the increments of the over-deductions can reach from 250% to 315% in the following cases:

o Partnership projects with startups.

o Collaboration projects with research centres.

o Knowledge-intensive SMEs, i.e. with R&D expenditure > 20% of the total.

5) The incentive to commercialise a patent is extended. Under the new regulation, in addition to the current 3-year exemption of the company's profits from commercial exploitation of the patent, there is now a 10% income tax reduction for an additional 7 years after the expiry of the 3-year period.

6) Tax incentives for angel investors investing in start-ups are strengthened. The maximum limit for the deduction from the taxable income of a taxpayer-investor, up to 50% on the capital contributed to startups registered in the National Register of Startups, is expanded from 300,000 euros to 900,000 euros and the possibility of investing in A.C.E.S. is added.

7) Provision is made for the exemption from income tax for intra-group dividends received by a legal person that is a tax resident in Greece from a legal person established outside the EU, as well as for the income arising from the capital gains from the transfer of securities of participation in a legal person established outside the EU.

8) A modern taxation regime for Mutual Funds for Entrepreneurial Holdings (MEFs) is introduced. The tax regime for MEFs is streamlined and simplified, in order to provide an incentive for the creation of investment schemes based entirely in Greece, which are a key source of funding for innovative startups.

E) Changes to the administrative model of the Hellenic Public Prosecutor's Office in order to move even faster and more efficiently

- Responsibilities are redistributed between the Governor and the Management Board. The Management Board will not be involved in the day-to-day operation of the ADMA while at the same time acquiring a more institutional role, assuming the institutional control of the Governor and Deputy Governors as well as the preparation of annual evaluations of their work.

- 3 Deputy Directors are created to assist the work of the Director by covering specific areas. The 3 posts relate to the organisation of operations, legal affairs and digital transformation.

- The possibility of a second renewal of the Governor's term of office is introduced.

- The possibility of recruiting some Directors-General/Directors from the private sector in areas such as digital transformation and communications.

F) Exemption of tips up to 300 euro/month from tax and in their entirety from social security contributions

- For the first time, a tax-free allowance of up to 300 euros per month for tips received by employees (indicatively in catering businesses, personal care services, etc.) is established with immediate application from 1 November 2024. At the same time, for the entire amount from tips, employees and employers are exempt from social security contributions (unless otherwise provided for by individual or collective agreements).

- At the same time, the bill also includes a substitute provision, which aims to prevent any replacement of the agreed salary with tips, in order to avoid taxation of part of it. In such a case, the employer is subject to a fine of 22% of the reduction of the salary, in relation to the agreed salary, for one year from the time of the reduction. If the salary is restored to the original amount of the reduction, then the imposition of the fine also stops.

G) Measures to strengthen the resilience of the Greek economy to the impacts of climate change

Apart from the increase - from 10% to 20% - of the ENFIA deduction for those properties insured against natural disasters, the draft law provides for a number of other interventions aimed at strengthening the resilience of the Greek economy against the effects of climate change.

In particular, it provides for:

1) Compulsory insurance for companies with an annual gross income of 500,000 euros or more.

2) Mandatory insurance of vehicles for natural disasters based on their current market value.

3) A climate crisis resilience fee shall be introduced on tourist accommodation per day of use and per room or apartment in the months April to October as follows:

* For hotels:

* 1-2 stars, 2 euros,

* 3 stars, 5 euros,

* 4 stars, 10 euros,

* 5 stars, 15 euros,

* in rented furnished rooms - apartments, 2 euros,

* on properties available through short-term rentals, 8 euros. If the properties made available through short-term rentals are detached houses of more than 80 m², a resistance fee of EUR 15 is charged,

* in self-catering accommodation - tourist furnished villas (villas), 15 euros,

* in self-catering accommodation - tourist furnished houses, 8 euros if their surface is less than 80 sq.m. and 15 euros if it is more than 80 sq.m.

For the period November - March the resilience fee is as follows:

* For hotels:

* 1-2 stars, 0,5 euro,

* 3 stars, 1,5 euro,

* 4 stars, 3 euros,

* 5 stars, 4 euros,

* in rented furnished rooms - apartments, 0,5 euro,

* in properties available through short-term rentals, 2 euros. If the properties made available through short-term rentals are detached houses of more than 80 m², a resistance fee of EUR 4 is charged,

* in self-catering accommodation - tourist furnished villas (villas), 4 euros,

* in self-catering accommodation - tourist furnished houses, 2 euros if their surface is less than 80 sq.m. and 4 euros if it is more than 80 sq.m.

The revenue from the levy is used to cover the costs of prevention and rehabilitation of natural disasters, climate change adaptation projects and infrastructure improvements to support the country's tourism product.

4) Imposition of a cruise tax in favour of the State. The fee applies mainly to foreign visitors and is levied per cruise ship passenger disembarking in a port of the country and ranges from 1 to 20 euros, depending on the port and the period of time. The revenue collected will be allocated to the municipalities within the administrative boundaries of the ports and to the Ministries of Maritime Affairs and Insular Policy and Tourism, to be used for the construction and improvement of infrastructure and the promotion of tourism.

H) In addition, other provisions promote a number of important initiatives such as:

1) Suspension of new housing in the 1st, 2nd and 3rd Municipal Community of the Municipality of Athens for short term rentals for one year. Specifically, from January 1, 2025 to December 31, 2025, no registration in the Registry of Short-Term Residential Properties is allowed for properties located in the 1st, 2nd and 3rd Municipal Community of the Municipality of Athens. In case of non-compliance, a fine equal to 50% of the income earned from short term rentals from 1 January 2025 until the audit, which is not less than 20,000 euros, is foreseen. In case of a new violation within the same tax year, a fine equal to the amount of the rent received, which is not less than 40,000 euros, is imposed.

2) Exemption from ENFIA for the years 2025, 2026 and 2027 for the properties of the Municipality of Soufli of the Region of Eastern Macedonia and Thrace.

3) Organisational provisions for the operation of the Anti-Money Laundering Authority. The quantitative increase in the number of asset declarations checked annually, the improvement of the quality and the enhancement of the effectiveness of its work require stability and enhanced independence, which are ensured by the provision of organic posts and a uniform salary scheme, as opposed to exclusive staffing through secondments.

4) The procedures for the granting of financing in the form of loans to cover the housing needs of first homes and energy upgrading of properties through the Recovery Fund (the «MY HOME» programme) are promoted. More specifically, the terms, conditions and procedure for granting loans and interest rate subsidies to natural persons, the criteria and the way of checking eligibility requirements, etc. In addition, the bill also provides for an increase in the housing repair subsidy under the «Renovate - Rent» programme and its retroactive application. In more detail, it provides for an increase in the subsidy for the realization of repair and renovation costs on the property included in the program of up to 13,500 euros from 10,000 euros today, which include the required materials and works. The subsidy now amounts to 60% of the costs incurred from 40% today.

5) Issues concerning the sub-concession contracts concluded by TA.I.P.E.D. concerning port operations and services of port and other facilities are regulated. In particular, it is provided that in each sub-concession contract, it shall be stipulated that a percentage of the foreseen annual financial compensation, which may not exceed 20%, shall be paid by the sub-concessionaire to the relevant Port Authority SA in return for the responsibilities exercised by the latter with regard to the monitoring of the proper operation of the port included in the sub-concession contract.

6) Establishment and enrichment of the digital platform - geoportal «valuemaps.gov.gr - Objective Determination of Real Estate Values on a map», which is the digital register of the system of Objective Determination of Real Estate Values (AREV) for the extraction of information regarding the starting prices, the coefficients of variation of starting prices, the maps, the price tables and the way of calculating the value of real estate. The platform presents all data related to these zones and provides a function for calculating the property value of real estate.

7) Interventions in the framework of the registration of certified valuers in the Register of Certified Valuers of the Ministry of Economy and Finance and in procedural issues of the Disciplinary Board. In particular, the applicant's non-conviction for false expert opinion is added as a condition for inclusion in the Register. In addition, it seeks to update and modernise the framework for the functioning of the Disciplinary Board, while regulating issues such as the limitation period for disciplinary offences and establishing all the required procedures and details in the context of the application of the disciplinary procedure.

8) Concession of the use of the seashore, beach and marine area of the «Zante Shipwreck» area to the Municipality of Zakynthos, after the basic rescue work of the shipwreck has been carried out by the State, without compensation for its management, protection and exploitation. In this context, the Municipality of Zakynthos also undertakes to carry out works and maintenance and restoration of the area and its works, facilities and infrastructure. Furthermore, an entrance fee is established for the benefit of the Municipality of Zakynthos and constitutes revenue which must be used to finance projects that serve the development needs of Zakynthos and in particular the «Zakynthos Shipwreck» area. A percentage of 15% of the fare is paid by the Municipality of Zakynthos to the Ministry of Economy and Finance and a similar percentage is paid to O.F.F.P.E.K.A.

9) In the case of incorrect or late entry of data in the Information System for Monitoring Heating Oil and provided that this entry was corrected within 15 days of the deadline or of the service of a summons to apologize, then no fine is imposed on service stations.

10) The abolition of the certification by an independent appraiser and the provision of a guarantee, security or collateral as a condition for the inclusion in the regulation of debts to the Tax Administration. It also applies to the arrangements already granted as of 28.10.2023.

Finally, the following additional provisions were included in the draft law, following the public consultation:

- Provision is made for the concession of the simple use of a part of the seashore and beach to a municipality or a municipal company. This provision covers the case of granting to municipalities the simple use of a part of the seashore and beach for their own use. In addition, the alternative possibility of granting the simple use of the seashore and beach to special joint-stock development companies of municipalities for the purpose, inter alia, of developing municipal property is provided for.

- Abolition of the inclusion of pensions in the calculation of the salary ceiling for employees paid according to the single pay scale and uniformed personnel. In more detail, amounts of main and supplementary pensions paid by the e-EFKA are not taken into account for the calculation of the salary ceiling. It should be noted that the regulation is retroactive from 1 January 2024 and regulates the issue of retroactive search for additional amounts of salary paid due to the non-reduction by their employing institution of the regular monthly salaries paid in excess of the ceilings.

- Tax treatment of the benefit accruing to legal persons, legal entities and natural persons carrying on a business activity from the cancellation of part or all of their debt. This regulation reinstates an exemption provision that was in force for debt write-offs while it concerns income tax due from 1 January 2024 onwards. The aim is to help legal or natural persons engaged in business activity who have found themselves in a difficult situation due to loan obligations which they were unable to service and which have become overdue, disputed, settled or subject to the out-of-court mechanism. Therefore, to the extent that it has been possible to write off part or all of their debt to a credit institution or similar institution under an out-of-court settlement agreement, the income tax exemption in the tax year in which such write-off actually takes place should help them to return to a sound business and to realise future profits.

- Allowing jointly and severally liable persons to service a missed debt arrangement. The scheme provides for the possibility for these persons to repay the regulated debt on the same terms as the legal person would have done, by reviving the regulation.