In recent years, tax and insurance burdens have shaken the liquidity and viability of many businesses. The tax and insurance changes legislated for 2019 and 2020 present both challenges for growth and opportunities for reorganization and tax redesign.
The main points of change are:
1. Gradual reduction of corporate tax for LEGAL ENTITIES (companies).
For 2019, the tax will be 24% (it was 29% in 2018). From January 1, 2021, the 24% will be further reduced and is expected to reach 20%.
2. Reduction of dividend tax from 10% to 5%.
The tax on dividends has been reduced from January 1, 2019, to 10% from 15% which it was until 2018.
The further reduction to 5% from 01/01/2020 is a strong incentive for potential investors.
That is, if a corporation gives a dividend to a shareholder of 10,000 euros, instead of 1,500 euros tax, it will now pay 500 euros.
3. Reduction of tax for employees, pensioners, and professionals from 22% to 9% from 01/01/2020 for incomes up to 10,000 euros.
The existence of the 9% bracket will greatly help professionals as they will save up to 1,300 euros in tax from the reduction, plus an additional 1,300 euros from the tax prepayment. As is known, when you pay tax, you pay 100% and prepayment for the next year.
4. Reduction of professional insurance contributions.
Following a bill passed in January 2020, a new scale of insurance contributions with optional choice was established.
More specifically, it will be:
Up to 5 years: 126 euros
Level A: 210 euros
Level B: 252 euros
Level C: 302 euros
Level D: 363 euros
Level E: 435 euros
Level F: 566 euros
Additionally, the above contributions paid due to parallel insurance will be calculated in the pensionable amount, resulting in an increase in the final pension.
5. Reduction of tax prepayment for individuals and legal entities.
From this year, for all individuals engaged in business activities, the tax prepayment is reduced from 100% to 55%.
For legal entities and legal entities, the tax prepayment will be reduced from 100% to 80% from 2022. Specifically, for this year, it is further reduced to 70%.
6. Reduction of ENFIA by 30% within the two-year period 2020 – 2021.
According to the plan, it was reduced by 22% in 2019 and in 2020 it is expected to be further reduced by 8% to 10% across the board for all without distinctions of small, medium, and large property.
7. Increase of the tax-free threshold by 1,000 euros for each child from January 1, 2020.
For 2019, the tax-free threshold is 8,636 euros for a single person, 8,863 euros for a married person with one child, 9,090 euros for a married person with two children, and 9,545 euros for a married person with three or more children. This means that a married person with one child will see their tax-free threshold rise to 9,000 euros, a married person with two children to 10,000 euros, and a married person with three or more children to 11,000 euros.
However, apart from the positive changes of the new tax bill, special attention should also be given to the new commitments that businesses will now have.
The new commitments are:
1. Electronic books are established for all legal entities.
It becomes mandatory, for the entities of article 1 of Law 4308/2014 (legal entities in the form of a public limited company, limited liability company, partnership limited by shares, private capital company, etc.), to electronically transmit to the Independent Authority for Public Revenue (AADE) the data of issued accounting records-documents, maintained accounting records-books, tax electronic mechanisms, tax memories, and files created by tax electronic mechanisms.
2. The required amount of expenses with electronic means of payment is increased.
The required amount of expenses with electronic means of payment for each tax year is set at 30% of the actual income derived from salaried work – pensions and business activity and an amount of expenses up to twenty thousand (20,000) euros.
For the calculation of taxable income, expenses with electronic means of payment are considered to be expenses for the acquisition of goods and receipt of services in the domestic market or in EU or EEA member states, which are paid with electronic means of payment.
3. Increase in the cross-checking capabilities by the Tax Administration.
By decision of the Minister of Digital Governance, Kyriakos Pierrakakis, the Interoperability Center of the Public Sector is upgraded and expanded under the overall responsibility and management of the General Secretariat of Information Systems of Public Administration.
The Interoperability Center is now the main electronic platform for the exchange of data of all Public Administration Entities, through which each public service will be able to receive data concerning a citizen’s details from any other service, so that the citizen does not need to provide them.
4. Increase in tax and insurance audits on businesses.
There is already a significant increase in tax and insurance audits by the country’s control mechanisms to reduce non-compliance.
With all these significant changes in the taxation of legal and natural persons, as well as the new way of insuring professionals, it becomes imperative to revise our tax planning and redesign the operational structure of the business immediately from 2021.
The Link team, after evaluating the current state of the business, prepares the tax action plan for 2021, which includes the strengths that will remain and the weaknesses that will change, as well as the structural interventions that need to be made with the aim of profitability and sustainability of the business.
