Under the provisions of the above tax law, the provisions of which have reformed fundamentally the basic law regarding the income taxation (L. 2238 / 1994), which applied for decades in our country, among others also the provisions have been modified which define the deductible expenses of an entity through its business activities.
More specifically, a general rule has been defined, that the business expenses are deducted from the gross income of each financial period, if the following conditions are cumulatively met:
- Expenditure incurred in the interest of the business or in the ordinary course of trade.
- They correspond to real transaction, the value of which is not considered inferior or superior to the market value according to the information which are available to the Tax Authorities.
- They have to be entered in the accounting books of the company in the period they incurred and substantiated by adequate supporting documents (the concept of the supporting documents foreseen by the law is wider than the tax documents and they include: data as they are provided by the relevant provisions of the newly published Greek General Accepted Accounting Principles, such as public or private documents, outturn data, etc.)
- And under the precondition that they do not belong to the limitative list of non-deductible expenses of Articles 23 and 48 of the Income Tax Code.
The non-deductible expenses are:
- Interest on loans taken by the company from third parties, other than bank loans, interbank loans and debenture loans, issued by public companies limited by shares to the extent that they exceed the interest, which would arise, if the interest rate was equal to the rate on loans overdrafts to non-financial corporation (this rate is taken each time from the publications of the Central Bank of Greece).
- Any kind of expenses which relate to the purchase of goods or receiving services worth over € 500,00from Greece or abroad, in case the partial or total repayment has not been done by using a banking payment instrument (transfer, deposit, debit or credit card, check, etc.).
- The unpaid social security contributions. Social security contributions, which are paid on time in their legal payment deadline or any extension thereof, even in the next financial year, are deductible from the income of the financial year to which they relate.
- Social security contributions which relate to the financial years 2014 and later, which are paid with delay, are deductible from the taxable income of the financial year in which they were paid regardless of the year concerned.
- Any kind of provisions, excluding provisions for bad debts. For these provisions, the specific rules of Article 26 of the Income Tax Code apply accordingly.
- The fines and penalties, including surcharges (late payment penalties), imposed because of non-performance of contractual obligations by enterprises or breaches of legal provisions, etc.
- The special tax levies on earnings from business.
- The value added tax (VAT) corresponding to non-deductible expenses, provided that this tax is not deductible as input VAT from the output VAT, according to the provisions of codified Law 2859 / 2000 about VAT.
Taxes, which are not deductible from the gross income of each financial period, are listed exhaustively in the relevant sub cases and consequently, other taxes not included in these list are deductible (e.g. property tax (ENFIA), annual circulation vehicles tax, stamp duty, State fees for the National Committee of Telecommunications and Post, etc.)
- The imputed rent from the own use of real estate property to the extent that it exceeds three percent (3%) of the objective value of the property.
- Expenses for organizing and conducting informative workshops and meetings related to food and accommodation or for the customers or the employees of the company.
- Personal consumption expenses.
- Costs, which relate to intra-group dividends, which are exempt from income tax.