The distinction between tax on rental income and tax on capital profits from selling assets acquired by Greek S.A. Companies. The deductible expenses (Is ENFIA a deductible expense?)

According to Article 47 par.2 of the Income Tax Code, all revenues acquired by legal entities of Article 45 of the Income Tax Code, including income from lease of property and goodwill deriving from the transfer of property for value, are considered as income from business activity and taxed under article 47 and 58 of ITC.
It should be noted that in the case of individuals, there is a distinction in the taxation of income deriving from different sources.
In particular, the income deriving from the lease of property is taxed separately and according to the following scale:

Income from real estate property (€)Tax rate (%)
0 – 12.00015%
12.001 – 35.00035%
35.001 – ……45%

Further, the goodwill from the transfer of property for value or of ideal shares or the right in rem of property or ideal shares or participating interests, which attract more than 50% of their value directly or indirectly from property and it is not considered as business activity, is subject to individuals’ income Tax (Article 41 ITC) and is taxed at the rate of 15% (Article 43 ITC).

It is also noted that according to Article 99 par.5 of L.4446/2016, the suspension of the application of the taxation of the goodwill related to the transfer property for value, which was initially granted until the 31st December 2016, pursuant to Article 90 of L.4316/2014 was extended until the 31st December 2018 and according to Article 101 of L.4583/2018 is recently extended until the 31st December 2019.
Furthermore, the Income Tax Code establishes rules for the deduction of business expenses from gross revenues for entrepreneurs whether they are natural persons or legal persons or legal entities.

In particular, in accordance with Articles 22 and 23 of the Income Tax Code, the following provisions apply:
When determining the profit from a business activity, it is allowed to deduct all expenses that:
a) are carried out in the interest of the undertaking or in the ordinary course of trade,
b) correspond to a real transaction and the value of the transaction is not considered to be lower or higher than the market value, based on the data available to the Tax Administration, namely costs that are not fictitious or partially fictitious or non-existent.

Excluding the following costs, which are not deductible:
• interest on loans taken by the enterprise from third parties, other than bank loans, interbank loans, and corporate bonds issued by public limited companies,
• any type of expense involving the purchase of goods or the receipt of services of a value exceeding five hundred (500) euro, if the partial or total redemption was not made using a bank payment instrument,
• unpaid social security contributions,
• expenditure incurred in the context of an employment relationship where the partial or total redemption has not been effected by the use of an electronic payment instrument or by a payment service provider,
• forecasts,
• fines and penalties, including surcharges, imposed for failure to comply with contractual obligations of undertakings or violations of law, etc.
• the provision of remuneration in money or in kind constituting a criminal offense, including but not limited to the proceeds of money laundering from which a benefit is derived,
• income tax, including business tax and extraordinary contributions, levied on profits from a business activity, in accordance with the Income Tax Code, as well as the Value Added Tax (VAT) attributable to non- deductible expenses, if it is not deductible as VAT of inputs,
• the imputed rent in case of self-use of the objective value of the property, if it exceeds 3%,
• the expenses for the organization and holding of informative seminars and meetings concerning the feeding and accommodation of customers or employees and the holding of festive events, feeding and accommodation of guests, in so far as they exceed the amount of 300 Euro per participant and if the total annual expenditure exceeds one half percent (0.5%) of the firm’s annual gross income.
• personal consumption expenses,
• total expenditure paid to an individual or legal person or legal entity who is a tax resident in a non-cooperative or preferential tax regime, [Article 65 of the Income Tax Code], unless the taxpayer proves that these costs relate to actual and ordinary transactions and do not result in the transfer of profits or income or capital for tax avoidance or evasion. It is not possible to deduct the expenses paid to a natural or legal person or a legal entity who is a tax resident in a Member State of the EU or the EEA if there is the legal basis for the exchange of information between Greece and that Member State

It should be noted that in the case of a foreign legal person or legal entity not having its tax residence in Greece and taxed in accordance with the provisions of Articles 47 and 58 of the Income Tax Code, irrespective of whether or not it acquires a permanent establishment in Greece, all the expenditure is deducted under the conditions laid down in those provisions of Articles 22 and 23 of the Income Tax Code.

Finally, in accordance with Circular 1132/2015, taxes which are not deductible are listed restrictively in these cases of Article 23 of the Income Tax Code and consequently, other taxes not included in them are deductible (e.g. ENFIA, circulation fees, stamp duty, fees payable to the National Telecommunications and Post Commission, etc.) especially at the time they are paid. An exception is the circulation tax which is paid in advance and therefore deducted in the next tax year, i.e. the year concerned, as well as advertising fees, which are deductible at the time they are concerned.