The procedural aspects (step-by-step) of the filling of the tax return related to the gain from the transfer of shares

1.a. The filing of income tax return

Tax residents in Greece should submit electronically, via their personal account on the official website of the Ministry of Finance (hereinafter “taxisnet”), a tax return in which they should declare their worldwide income, as well as the tax deducted abroad. Tax returns are normally submitted by June 30th of the following tax year (Articles 3 and 67 of the Income Tax Code – Law 4172/2013 hereinafter “ITC”).

Since the transfer of shares by an individual has been agreed to be paid in installments in following tax years, the relevant capital gain is taxed during the tax year when transfer has been taken place, regardless of the time/way of the payment.

In particular, the capital gain of individuals (tax residents of Greece) derived from transfer of shares held in a foreign company must be declared in the annual income tax return (form E1), in code 865. If any tax has been paid abroad for the same income, code 867 must be completed respectively (Circular No 1068/2018).

It should be noted that husbands and wives (legally married couples) are liable to file a joint income tax return. The spouse is responsible to file the joint tax return, in which included his income and his spouse income as well. However, the income of each spouse is taxed separately. Hence, each spouse is responsible for any tax will be imposed on his/her income. By virtue of Law No 4583/2018 as of January 1st, 2019 and onward, spouses may opt to file separate tax returns, following an irrevocable statement that should be submitted to the tax authorities by the end of February of the year following the relevant tax year.

1.b. The amount of tax to be paid

Any gain derived from the transfer of shares held in a non-listed company is subject to income tax for individuals and is taxed at a rate of fifteen per cent (15%)

As regards the calculation of the afore – mentioned gain, the acquisition cost of the shares as included in the transfer agreement at the time of the acquisition is deducted from the agreed transfer value of the shares.

Based on ITC:

  • acquisition cost → the lowest value between the value of the shares determined by the value of company’s equity and the one included in the purchase agreement (or Articles of Association) at the time of acquisition of the shares.

Kindly note that the determination of the acquisition cost is affected by any increase/reduction of company’s capital.

  • transfer value → as included in the transfer agreement, but not less than the value of the of the company’s equity at the time of the transfer.
  • equity → as included in the company’s last monthly balance of payments before the transfer date.

To better understand the calculation of taxable capital gain, based on Circular No 1032/2015, we have provided the following example:

On 2.06.2001 a foreign ltd company was established; the share capital was 1.000.000 euro, based on its Articles of Association, as well as the equity. An individual owned 20% of the shares.

On 10.08.2006 the shareholder acquired further 30% of shares for 400.000 euro, so he held 50% of shares and the equity was 1.500.000 euro

On 21.07.2018 the above shareholder transferred his shares for 800.000 euro and the equity was 5.000.000 euro.

The acquisition cost is calculated as follows:

  • For 20% of shares: 1.000.000 * 20%= 200.000 euro
  • For 30% of shares:
  • 000 euro (based on the agreement dated on 10.08.2006)
  • 500.000* 30%= 450.000 euro (based on equity)

Therefore, as acquisition cost of 30% is considered the lower value between the value of the shares determined by the value of company’s equity (450.000 euro) and the one included in agreement (400.000 euro), namely 400.000 euro.

The total acquisition cost of 50% of the shares is 600.000 euro (200.000+400.000).

The transfer value is calculated as follows:

  • 000 euro (based on the agreement dated on 21.07.2018)
  • 500.000 euro (5.000.000* 50%, based on equity)

Hence, as transfer value of 50% of the shares is considered the higher amount between the transfer value included in 21.07.2018 agreement and the equity of the same date, namely 2.500.000 euro.

The taxable capital gain is 1.900.000 (2.500.000- 600.000) and the tax is 285.000 euro (1.900.000*15%).

Further, for the «total income» of more than twelve thousand euro (€12,000) earned from 1 January 2016 onwards, a special solidarity levy is also imposed in accordance with the progressive rates below:

Income (€)Special solidarity levy rate (%)
0 – 12.0000%
12.001 – 20.0002,20%
20.001 – 30.0005,00%
30.001 – 40.0006,50%
40.001 – 65.0007,50%
65.001 – 220.0009,00%
>220.00010,00%

«Total income» is defined as the sum of income from employment (wage labor), pensions, business activity, capital, capital gains, taxable or exempt, actual or imputed earned in a tax year.

In case of a taxpayer, who is tax resident in Greece and acquires income abroad during the tax year, the payable tax in Greece in respect of that foreign income is reduced by the amount of tax paid abroad for the same income. The above reduction cannot exceed the amount of the tax corresponding to that income in Greece [Article 9 (1) and (2) of the ITC and No. 1067/2015]. Kindly note that the tax paid abroad shall be declared in code 867 of the income tax return (form E1).

In short, the amount of tax to be paid is the tax of 15% on the capital gain, which derived from the transfer of shares and calculated as described above plus the imposed special solidarity levy.

1.c. The method of payment – The number of installments

The payment of the tax is made in three (3) equal two – monthly installments following the expiry of the deadline of tax return’s submission, which is usually until the end of June. The first installment shall be paid until the last working day of July and each of the following until the last working day of September and November.

1.d. Other practical issues that relate to the filling and the payment of Greek tax on the capital gain that you received from the sale of your shares in the Finish company. Documentation

Following the submission of the annual tax return, any relevant documentation may be requested by the competent Tax Office to be provided by the taxpayer in order to justify the declared income.

As regards the gain derived from the transfer of shares declared in code 865 of the income tax return, the required documentation is the following:

  • The Articles of association of the company/purchase agreement and equity at the time of the acquisition;
  • the transfer agreement of the shares;
  • the company’s last monthly balance of payments before the transfer date and;
  • the Bank statement proving the payment of the gain.

2. The consequences of non-disclosure of the capital gain/late filing of tax return.

2.a.  The administrative penalties

In case of non-disclosure of the capital gain, the following penalties will be imposed:

The administrative penalties of Articles 53 and 58 of the Code of Tax Procedure (herein CTP) shall apply.

  • Article 53 of the CTP stipulates that if any amount of tax is not paid within the deadline, the taxpayer is liable to pay interest on that tax amount for the time-period starting from the day following the expiry of the legitimate deadline.
  • In addition, the fine of inaccurate tax return is imposed under Article 58 of the CTP which is calculated as follows:

if the amount of tax resulting from a tax return is less than the amount of tax resulting from the tax reassessment carried out by the Tax Administration, the taxpayer is liable to a fine on the difference, as follows:

(a) 10% of the difference if that amount is between 5% and 20% of the tax resulting from the tax return,

(b) 25% of the difference if that amount is between 20% to 50% of the tax resulting from the tax return,

(c) 50% of the difference if that amount exceeds 50% of the tax resulting from the tax return.

However, in accordance with Article 19 of the CTP, if the taxpayer considers that the tax return, which was been submitted to the Tax Administration, contains an error or omission, they can submit a corrective tax return. The corrective tax return may be submitted at any time until the notification of the temporary determination of tax liability or until the expiration of the Tax Administration’s right to audit the initial tax return. The above administrative penalties apply also in the case of a late-filed corrective tax return, it carries all the consequences of a late-filed tax return.

2.b. The criminal consequences

As regards the criminal consequences, the criminal penalty under Article 66 of the CTP stipulates that the crime of tax evasion is committed by any person who intentionally avoids the payment of income tax and withholding taxes, by not filing a tax return or filing an inaccurate one so that the tax base is concealed or appears reduced. The above person shall be punished by imprisonment of at least 2 years if the tax that corresponds to the taxable income or the assets that have been concealed exceeds € 100,000 per tax type for the tax year, while if the main tax exceeds € 150,000 per tax year, the imprisonment ranges from 5 to 20 years.

2.c. The time-bar for the audit (statute of limitation).

It should be noted that in accordance with Article 36 of the CTP, the State has the right to impose a tax penalty within 5 years from the end of the year in which the deadline for the submission of a tax return expires.

Exceptionally, this deadline is extended in the following cases:

(a) if the taxpayer submits an initial or corrective tax return within the fifth year of the limitation period, that period shall be extended for a period of one year after the end of the five-year period,

(b) if any information is requested from a foreign country, the above deadline is extended for one year from when the information is received by the Tax Administration,

(c) if an administrative appeal or remedy is filed, that period shall be extended for a period of one year following the final judgment.

In cases of tax evasion, when the main tax exceeds € 100,000 for each tax year, a tax determination act may be issued by the tax administration within 20 years from the end of the year in which the tax return filing deadline expired.