You are viewing post Tax withholding on branches of foreign companies in Greece – MMC. 1007/2017
Based on Mimeographed Ministerial Circular (MMC) 1007 / 01.18.2017 “Tax treatment of fees paid for the services of part 4 of paragraph 1 of Article 62 of Law 4172/2013, which are provided in Greece by a permanent establishment of a foreign legal entity registered in a Member – State of the European Union or the European Economic Area” as explained by the Tax Administration, fees for technical services, management fees, consulting fees or remuneration for such services, received through a permanent establishment in Greece, a legal entity, that is a tax resident of a Member – State of the European Union or the European Economic Area, are not subject to tax withholding. An exception is the fee received by these entities for services they provide to government entities (as defined in Article 64 paragraph 2) subject to withholding tax are certain rates, where applicable, and fees for these technical works, which are subject to withholding tax, (as defined in Article 64 paragraph 1, part 4). It is expressly stated that with the issuance of this Circular, any other previous Circulars, with content contrary to this, shall cease to apply in the matter of tax measures related to this issue.
It was previously believed that these provisions demonstrate discrimination, that is unfavorable (application of different rules to comparable situations or the same rule to different situations), towards foreign companies operating in Greece through a permanent establishment, for the reason that, unlike domestic legal entities, foreign legal entities operating in Greece through a permanent establishment, essentially urged to make an advance payment of the income tax, meaning that they are devoid of cash flow, resulting in a lack of fair competition. According to the Treaty on the Functioning of the European Union, freedom of establishment for the nationals of a Member State in another Member State includes the setting up and management of enterprises under the conditions laid down by the legislation in the country where this enterprise will be established for its own nationals, which also applies to companies having their registered office, headquarters or principal establishment within the European Union.