Greece introduced a new business tool for the management of cash flow and family property assets in February 2021. It is regulated in the “family offices” law.
Family Offices in Greece
The new beneficial tax regime of the “family offices” law, Article 25 of Law L4778/2021, provides for the incorporation of a special purpose vehicle either through family members and/or other legal entities in which family members participate. It will be available only for individuals who have their tax residence in Greece.
For the implementation of a family office in Greece, the following requirements must be met:
The family office must employ at least 5 people within a period of 12 months from its incorporation.
The family office must spend at least EUR 1,000,000 in operating expenses annually, while its taxable profits will be determined on a cost-plus basis by applying a specific markup of 7% to its total expenses.
Our experienced team can support you in setting up a family office in Greece, as well as in all legal and tax aspects of real estate transactions. Dimitrios Leventakis, Managing Director, ECOVIS HELLAS L.T.D., Athens, Greece
The regime’s tax features provide certainty for the corporate tax base, since any expense which is properly recorded under Greek accounting regulations is treated as tax deductible. At the same time, offices covered by the regime do not have to prepare transfer pricing documentation for their intra group transactions, explain the Ecovis experts.
Furthermore, family offices are not obliged to be registered with the commercial registry and to publish annual financial statements. Any transactions between the family office and the family members will also be out of the scope of VAT.
Digital Building Identification
A new electronic Digital Building Identification came into effect on 1 February 2021. The ID was introduced under Law 4495/2017 and further specified under Laws 4693/2019 and 4759/2020. It is mandatory for all buildings old and new, public and private. The ID will be required when buying or selling a property, issuing any building permit, and gaining an exemption from annual fines for additional constructions that took place before 2011 and have not been included in building permits.
Net income earned by a Controlled Foreign Corporation (“CFC”) may be subject to immediate US taxation to US shareholders, whether or not distributed. This results from the Global International Low Tax Income (GILTI) provisions of the US Tax Cuts & Jobs Act of 2017.
The effective tax rate on this income, governed by GILTI, is 10.5% for C corporations and as high as 37% for individuals. After 2025, the rate for C corporations increases to 13.125%. There are two significant factors in determining whether US shareholders will be subject to tax on a CFC’s net income, explain the experts from Marcum LLP*. These factors are:
The level of asset investment by the CFC in its own country. The GILTI provisions will tax, each year, the excess return of a CFC above 10% of foreign depreciable assets, known as the Qualified Business Asset Investment (QBAI).
The effective foreign income tax rate on the CFC’s earnings.
When to Include GILTI Income in US Income
Once the GILTI amount is determined, the US shareholder will be required to include the allocable share of this amount in US taxable income. There is an exclusion available equal to 50% of the GILTI amount, and the other 50% is taxed to the US shareholder in accordance with applicable federal income tax rates. For a corporate shareholder, the GILTI income is taxed at 21%, after taking into consideration the exclusion, for an effective tax rate of 10.5%.
Foreign income taxes paid by the CFC can be taken as a tax credit against US tax on GILTI income, subject to an 80% reduction. As such, if the CFC’s effective foreign income tax rate (determined under US tax principles) is at least 13.125%, generally there should be no net US income tax due on a corporate US shareholder’s GILTI income, after application of exclusions and foreign tax credits. US individual shareholders with GILTI income can, by election, be entitled to the same exclusions and credits as a corporation.
Make Use of the Tax Election Annually
US tax regulations finalised in July 2020 provide for a GILTI High Tax Election. Under this election, a US shareholder of a CFC will not be required to include GILTI income on his/her/its US income tax return if the CFC’s effective tax rate, as determined under US income tax principles, exceeds 18.9%. Once this threshold is met, a US shareholder can elect to exclude a tested unit’s (defined below) income entirely in determining the GILTI amount.
The election may be made on an annual basis and applies, consistently, to all CFCs owned by the same domestic controlling US shareholder and to all of a CFC’s US shareholders. A controlling US shareholder will provide notification to non-controlling US shareholders if the election is made.
We can help navigate the GILTI rules for US shareholders of foreign entities. Mark Chaves, CPA, Co-Leader International Tax Services Practice, Marcum LLP*, Miami, Florida, USA
It is important to note that the GILTI High Tax Election is made on a tested unit basis, say the Marcum LLP advisers. A single CFC may be comprised of numerous tested units, or may itself constitute a tested unit. A tested unit may be a CFC, a branch of a CFC in certain cases, or certain entities in which a CFC has an interest. Tested units that are resident in the same country are combined.
The GILTI High Tax Election may not be beneficial in all cases. Clients should be careful to properly analyse the pros and cons before making the election on their US income tax returns.
For further information please contact:
Mark Chaves, CPA, Co-Leader International Tax Services Practice, Marcum LLP*, Miami, Florida, USA
*Marcum LLP is the exclusive associated partner of ECOVIS International for accounting, tax and audit in the United States of America.
Taxes in Finland: New Tax Benefits for Foreign Companies
Foreign companies can now take advantage of new tax incentives in Finland. The tax breaks can reduce the cost of joint research and development projects by 150%. In addition, tax-free shares will encourage employee commitment and new e-identification and e-authorisations are being introduced.
The new tax incentives are for all companies operating in Finland, both domestic and international and do not constitute state aid under the EU’s definition, explain the Ecovis experts in Finland.
One of the new tax incentives encourages the share-based commitment of employees. It is not limited to start-ups, but applies to all non-listed companies. When non-listed limited liability companies issue shares to employees in Finland, the subscription price may be lower than the market value of the shares. If the subscription price is the share’s mathematical value, an individual employee who buys such shares will not be treated as having received a taxable benefit.
Would you like to take advantage of the tax conditions in Finland for your company? We will help you with settlement. Jaana Palomäki, Managing Partner, ECOVIS SGO Finland Ltd, Helsinki, Finland
150% Tax Deduction for Joint R&D Projects
Companies conducting R&D activity with a genuine research organisation meet the criteria for a tax deduction in Finland. The new tax law came into effect in January 2021 and gives companies a 150% tax deduction for joint R&D projects from 2021-2025.
If the actual R&D work is performed by a sub-contracted party (university/research institute etc.), the deduction is 50% on top of the existing deduction, which is 100%. The minimum threshold for tax deduction of costs is EUR 10,000/fiscal year, with a maximum of EUR 1,000,000. This means that the actual deduction is between EUR 5,000 – 500,000 per fiscal year.
The Finnish authorities are modernising their electronic systems. The “KATSO” service will be replaced by Suomi.fi e-identification and e-authorisations. The authorities in Finland use “KATSO” as an identification and authorisation service for companies. The “KATSO” services will cease to operate on 30 April 2021. E-authorisation is an even more secure solution that can not only be used by government services, but also by the private sector. With Suomi.fi e-authorisations, private persons, companies, and organisations can authorise someone else to act on their behalf. A mandate is an electronic power of attorney, the details of which are entered in the authorisation register.
Facts & figures on Finland: You and your company can benefit from this
Finland’s 20% corporation tax rate is the lowest in the Nordics and one of the lowest in the EU.
The Finnish government’s goal is to raise the R&D percentage of GDP to 4% in 2030.
Finland has the highest number of digital start-ups per capita in the world.
Finland is ranked first in the global Covid Economic Recovery Index and offers a safe research and development environment.