Tax Updates: December 5th 2023

The Independent Authority for Public Revenue (AADE) recently issued Circulars Ε.2066/2023 and E.2068/2023, in order to fill the existing legislative gap on what concerns the VAT treatment of revenues from over the counter derivative products in the absence of explicit provisions in both Greek and EU legislation.

More specifically, circular E.2066/2023 clarifies that any revenues arising from Contracts for Difference (CFDs) is subject to VAT at the rate of 24%, taking into consideration the fact that Contracts for Difference (CFDs) are derivatives that are not traded on a stock market (but over the counter / OTC) and are utilized for hedging risks. The above VAT treatment is in line with the established case law of the CJEU on the restrictive interpretation of tax exemptions, as both in EU and national legislation, the VAT exemption is only available for derivatives traded on a stock market (e.g. options), whereas, on the contrary, the exemption does not explicitly apply to over the counter derivatives, such as CFDs.

Subsequently, in order to ensure the correct implementation of the above circular, AADE issued Circular E.2068/2023, which provided additional clarifications on the scope of E.2066/2023 and the exemption from VAT of financial products traded over the counter. In particular, although E.2066/2023 clarified that the VAT exemption provided for in Greek and EU legislation covers exclusively derivatives traded on a stock market and not those traded over the counter such as CFDs, it was also clarified that this does not exclude the application to OTC derivatives of VAT exemptions provided by other provisions of the VAT Code, such as those of Article 22. Consequently, the supply of services and respective income therefrom related to transactions concerning OTC derivatives, where at least one of the contracting parties is a credit institution or an Investment Services Company (AEPEY), are exempt from VAT under Article 22(1)(k), (kd) and (ke) of the VAT Code. Furthermore, it is highlighted that the application of such exemptions from VAT is not optional.

Finally, taking into account that the income from CFDs qualifies always as income from the supply of services, this second circular stipulates that when one of the parties to the CFD is established outside Greece (within or outside the EU), the provisions of Article 14 of the VAT Code regarding the place of supply and consequently the place of taxation of this service, shall in principle be taken into consideration.