On 5 December 2024, the Convention between Greece and Japan for the elimination of double taxation with respect to taxes on income and the prevention of tax evasion and tax avoidance (Double Taxation Treaty or DTT), that had been ratified by virtue of Law 5137/2024, entered into force.
Treaty Rates for withholding taxes
Dividends: 5% (if the beneficial owner is a company that owned, directly or indirectly, for a six-month period, at least 10% of the capital or voting rights of the paying company if the paying company is a Greek resident, or 10% of its voting rights if it is a Japanese resident company) or 10% (in all other cases).
Interest: 0% (when the interest is beneficially owned by the other Contracting State, or a political subdivision or local authority thereof, or its central bank, or any institution wholly owned by the other Contracting State or a political subdivision or local authority thereof) or 10% (in all other cases).
Royalties: 5%
Taxation of business profits
Where an enterprise of one of the two Contracting States has a permanent establishment in the other Contracting State, through which the enterprise carries on business, only the profits attributable to the permanent establishment can be taxed in that other Contracting State.
Mutual Agreement Procedure and Arbitration Proceedings
Issues related to taxation, which are considered not to be in accordance with the provisions of the DTT, may be resolved through the mutual agreement procedure between the tax authorities of the two Contracting States. In addition, where such taxation issues are not resolved through the consultation between the tax authorities of the two States within three (3) years, the issue may be resolved pursuant to a decision of an arbitration panel composed of third parties.
Exchange of Information and Assistance in Collection of Tax Claims
In order to effectively prevent international tax evasion and tax avoidance, the DTT introduces the obligation of exchange of information concerning tax matters and the mutual assistance in the collection of tax claims between the two States.
Prevention of Abuse of the DTT
In order to prevent abuse of the benefits arising from the Treaty, specific cases are regulated in which the provided privileges will not ultimately apply. In particular, where an enterprise of a Contracting State derives income from the other State and the first State attributes that income to a permanent establishment in a third jurisdiction and exempts the profits of the permanent establishment from tax, then the privileges of the Treaty do not apply if the tax in the third jurisdiction is less than 60% of the tax that would be imposed in the first State if the permanent establishment were located there. Also, the benefits are not granted if it is reasonable to conclude that their acquisition was one of the main purposes of the arrangement or transaction that led directly or indirectly to that benefit.
Date of applicability
The provisions of the DTT shall apply from 1 January 2025, with the exception of those provisions relating to the exchange of information and assistance in the collection of taxes, which are applicable from 5 December 2024.
The list of non-cooperative countries for tax purposes for the fiscal year 2023 was recently published by virtue of Decision A.1198/2024 of the Independent Authority for Public Revenues, in accordance with the provisions of paragraph 1 of article 65 of the Greek ITC. We note that, in comparison with the previous list of non-cooperative countries for fiscal year 2022, the list for 2023 also includes Zambia, Zimbabwe, Fiji, Sierra Leone and Belize, while Mauritania, Rwanda, Thailand and Sint Maarten were removed. Therefore, the list of non-cooperative countries for the fiscal year 2023 includes the following countries: Angola, Haiti, Cote d' Ivoire, Algeria, Anguilla, Antigua and Barbuda, Vanuatu, Kingdom of Lesotho, British Virgin islands, Gabon, Ghana, Guyana, Guinea, Guatemala, Zambia, Zimbabwe, Kazakhstan, Cambodia, Congo, Belarus, Liberia, Madagascar, Mali, Belize, Botswana, Niger, Nicaragua, Dominica, Honduras, Palau, Panama, Seychelles, Sierra Leone, Tanzania, Togo, Trinidad and Tobago, Djibouti, Chad, Philippines, Fiji. Furthermore, four countries are considered as non-cooperative only for a specific part of 2023, namely: Vietnam, Benin, Burkina Faso and Papua New Guinea.
Tax Impact
As a reminder, we note that according to the Greek tax legislation, determination of a country as non-cooperative may give rise to adverse tax consequences and in particular to the non-deductibility of expenses paid to an individual or legal entity which is tax resident in such country, unless the taxpayer proves that the payments are actual and according to the normal business practice and do not result in the transfer of profit, revenues or capital with the purpose of tax avoidance or tax evasion. Apart from the above, many of the exemptions from the Special Real Estate Tax are likely not to be applicable for legal entities established in non-cooperative countries.
