The Law on Social Policy and Development (3220/2004), enacted in January this year, amended provisions of Decree 1297/1972, which provides tax incentives for mergers between companies.
In particular, Decree 1297/1972 applies to mergers of, or transformations of any type of business to, joint stock companies or limited liability companies. Such tax incentives include: (i) the exemption of capital gains from relevant income tax; and (ii) the exemption of the sale and transfer of the merged companies' assets, together with registration in public registries, from direct or indirect taxes, duties or levies.
Pursuant to Article 12 of the decree, its provisions do not apply to companies where the main activity is the construction or exploitation of real estate (with the exception of hotel owners). This aims to exclude the application of the tax incentives to companies where the sole purpose is to avoid the transfer tax payable in the event of a sale or transfer of real estate. However, it also precludes the application of the tax incentives where only one of the merged companies is operating in real estate construction or exploitation.
The new law provides that the decree is also applicable to mergers between joint stock companies pursuant to Articles 68 and following of the Greek Company Law if the main activity of the absorbing company is the construction or exploitation of real estate, provided that the activities of the absorbed company do not fall under these areas. This exception also applies where a merger is effected under either Decree 1297/1972 or Law 2166/1993, with the latter law also providing tax incentives for mergers that fall within its scope.
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