Business Mergers: 2022 brings tax incentives for Greek small and medium sized companies in the verge of merging
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From January 1, 2022, tax incentives are offered for business mergers in order to facilitate mergers and any kind of corporate transformations of small & medium sized Greek companies, in full compliance with Law 4601/2019 on corporate transformations.

The most important incentive is the reduction of the due tax on the profits (before taxes) by 30% for three (3) years starting from the next year of the date of completion of the transformation of any form, provided that the following conditions are met:
1. the total average turnover of the transformed enterprises, taking into account the previous three years, is at least equal to one hundred and fifty percent (150%) of the turnover of the enterprise with the highest average turnover of the last three years among the transformed enterprises, and
2. the turnover of the new company, that is, the sum of the turnover of the last approved and published financial statements of the transformed companies, minus the transactions between them, is equal to or greater than the amount of four hundred and fifty thousand (450,000) euros.

It is worth noting that the measure of tax reduction also applies to sole proprietorships that are transformed into general partnerships or any other type of companies, as well as to mergers of sole proprietorships in order to create a new legal entity. In this sense, the provision is of particular importance - for the first time - for freelancers, who can also use it in this context. For the sole proprietorships (personal companies) that are merged, however, there are also restrictions regarding the time of establishment of each enterprise and the turnover of the new company, which must be equal to or greater than one hundred and fifty percent (150%) of the turnover of the sole proprietorship. with the highest average turnover of the last three years among the transforming companies, while the new company must keep bibliographic books (including the "fund" monitoring reef).

Provisions for the transfer of losses can also be regarded as an important incentive: the possibility of transferring the loss of the transformed companies to the balance sheet of the new company and the possibility of offsetting this loss with the profits of the new company. More specifically, the loss transferred to the balance sheet of the new company by the amount that may not be offset by profits existing during the transformation, is offset by the resulting profits of the new company of the current or subsequent years, only to the extent recognized for tax purposes. general provisions on income tax, if the turnover of the new company, ie the sum of the turnover of the last approved and published financial statements of the transformed companies, minus the transactions between them, is equal to or greater than the amount of four hundred and fifty thousand ( 450,000) euros. The amount of the unrecognized loss can be amortized each year without the right to deduct from gross income or offset with the resulting profits. It is worth emphasizing that the companies that settled their debts in accordance with articles 31 to 64 of law 4738/2020 can transfer in whole or in part the balance of the account with the losses, which arises after the conclusion of a consolidation agreement. with their creditors and its ratification by the competent court, according to the definitions of Law 4308/2014 (ELP).


However, apart from the transformation and the incorporation of a new company by absorption of existing legal entities or enterprises, in the context of mergers with the provision of tax incentives, a new informal corporate form emerges in Greek business law, the "cooperation", which is a loose partnership or joint venture or a new company with the following characteristics:
a) is created by virtue of any form of contract or agreement between unrelated persons, within the meaning of circumstance g of article 2 of law 4172/2013, with the object of contract farming or franchising agreement or by virtue of the establishment of any form of legal of another person or legal entity, including joint ventures, cooperatives, organizations or producer groups, regardless of their legal form.
b) is intended to jointly promote the business activities of the cooperating companies or persons;
c) lasts for at least five (5) years from the date of conclusion of the agreement or the establishment of the legal entity or legal entity, and
d) the total average turnover of the companies participating in it, taking into account the previous three years, is at least equal to one hundred and fifty percent (150%) of the turnover of the company with the largest, among the cooperating companies, average turnover of the last three years.

In summary, we would say that the new beneficial provisions apply directly to small and medium-sized enterprises and, in particular, in the case of transformations, to medium-sized enterprises with up to two hundred and fifty (250) employees and an annual turnover not exceeding fifty million (50,000,000) euros. In the case of partnerships / co-operations, it concerns small companies that employ up to fifty (50) employees and the annual turnover of which does not exceed the amount of ten million (10,000,000) euros.

All the above are part of the support mechanism for the development of entrepreneurship. Considering that the expenses related to the so-called "green" economy will be deductible increased by 100% in combination with the reduction of the tax rate to 22% and the advance payment of income tax, the incentives are significant. However, the choice should be made after analyzing all the parameters related to a transformation and the reasons for its implementation should not remain in the temporary tax benefit, but this should assist the already taken decision for "change" for primarily business reasons.

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Απόστολος Ο. Μουντούλιας

Δικηγόρος, ΜΔΕ 

@ a.moudoulias@dikaion-law.com