Incentive Law 1892/90

Greece has a comprehensive range of incentives based largely on one piece of legislation. That law provides for incentives to qualifying investors carrying out productive investments. There are four basic types of aid that are provided for, namely, investment (cash) grants, interest subsidies, tax allowances, and increased depreciation rates. The level of the aid varies depending on where in Greece the investment is carried out. Where the investor selects the grants and interest subsidy, the tax allowances are not available and vice versa.

Prospective investors should first evaluate their investment to ensure it qualifies as a "productive investment" as defined under the law. In general, the qualifying investments involve the construction, expansion and modernisation of facilities, and the purchase/installation of equipment and technology, although the provisions of the law which define 21 productive investments must be reviewed in the final analysis. Certain investments are specifically excluded, including the purchase of passenger vehicles of up to six seats, the purchase of office furniture and fixtures. The purchase of land is included only in certain cases.

Eligible investing enterprises are specified and the main sectors which are included are the following:

- commercial;
- manufacturing;
- agriculture and marine culture;
- hotels and tourist facilities;
- high technology;
- energy conservation;
- mining and quarrying;
- daily press;
- public parking facilities;
- cure and rehabilitation centres; and
- means of transportation for remote areas.

For the purposes of the incentive law, Greece is divided into four major regions (A, B, C and D). Certain additional benefits are given for investments located in the northern part of Greece known as Thrace (part of region D). Benefits provided to the various regions increase from A to D where A represents the most developed regions including the Attica, Corinth and Salonica regions and D the least developed border region of the mainland and islands bordering Turkey.

The regions are defined slightly differently where the investment involves hotels and tourist facilities. In addition, special zones are defined providing for increased incentives.

The incentives provided may be summarised as follows: [QQ]
Tourist Investments - Hotels & Tourist Accommodation, Camp Sites (see note ***)


Area 			A    	B    	C    	D	Thrace
Grant     		-   	10%  	15%  	25%  	35% 
Interest Subsidy    	-	10%  	15%  	25%  	35%
Increased Rates of 
Depreciation		-	20%  	35%  	50%	50%

TAX ALLOWANCES*
% of Investment 	-	40%  	55%  	70%  	100%
% of Profits		-	60%  	75%  	90%  	100%

Manufacturing - Industry & Craft Industry
Area 			A    	B    	C    	D	Thrace
Grant**** 		40%**   15%  	25%  	35%  	50%
Interest Subsidy****	40%**	15%  	25%  	35%  	50%
Increased Rates of 
Depreciation		20-40%	20-80%  35-120% 50-150%  50-150%

TAX ALLOWANCES*
Percentage of Investment -	60%  	75%  	90%  	100%
Percentage of Profits	-	60%  	75%  	90%  	100%


* These are granted only as an alternative to the grant and interest rate subsidy, except if the investment is made by a commercial enterprise which is only eligible for the tax allowances.

** For special investment projects only up to 40% applies to areas A, B and C. Area D receives up to 45% and Thrace up to 55%. With respect to area A, where the special investment is between Drs. 5 billion and Drs 25 billion, such portion of the investment is eligible for a grant of only 30%.

*** In general, tourist undertakings are no longer subject to grants, except for projects located in tourism development areas (P.O.T.A.) designated as such by the relevant ministries and approved by Presidential Decree. Other projects eligible for grants are the complete modernisation of hotel installations and equipment and certain specified projects of hotel enterprises. The above rates apply to these projects. Special investment projects such as exploitation of mineral springs and winter tourism centres, expansion or modernisation of marinas, conference centres and golf courses are eligible for grants of 25% for area A and 35% for areas B, C, D and Thrace. Conversion, repairs or restoration of traditional houses or hotel buildings in area A are subject to the grants of area C (15%), whereas in areas B, C and D they are subject to grants of 30% and in Thrace of 35%.

**** The above rates concern the value of the investment up to Drs 5 billion only. Ordinary investments exceeding Drs 5 billion and up to Drs 25 billion are eligible (for the part exceeding Drs 5 billion) for 30% in regions B, C and D and for 40% for Thrace.

The grants and interest subsidies which are provided as an alternative to the tax allowance (reduction) are described in "Incentives - Subsidies and Grants, and Financial Assistance and Guarantees".

The tax allowance entitles the qualifying investor to claim a reduction in taxable profits, provided it is located in regions B, C and D and the productive investment is completed by 31 December 2004. The maximum amount which may be deducted from taxable profits is determined as a percentage of the annual profits and the cost of the investment. Only where certain Special Investments are effected in Area A is a tax allowance available.

Qualifying enterprises making investments qualifying for subsidies or tax exemptions may claim accelerated depreciation on fixed assets purchased up to 31 December 1994. For computing regular and accelerated depreciation, the cost of assets will be reduced by the amount of government grants received by the enterprise.

Indirect Tax Incentives

Industrial Loans in Foreign Currency

Long term loans in free foreign currency (the proceeds of which are converted to drachmae through the Bank of Greece) granted to industrial or mining enterprises for productive investments, and the interest thereon are exempt from stamp duty. Where such loans are granted by foreign entities which do not have a permanent establishment in Greece any interest earned will be exempt from income tax in Greece.

Subsidies & Grants

Incentive Law 1892/90

For a description of the criteria for eligibility, see "Incentives - Direct Tax Incentives".

The minimum ratio of the investor's participation (where the value of contributed land is included only in certain circumstances) to the total cost of the investment not exceeding Drs 5 billion is as follows:

  • Region A 40% (for special investment projects)
  • Region B 40%
  • Region C 40%
  • Region D 30%
  • Thrace 20%

For investments exceeding Drs 5 billion and up to Drs 25 billion, the minimum participation of the investor is 33% in all regions for that part of the investment exceeding Drs 5 billion.

Grants Under Law 1892/90

Non-repayable grants up to Drs 3 billion are provided by the government pursuant to Incentive Law 1892/90 as capital assistance for productive investments not exceeding Drs 5 billion for all categories of enterprises, or up to Drs 25 billion for manufacturing enterprises. Productive investments exceeding Drs 25 billion may be eligible only if they concern industrial or tourist investments of significant importance to the national economy. Grants to hotel enterprises are only available for productive investments up to Drs 1 billion.

The grant is calculated as a percentage of the overall investment and special investment projects (as defined) are eligible for an increased rate. See the table in "Incentives - Direct Tax Incentives", for the rates applicable to each investment region.

Interest Subsidies Under Law 1892/90

In addition to the above grants, a government subsidy may be claimed for the interest payable on loans received from banking or other financing institutions or on public bond issues.

The rate of the interest subsidy is equal to the rate of the grants. See the table in "Incentives - Direct Tax Incentives", for the rates applicable to each investment region.

The interest subsidies are available for the initial term of the loan. The length varies from up to four years to up to ten years, depending on the type, or region of the investment.

Financial Assistance & Guarantees

The state does not have any programs to provide guarantees for the debts of investors.

Imported Goods
As a member of the EU, Greece does not impose import duties on goods imported from member states.

Furthermore, several duty free complexes and free trade zones exist in Greece where imported equipment and products are not subject to any duty or other tax. There are available only for manufacturing and industrial enterprises.

Other Help & Assistance Available

Specific assistance may be available depending on the nature of the investment and/or the "investor" (for example, leasing companies and venture capital companies). Advice should be sought on an individual basis.

The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be obtained before any action is taken.

For further information contact Marios T. Kyriacou, KPMG Peat Marwick Kyriacou, Athens, Tel: 00 301 77 52 001; Fax: 00 301 77 04 182.