Law 1297/1972 was enacted in order to encourage mergers and acquisitions of business entities for the purpose of creating larger and more efficient entities. The validity of this law for mergers has been extended by Law 2166/1993 (from 31 December 1992) until 31 December 1996.
The incentives provided by this law take the form of exemptions from various taxes and duties, e.g. exemption from stamp duty, exemptions from transfer tax on real estate and the deferral of income tax on gains arising from the revaluation of assets at the time of the merger until the dissolution of the company or the distribution of the gains. These benefits apply on the conditions that the company resulting from the merger will have a paid up capital of at least Drs 60 million in the case of a company limited by shares (AE) or at least Drs 30 million in the case of a Limited Liability Company (EPE) and in most cases, that 75% of the AE shares or EPE parts will not be transferable for the first 5 years following the merger.
The incentives apply not only in cases where two or more entities are merged but also where an entity is converted from its existing legal form into an AE or EPE.
In addition, Law 2166/1993 places at the disposal of businesses a new procedure for the transformation of businesses (conversions, absorptions, mergers, splitting, contributions).
The main tax benefits of Law 2166/1993 are as follows:
- no revaluation gains are recognised, as assets and liabilities are transferred to the new company at book values confirmed either by a certified auditor or by the tax authorities; and
- exemption from real estate transfer tax, capital concentration tax in most cases, stamp duty and other taxes imposed on contracts.
- the ability of the new company to utilise the tax losses of predecessor companies was also available until March 1996 when this benefit was eliminated by amendments to the law.
This new procedure is shorter and simpler than that of Law 1297/92, does not enforce restrictions on the subsequent transfer of shares as does Law 1297/72, the minimum capital requirements are the regular amounts imposed by company law and is applicable to a wider range of businesses. However, there is a requirement that the businesses being transformed must have published a financial statement for a period of at least twelve months.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Marios T. Kyriacou, KPMG Peat Marwick Kyriacou, Athens, Tel: +301 77 52 001; Fax: +301 77 04 182 or enter text search 'KPMG Peat Marwick Kyriacou' and 'Business Monitor'.