Tax-i 204: Incorporation of Pillar Two rules in the Greek legislation

On April 5, 2024, law 5100/2024 was published in the official Government Gazette for the implementation in Greek legislation of Council Directive (EU) 2022/2523, aiming to ensure a global minimum level of taxation for multinational groups and large-scale domestic groups in the EU (“Pillar II”).

The new law applies to all constituent entities located in Greece that are members of a MNE group or of a large-scale domestic group, which has an annual consolidated revenue of EUR 750 000 000 or higher, in its ultimate parent entity’s consolidated financial statements, for at least two of the four fiscal years immediately preceding the tested fiscal year. Certain entities, such as governmental entities, non-profit organizations, pension funds, etc., are excluded from the new provisions.

The law provides for the application of a “top-up” tax to ensure a minimum level of taxation. The top-up tax applies when the effective tax rate in a jurisdiction is less than 15%. In such case, the group pays top up tax for the difference between the effective tax rate and the 15% minimum tax rate.

Pillar Two, the key components of which are commonly referred to as the "global minimum tax" or "GloBE," introduces a minimum effective tax rate of at least 15%, calculated based on a specific rule set. Groups with an effective tax rate below the minimum in any particular jurisdiction would be required to pay top-up tax to their head office location. The tax would be applied to groups with revenue of at least EUR 750 million.

The new law broadly follows the EU Directive (2022/2523) on the minimum level of taxation and introduces three taxing mechanisms, the Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR) and the Domestic top up tax (DMTT). Additionally, safe harbor rules are adopted to ease the compliance burden of the MNEs, particularly in the first years of Pillar II, stipulating cases where the amount of the top up tax is reduced to zero provided that certain criteria are met.

Income Inclusion Rule (IIR)

Greek ultimate or intermediary parent entity will pay top up tax with respect to Greek and foreign Group constituent entities that were taxed below 15% effective rate at their jurisdictional level (applicable to financial years starting on 31 December 2023).

Undertaxed Profits Rule (UTPR)

The UTPR aims to collect any residual amount of top-up tax that cannot be collected through the IIR or QDMTT. UTPR top-up taxes will be calculated based on certain criteria, including the number of employees and the value of tangible assets (applicable to financial years starting on 31 December 2024). Where the UPE of the group is located in an EU jurisdiction that has provisionally opted out of the Pillar Two rules, the UTPR also applies for fiscal years beginning on or after 31 December 2023.

Qualified Domestic top up tax (QDMTT)

Greek constituent entities will pay a top up tax to reach 15% effective tax rate, if their aggregate effective tax rate is below 15% (applicable to financial years starting on 31 December 2023). Given that Greece is a high-tax jurisdiction, the QDMTT should not be expected to have a wide application, unless the effective tax rate falls below 15% because of tax incentives or tax exemptions.

Safe harbors

The law includes also provisions on safe harbors, including a transitional country-by-country (CbC) reporting, a transitional Undertaxed Profits Rule, as well as a permanent Qualified Domestic top up tax safe harbor.

Group entities falling within the scope and located in Greece are required to submit the top-up tax information return no later than 15 months after the end of the fiscal year while this deadline is extended to 18 months for the transitional year. The Greek tax return for the payment of the top-up tax must be submitted one month after the deadline for the submission of the top-up tax information return.

Download the Tax-i in pdf here.