INTERNATIONAL BUSINESS PRACTICES IN GREECE

BUSINESS ORGANIZATIONS

All traditional forms of business entities exist in Greece, along with some more clearly defined types. These include the: corporation (Anonymos Etairia); limited liability company (Etairaia Periorismenis Efthymis); general or common partnership (Omorythmos Etairia); limited partnership (Eterorrythomos Etairia); sole proprietorship or individual enterprise (Atomiki Epicherisis); cooperative (Synetairismos); and joint venture (Koinopraxia). Foreign-owned or operated business entities may exist in Greece in any of the forms mentioned above. In the event that a foreign- owned company wishes to undertake an industrial project, the investor is required to establish a Greek corporation in order to benefit from Greek law concerned with foreign investment or any other benefits provided by Greek legislation. If a foreign company does not wish to establish a corporation in Greece, it may establish a branch office. Corporation (Limited Company; Anonymos Etairia - denoted AE): According to Greek law, a corporation formed in Greece must include at the end of its name the letters "AE". In order to establish an AE in Greece, the articles of incorporation must be executed by a notary public and approved by the Directorate of Commerce at the Prefecture (regional administration) who will issue the necessary decree authorizing the operation of the corporation. The articles (or a summary of the articles) and the decree must be published in the Government Official Gazette. The Board of Directors may have between three and nine members, none of whom are required to be Greek nationals or persons residing in Greece. Board meetings must be held at least once a month within Greece unless special permission is granted from the Ministry of Commerce. Persons managing Greek corporations may be foreign nationals, but they must obtain a permit in order to work in Greece. Work permits can be obtained from the Ministry of Labor and Public Order. Foreign Branch Offices: Foreign corporations may establish a branch office in Greece after obtaining written permission from the Ministry of Commerce. In order for permission to be granted, a corporation must designate a person who has permanent residence in Greece to act as the corporation's legal representative in Greece. A Greek consular officer in the company's home country must authenticate the power of attorney. A legal representative must possess the power to represent the company in all legal relations with third parties and be able to accept all documents presented or served to the corporation. To establish a branch, a company must apply at the appropriate Prefec- ture (Directorate of Commerce) requesting a permit to be granted for the creation of the branch. Applications must be accompanied by a certified copy of the articles of incorporation, certificates of operation, sufficient paid-in capital, the year of formation, as well as a copy of the Board of Director's minutes establishing the branch and the note declaring power of attorney. All the documents accom- panying permits must be translated into Greek by the Ministry of Foreign Affairs in Athens. The branch office is legally established in Greece when notice is provided in the Official Gazette.

EXPORTING

Agents and Distributors: It is estimated that 80 percent of Greece's imports are handled through either sales agents or distributors. While sales agents operate on a purchase basis without affecting imports for their own account, distributors generally operate on a wholesale basis and obtain exclusive sales rights for certain districts or for the entire country. Note: Greek courts do not draw a distinction between commercial agents and distributorships. Sales agents of foreign nationality are required to obtain an operation license, issued by a special committee of the Athens Chamber of Commerce. Issuance of the license is subject to the requirement that Greek nationals are accorded similar treatment in the applicant's country of residence. Applicants for such licenses are screened for reputation, experience and financial stability. Manufacturer's agents are legally required to sell all foreign exchange earned from commis- sions to the Bank of Greece in exchange for Drachmas, at the current exchange rate. A commercial agent mediates and negotiates contracts in the name of, and for the account of, the principal or in his own name. Many types of recognized agents are defined by the activities performed, types of products or negotiated, and rights undertaken. Choice of law and choice of forum clauses are allowed. However, if no law is stipulated, Greek law will be applied to agreements, including those situations where the agents are located in Greece or contracts signed within Greece. Under Greek law the agent is obliged to adhere to a number of condi- tions, including: adherence to the principals instructions; systemic activity; protection of the principal's interest; non-competition; obligation to secrecy; safekeeping of the principal's object; resti- tution of acquisition; and obligation to render accounts. Termination of agency agreements is regulated by articles 724 and 725 of the General Commercial Code. The principal may terminate the commercial agency agreement at any time for indefinite term agree- ments. However, an immediate termination without notification may be viewed as abusive and therefore qualify as a breach of good faith. No termination notice is required for definite-term contracts. However, an agent may request indemnification up to the amount of income or commission deprived due to termination. Import Restrictions: In general, goods imported into Greece are not subject to quality, quantity or foreign exchange restrictions. Approval for commodities originating from any country must be obtained from a commercial bank after an application has been filed by the local importer. The application must be accompanied by the original and five copies of the foreign supplier's invoice describing in detail the commodity to be imported. A license must be obtained from the Ministry of Health and Welfare in order to import pharmaceuticals, cosmetics or dietetic foods. Such licenses may only be issued on the advice of the State Laboratory of the Control of Medicines and the National Pharmaceuticals Organization. Importers of electrical household appliances are required to obtain special approval from the Ministry of Industry (their approval being based on the foreign supplier's technical specifications, the product's conformity to EC standards, and the safe performance of the equipment). Import Duties: All durable products imported into Greece from non- European Community (EC) countries are subject to the EC's Common Customs Tariff (CCT). The CCT has two types of duty rates which are applicable to non-EC countries wishing to export to Greece -- autono- mous and conventional rates. The latter are lower rates and are applicable to more than 80 GATT member states, including the United States, as well as to countries that have signed agreements with the EC establishing most-favored-nation (MFN) status. Other direct and indirect taxes levied against imports include: value- added tax (VAT) and a University/Bank Charge. VAT rates are set at eight percent for basic commodities and services, and 18 percent on categories not included under the basic commodity category. The University/Bank charge is a 0.65 percent tax based on the cost, insurance, and freight (c.i.f.) value of imports. Documentation: Exporting to Greece requires one original and six copies of the signed commercial invoice, a certificate of origin (if requested by the Greek importer) and a bill of lading or air waybill. Other documents required for shipment of designated commodities may include: proof of insurance, sanitary or phytosanitary certificates, a packing list, a weighing list, and an inspection certificate. Any special documents should be stipulated by the importer as required under Greek law and/or under the line of credit.

COMMERCIAL POLICIES

Free-Trade Zones: Free zones for warehousing and light manufacturing exist at the Piraeus, Thessaloniki, and Heraklion port areas. Goods of foreign origin may be brought into the free- trade zones without payment of customs duties or other taxes, and may remain free of all duties and taxes while held in the zone or if subsequently trans- shipped or re-exported. Similarly, documents pertaining to the receipt, storage, or transfer of goods within the zones are free of stamp taxes. Handling operations should be carried out according to EC regulations. Transit goods may be held in the zones free of bond. The zones may be used for repacking, sorting, and relabeling operations. Duration of storage is unlimited as long as the warehousing charges are paid. (Assembly and manufacture of goods is carried out on a small scale only at the Thessaloniki free zone.) Exchange Controls: Legislative Decree (LD) 2687 of 1953 provides the following exchange guarantees for all types of foreign investments: protection against expropriation, irrevocability of instruments of approval, repatriation of capital, and the remittance of "reasonable" earnings. The Bank of Greece has been gradually liberalizing current invisible transactions. In mid-1992, the transfer of profits, dividends, interest royalties, rents and other current invisible operations was fully liberalized. Time restrictions on repatriation of past profits, divi- dends and rents were also lifted. Repatriation of profits, dividends and rents derived from legally effected investments from non-EC countries is allowed, regardless of the importation of foreign exchange or any official approval for such investment.

FOREIGN INVESTMENT

Greece encourages foreign direct investment which stimulates economic development through export expansion, import substitution, job creation or technology transfer. Foreign capital inflows for investment purposes are allowed in the form of cash, equipment, or intangible assets, and are usually subject to approval from the Ministry of National Economy and Finance. Direct foreign investment opportunities have improved since 1990 when the Greek government eliminated a provision for obli- gatory state equity participation in any investment in excess of 2 billion Drachmas. Restrictions: The Ministry of National Economy may reject an applica- tion to invest within Greece in sectors of the economy it deems adequately developed. Outside of banking and utilities, the amount of permissible foreign equity investment is not specifically limited. Non-EC investors may not own greater than 40 percent of the share capital in Greek state-owned banks and shipping companies. Incentives: Incentives are available to both domestic and foreign investors and are provided through two basic packages. The first may involve cash grants, subsidized interest rates or increased deprecia- tion rates. The second also allows for increased depreciation rates but rather than cash grants or subsidized interest rates, it offers tax deductions. In order to qualify for an incentive program, there is a minimum investment level of 60 million Drachmas for manufacturing concerns. Special incentives are available under the EC Integrated Mediterranean Program, which is designed to help certain Mediterranean regions overcome structural inadequacies. For purposes of investment, Greek law divides the country into four regional zones, A through D, and the Prefecture of Thrace. Each of the zones offers different incentives, based not only along the lines of the location of the zone, but also according to the type of investment that may be planned for the area. In general, incentives for indus- trial investments differ from incentives available for hotels, hostels, rented apartments, campsites, spas, and winter sports centers.

INTELLECTUAL PROPERTY RIGHTS

Greek law extends equal protection for patents and trademarks to foreign and Greek nationals. Greece is a member of the Paris Convention for the Protection of Industrial Property, the European Patent Con- vention, the World Industrial Property Organization, and the Berne Copyright Convention. In addition, as a member of the EC, Greece has harmonized its legislation in accordance with EC IPR rules and regulations. In accordance with EC law, patent protection is extended for 20 years. Greek trademark legislation is also fully EC harmonized. Foreign trademarks can be registered in Greece as Greek trademarks without submission of a home country registration certificate or other evidence of ownership. Trademarks are protected for 10 years under Greek law. Copyright protection is granted to U.S. firms according to an agreement signed between the governments of Greece and the United States. Like patents, copyrights are protected for 20 year periods.

TAXATION

New Greek tax laws were passed on June 18, 1992 which introduced sub- stantial fiscal reforms to enable Greece to implement EC taxation directives. Changes include a lower tax rate for middle and higher income brackets, a uniform and generally lower tax rate for businesses, and legislation to broaden the tax base and stop tax evasion. Corporate Taxes: Although corporate taxes (under the new tax system) are fixed at a uniform rate of 35 percent, taxable profits may be reduced by the means of numerous incentives. As discussed earlier, incentives vary according to a number of variables, including location. In regard to resident corporations (i.e., Greek and foreign corpora- tions operating and managed in Greece), corporate income taxes are levied on profits before the distribution of dividends. Income taxes resulting from operations overseas and therefore paid abroad may be credited against Greek taxes. Non-resident companies are taxed only on income arising from Greek sources. Since there is no general capital gains tax in Greece, capital gains derived from certain transactions are subject to tax as income for corporations. Under the new tax laws, dividend tax has been abolished. Interest on loans (other than banking loans) is subject to withholding tax when the interest becomes due. Personal Income Taxes: Greece uses a schedular tax system in which a distinction is made among different categories of income (i.e., rentals and investments). Individuals permanently residing in Greece are expected to pay income tax on worldwide income, subject to any special provisions covered under bilateral tax treaties. Temporary and non- residents are taxed only on income earned in Greece. Foreign persons employed by businesses established under Law 89 of 1967 pay tax on income earned while they are physically present in Greece. There is a limited number of personal allowances that persons may qualify for under the new Greek tax laws. A bilateral tax treaty between the United States and Greece has been in effect since 1953. Other Taxes: Other direct and indirect taxes include a value-added tax (VAT), stamp duties, import duties and consumption taxes. There are two VAT rate categories: the lower VAT rate of eight percent is applicable to basic commodities (mainly food products) and certain services; and the higher rate of 16 percent is applicable to items not included in the lower rate. Books and printed material are subject to 50 percent of the lower VAT rate (i.e., four percent). In August 1992, the Greek government abolished the previously applied 36 percent VAT rate on luxury commodities (mainly electronic goods) and also abolished a number of special consumption taxes (such as lubricants and additives). Additionally, a large number of goods (raw materials and industrial goods) previously subject to the eight percent VAT rate were transferred to the higher percentage rate. The government took these measures in order to adjust to EC requirements. Finally, a University/Bank Charge of 0.65 percent on the c.i.f. value of imports from non-EC countries remains applicable. Tax Treaties: Since Greece and the United States have signed a double taxation treaty, U.S. companies deriving income from, but not resident in, Greece are not subject to income tax on that income. Under the U.S.-Greek double taxation treaty, interest received from sources within Greece by a resident or corporation of the United States is exempt from Greek tax, but only to the extent that the rate of such interest does not exceed nine percent per annum. This exemption does not apply to interest paid by a Greek corporation to a U.S. corporation controlling more than 50 percent of the voting capital of the Greek corporation. Also, withholding tax is not levied on royalty payments to firms in the United States so long as they do not maintain permanent establishments in Greece.

REGULATORY AGENCIES

 * Ministry of National Economy and Finance (MNE) processes investment applications and chairs the Greek Foreign Investment Committee. * Ministry of Industry, Energy, and Technology is involved with granting a number of permits required for constructing industrial plants within Greece. * The Town Planning Office in the Ministry of Public Works is responsible for granting permits for the construction, expansion, or modification of industrial buildings. * The Ministry of Industry, Technology and Energy issues permits of approval to companies that submit a satisfactory preliminary study of waste disposal and air-pollution controls. * The Ministry of Commerce holds jurisdiction over, among other things, mergers, takeovers, and acquisitions of companies. * The Service for the Protection of Competition registers agreements between companies under the advice of the Competition Committee, thus ensuring and enforcing antitrust laws. * The Bank of Greece is also involved with a number of licenses, financial controls, and other legal and administrative activities related to investment. * The Ministry of National Economy and Finance oversees all financial activities of both the public and private sectors, including tax keeping records and payments.

USEFUL CONTACTS

 U.S. Embassy in Greece 91 Vasilissis Sophias Blvd. GR-101 60 Athens Telephone: (30 1) 721-2951 Facsimile: (30 1) 721-8660 To mail from the United States: U.S. Embassy, Greece APO AE 09842 The Embassy of Greece in the United States 2221 Massachusetts Ave., NW Washington, DC 20008 Telephone: (202) 939-5800 Facsimile: (202) 939-5824 The American-Hellenic Chamber of Commerce 16 Kanari Street GR-106 74 Athens Telephone: (30 1) 363-6407 Facsimile: (30 1) 361-0170 The Greek Chamber of Commerce in the U.S. The Hellenic-American Chamber of Commerce 29 Broadway New York, NY 10006 Telephone: (212) 493-7500 -

---

 This resource is extracted from the Department of Commerce National Trade Databank (NTDB) courtesy of the Libraries of the University of Missouri at St. Louis.

Back to GreekInternet.Com Index