Greece may face EU commission over 26% withholding tax

Greece may face European Economic Affairs Commission on 26% withholding tax plan. Bulgaria complained to the European Commission on 30 March about a new Greece law battling corporate tax avoidance that Sofia warns could undermine trade between the Balkan neighbors.

In a letter to European Economic Affairs Commissioner Pierre Moscovici, Bulgarian Finance Minister Vladislav Goranov took exception with Athens introduction of a 26% withholding tax on Greece business transactions originating in Cyprus, Ireland and Bulgaria, all of which have minimalist corporate tax structures. Goranov called it “a discriminatory and disproportionate measure” and warned of a “deterioration of bilateral economic relations” between Bulgaria and Greece as a result.

According to Dnevnik, the EurActiv partner in Bulgaria, Greece’s aim is to fight tax avoidance via Bulgaria, where the corporate tax is lower (10%). Athens would therefore tax by 26% (the percentage of corporate tax in Greece) all deals with Bulgaria, and would return this tax only when it would be proven that their aim was not tax avoidance.

Goranov’s letter blasted the measure for “assuming that all transactions originating in these three EU states represent fraud or tax aversion”. Recent years have seen a considerable spike in companies filtering business deals through affiliates in low-tax nations. Greece has a 23% value added tax compared with Bulgaria’s 20%, for example, while the difference in corporate tax rates is even greater. An estimated 14,000 Greek companies have operations in Bulgaria.