The establishment of branches of foreign companies in Greece has been institutionalized already for five decades with the mandatory law 89/1967. The purpose of the Greek legislator at the time of the adoption of this law was to attract foreign investment through the provision of tax incentives for the establishment of foreign commercial, industrial and shipping companies in Greece, with a vision to make the country an international pole of attraction. Today, the use of the provisions of the above law is extremely interesting, as it can serve the creation of important new jobs in our country in innovative areas of work (such as software development, programming, logistics, human resource management, etc.) by producing significant benefits for the national economy, but also for foreign companies that will choose to establish a branch in our country.
Ι. Concept and purpose of the companies of Law 89/67 – Conditions of establishment and operation
The law provides the possibility for companies established abroad to establish subsidiaries or branches, offices and agencies in Greece, which have the sole purpose of providing specific services to their main stores or to related non-established in Greece companies. The list of permitted services, before law 4605/2019, included the following services:
(a) consulting, (b) central accounting support, (c) quality control of production, products processes and services, (d) design of studies, projects and contracts, (e) advertising and marketing, (f) data processing, (g) supply of information, (h) research and development.
By virtue of law 4605/2019, the following categories of services were added to the already permitted services, in an effort of the legislator to cover the needs of the modern economy as these are formed internationally:
(i) software development, computer programming and computer systems support; (j) storage and management of records and data;
(k) management of suppliers, customers and supply chain excluding transportation by own means;
(l) human resource management and training of employees and (m) computer-based call center and telephone information activities.
In order for a subsidiary or a branch to meet the provisions of Law 89/67, a special permit from the Ministry of Economy and Finance is required. The sole obligations of the companies / branches that operate under this special regime are:
- to employ at least four (4) persons in Greece, of which one (1) may be part-time employee and
- to have annual operating expenses in Greece of at least one hundred thousand (100,000) euros.
II. Tax advantages and other incentives
One of the main advantages of Law 89/67, which makes the establishment of companies / branches in Greece attractive, is the special and simplified way of their taxation. Specifically:
- The gross revenues of the companies from the services provided are determined based on the “cost-plus” method, i.e. with the application of a predetermined mark-up to their total expenses.
- The said mark-up applied to each company is determined by a decision of the Minister of Economy and Finance, upon examination of the market conditions in the specific sector of activity. The applicable mark-up cannot be less than 5% and is reassessed every five years.
- All expenses on which the predetermined mark-up is calculated are tax deductible from the gross revenues, provided that they are justified by lawful fiscal documents.
In addition, Law 4605/2019 provided for the granting of incentives for companies subject to the provisions of Law 89/67. These concern incentives for salary expenses, for research and development projects, for professional training programms, etc.
ΙΙΙ. Establishment and operation of Shared Services Centers
Law 89/67 is a useful legislative tool for attracting foreign capital to Greece, allowing multinational groups to establish the so-called “Shared Services Centers”, i.e. units whose sole purpose is the provision of support services to other companies of the same group.
Shared Services Centers are a dynamically evolving global trend thanks to technological development and globalization. They allow companies to increase their operational efficiency and effectiveness, reduce the cost of services provided and operate more flexibly. About 150 foreign companies have already been established in Greece to create Shared Services Centers under Law 89/67, some of which belong to large multinational groups. Typical examples of foreign companies that chose Greece as the location of a branch of Law 89/67 for the operation of Shared Services Center are RED BULL, the American SITEL GROUP, the German multinational Tricontes360 and many more emerging companies.
It is noteworthy that with the recent expansion of the list of permitted services that companies of Law 89/67 can develop, so that it includes other important supportive intra-group services (such as software development, programming, telecommunications, etc.) and with the provision of incentives, the law now follows the needs of the modern economy and makes our country more competitive and simultaneously attractive for the establishment of Shared Services Centers. The benefits that our country can obtain from attracting such investments are multiple, with primary being the increase of jobs, including those of senior officers, in fast-growing areas of modern entrepreneurship, such as software development. In this way, for example, a foreign IT company can set up a branch or subsidiary by hiring staff in Greece, which will provide remote services to the parent company and the latter will then provide services to its customers around the world.
It can be easily understood that the tax incentives provided by the law, the expansion of the services that can be subject to it, the security of the living environment, the geopolitical position of the country and its highly trained human resources, are comparative advantages for the emergence of Greece as an international center for the installation and operation of Shared Services Centers with significant economic benefits for the country.