Double taxation agreement Greece: New tax treaty with France

On 11 May 2022, France and Greece signed a new tax treaty. If both countries complete the ratification process before 31 December 2022, the new agreement will apply from 1 January 2023. The double taxation treaty with Greece replaces the original tax treaty signed in 1963. The Ecovis experts know the details.

As the text of the new treaty was signed after France and Greece ratified the OECD multilateral instrument (MLI), the new tax treaty will not be covered by the MLI, however it directly integrates some similar provisions, such as, for example:

• The inclusion of the new definition of a dependant agent (a person who habitually concludes contracts or who habitually plays the principal role leading to the conclusion of contracts, which on a routine basis, are concluded without significant modification by the foreign enterprise) in article 5.
• The introduction of the general anti-abuse clause “Principal purpose test” in article 27.

Who is affected by the new double taxation agreement with Greece

The new tax treaty concerns corporate income tax and additional contributions, personal income tax and social security contributions (CSG and CRDS). It does not cover wealth tax.

It applies to French partnerships or similar if

• they have their place of effective management in France
• they are subject to tax in France and
• all unit holders, partners or members are, under French tax law, personally subject to tax on their share of the profits of that partnership or other similar entity (including a group of persons)

The double taxation agreement between France and Greece makes international cooperation easier for companies.

Vanessa Raindre, Tax partner, ECOVIS MD Legal, Paris, France

What will change with the new double taxation agreement

The following changes apply to the taxation of passive income:

• Dividends: No withholding tax shall apply if the effective beneficiary is a company that holds at least 5% of the distributing entity during a 24-month period. In other cases, the withholding tax is limited to 15% (whereas no cap is included in the initial tax treaty from 1963).
• Interests: Withholding tax is limited to 5% (whereas the cap is set at 10% or 12% in the initial treaty)
• Royalties: No change (withholding tax is limited to 5%)

Concerning the taxation of capital gains realised on the sale of companies’ shares whose value is mainly derived from real estate properties, the new article 13 allows taxation by the country where the properties are located. It should be noted that when calculating the company’s real estate predominance, buildings used for the company’s activity are not taken into account.

The tax treaty provides for the non-application in tax matters of non-discrimination or most favoured nation clauses contained in other agreements or treaties concluded elsewhere by France and Greece (article 22, par. 7). In addition, it is clearly specified that France is entitled to apply the following French anti-abuse mechanisms : articles 123 bis, 155 A, 115 quinquies, 209 B, 212, 238 A and 238-0 A of the French tax code.

For further information please contact:

Vanessa Raindre, Tax partner, ECOVIS MD Legal, Paris, France
Email: vanessa.raindre@mdlegal.fr