GREECE Law and Practice Contributed by: Fotodotis Malamas, Bernitsas Law
3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Entities that can be used for tax planning are usually charitable foundations and, in the case of inheritance, a substitution in trust, whereby a testator may impose on an heir the obligation to surrender to another ben - eficiary the inheritance or a portion thereof which the heir has acquired after the occurrence of a specified event or at a specific time. The Independent Authority of Public Revenues issued Ministerial Circular POL 1114/2017 (the “Circular”) with regard to the tax treatment of foreign trusts and foundations. In general, trusts are treated as either transparent or opaque legal entities for income tax purposes, while foundations are treated as opaque legal entities. In both cases, however, it appears that the Ministry of Finance has adopted the look-through approach, treating beneficiaries as being subject to inheritance, gift or donation tax. 3.2 Recognition of Trusts Although brief reference is made in Greek legislation to arrangements such as a trust or foundation, there are no provisions regulating the establishment and operation of these legal entities, and trusts are not recognised, creating impediments to family wealth planning. However, for tax purposes, specific pro - visions apply to income originating from trusts and foundations. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation In accordance with the Circular, a trust constitutes a particular regime for property management and settle - ment, which lacks any legal personality and is estab - lished either by means of a statement of will of the property owner or with the transfer of such property, in life or at death, by means of a will. The settlor or trustor contracts with the trustee by way of a deed of settlement and transfers property assets to the latter, which the trustee manages to the benefit of trustees, beneficiaries or the settlor, or to their own benefit, for
the service of a specific purpose, which the trustee defines. More specifically, the trustee acquires the property of the settlor separately from its own and is obliged to keep it and deliver it in accordance with the terms and conditions of the trust, while the beneficiar - ies are natural or legal persons or legal entities who enjoy the benefits of the trust from the trustees, either via regular payments or upon the expiry of the trust, and also in accordance with the conditions set by the settlor (in life or after death). The Circular does not provide a clear definition of a trust, but describes its operation and the relationship between the settlor, the trustee and the trust. The Income Tax Code The Income Tax Code makes numerous references to trust and foundation structures. It defines various terms for taxation purposes and provides, inter alia, that any trust or foundation structure falls within the definition of the term legal entity ( nomiki ondotita ) and is therefore subject to taxation in Greece. In the income tax field, the Circular examines the peri - od after the introduction of the new Income Tax Code (ITC) and the period before it (the “Old ITC”). Trusts Since the introduction of the ITC, trusts have been recognised for tax purposes as legal entities but not as legal persons. As a result, withholding tax applies for passive income, such as dividends, interest and royalties. Real estate income is considered business income subject to the corporate income tax rate (cur - rently 22%). The provisions of double tax treaties (DTTs) also apply to trusts and foundations, unless otherwise provided for by the respective DTT. For the period to which the Old ITC applies, trusts are not considered legal entities. Furthermore, the Circular provides guidelines for the tax treatment of trusts and foundations from an inher - itance and donation tax perspective. It appears that the Ministry of Finance has adopted the look-through
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