Draft Law: Administrative Cooperation in Taxation – Key VAT & Penalty Reforms

This draft law aims to enhance tax transparency and combat tax fraud and evasion in Greece, particularly concerning crypto-assets and alternative payment methods, by transposing EU Directives 2023/2226 and 2025/872. It introduces significant changes concerning VAT mechanisms and tax penalties.

• VAT Reforms: The bill adjusts the reverse charge for specific construction works, applies a reduced 6% VAT rate to certain electricity transmission services (from ADMIE), and clarifies the VAT treatment of volume-based rebates, validating them even if prior notification was not made.
• Penalty Reductions/Abolitions: It significantly reduces or abolishes penalties for nil and credit VAT returns, and late withholding tax returns, with retroactive effect from April 2024. These changes include lower fixed penalties for different accounting systems and specific exemptions for certain amended returns.
• Minors’ Exemption: A new provision exempts individuals from late-filing penalties for tax returns related to minors, including those submitted by parents for minor children’s income.

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Detailed Explanation of Relevant Articles:

Article 64: Tax treatment of water losses – Addition of paragraph 4A to Article 9 of the VAT Code
This article introduces a new paragraph 4A into Article 9 of the VAT Code (Law 5144/2024), which defines what constitutes a “supply of goods” for VAT purposes. The new paragraph clarifies the treatment of water losses for water supply companies. Specifically, it stipulates that technical, physical, or operational water losses incurred by water supply companies during the production, processing, transport, or distribution of water are not to be considered a supply of goods. Furthermore, these losses are not to be treated as a disposal of goods for own use or for purposes unrelated to the company’s business activities. This provision is significant as it prevents water supply companies from being charged VAT on water that is lost due to technical reasons rather than being supplied to a consumer. The article also states that this provision applies to all pending tax years, ensuring retroactive effect for past cases of water loss.

Article 65: Value Added Tax on projects where the contracting authority is the Athens Water Supply and Sewerage Company (EYDAP) and the Thessaloniki Water Supply and Sewerage Company (EYATH) – Amendment of paragraph 4 of Article 45 of the VAT Code
This article modifies paragraph 4 of Article 45 of the VAT Code (Law 5144/2024), which deals with the reverse charge mechanism. The amendment introduces a new fourth subparagraph that specifically addresses construction works on real estate. For such works (as defined in paragraph 2, point (b) of Article 8) where the contracting authorities are the Athens Water Supply and Sewerage Company (EYDAP) or the Thessaloniki Water Supply and Sewerage Company (EYATH), and these entities are subject to Law 4412/2016 (Public Procurement Law) and are VAT-liable with the right to deduct, the reverse charge mechanism will apply. This means that the recipient of the services (EYDAP or EYATH) will be liable for the VAT. Consequently, the subcontractor performing the works will have the right to deduct input VAT but shall not charge VAT on the invoices issued. Instead, their invoices must explicitly state “Article 45, recipient is liable for tax.” An important exclusion is noted: this provision does not apply to large co-financed projects under specific EU Regulations (1303/2013 and 1083/2006) and any projects contracted by EYDAP or EYATH, regardless of whether they are co-financed.

Article 81: Treatment of discounts due to turnover
This article addresses the VAT treatment of volume-based rebates (discounts due to turnover). It clarifies that the failure to comply with the previous requirement of notifying the competent tax authority (DOY) regarding these rebates (as mandated by Article 19, paragraph 5, point (a) of the former VAT Code) does not constitute a reason for the non-recognition of these rebates. This provision is intended to resolve disputes and provide certainty regarding past practices. It applies to cases where a final corrective tax assessment has not yet been issued and to cases currently pending before administrative courts or the Council of State.

Article 96: Value Added Tax on services of the Independent Power Transmission Operator
This article concerns the VAT rate applicable to certain services provided by the Independent Power Transmission Operator (ADMIE). It explicitly states that services which are necessary for the transmission of electricity through the Greek Electricity Transmission System (ESMHIE) and for ensuring the quality and reliability of supply to electricity consumers are considered ancillary services to the supply of electricity itself. As such, these services are subject to the reduced Value Added Tax (VAT) rate of six percent (6%). The article further clarifies that the collection and remittance of VAT at this reduced rate by ADMIE fully satisfies the tax obligation. Moreover, VAT declarations submitted for periods up to the entry into force of this law, which pertain to these specific services, will be considered accurate concerning the applicable VAT rate.

Article 37: Penalties for failure to submit or late submission of Value Added Tax returns – Exemption from penalties for late returns… (amending Article 53 of the Code of Tax Procedure)
This article introduces significant changes to tax procedures and penalties, particularly for VAT and withholding tax returns.

• New Paragraph 1A: Adds a provision to Article 53 of the Code of Tax Procedure, stating that the penalty for non-submission or late submission of returns also applies to taxpayers who submit nil or credit VAT returns.
• Reduced Penalties for Late Submissions (Retroactive): Amendments to paragraph 2 of Article 53 significantly reduce penalties for late submission of nil or credit VAT returns and withholding tax returns. These reductions are retroactive to April 19, 2024. Specifically, the penalty is 250 euros per violation for taxpayers with single-entry accounting systems and 500 euros per violation for those with double-entry accounting systems.
• Exemptions from Penalties (Retroactive): Paragraph 7 of Article 53 is amended to exempt certain cases from penalties, also retroactive to April 19, 2024. These include:
  • Late submission of an amended VAT return or withholding tax return, provided the original return was filed on time.
  • Late submission of an amended income tax return for individuals or legal entities if the additional tax payable is up to 100 euros.
  • Late submission of an initial income tax return for individuals or legal entities if the tax payable is up to 100 euros.
  • Late submission of an initial indirect tax return (excluding VAT and real estate transfer tax), duty, contribution, and special taxes under Annex A, if the tax payable is up to 100 euros.
  • Late submission of an amended indirect tax return (excluding VAT and real estate transfer tax), duty, contribution, and special taxes under Annex A, if the additional tax payable is up to 100 euros.
• General Exemption for Minors (New Paragraph 13): A new paragraph 13 is added to Article 53, creating a general exemption from late-filing penalties for tax returns related to minors. This applies to returns submitted for a minor individual, or by an individual for obligations pertaining to a tax year during which they were a minor. This exemption also covers late income tax returns of a parent that include the income of minor children taxed in the parent’s name.
• Penalty Annulment/Modification: Penalty acts issued from April 19, 2024, onwards for violations covered by the retroactive provisions of paragraphs 1A, 2, and 7 of Article 53 are to be annulled or modified, with corresponding deletion or refund of penalties.

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