01 Jun Greece 2.0: Gaining Ground Through Reforms
John Kyriakides, Managing Partner, KG Law Firm leverages new legislation in Greece to answer 21st century demands across industries
You have over 20 years of experience as a partner with KG Law, and you have seen Greece steer itself through some of the toughest economic hardships in recent history. The country has ushered in reforms and laws aimed at economic recovery, and slowly but surely is pulling itself up by its bootstraps. How would you assess the current investment climate in Greece? What are the key benefits of the market to foreign investors, and what are some of its main policy advantages over some regionally comparative markets?
I have been practicing as a litigator since early 2000 and have been sitting in this very office since 2009 witnessing so many things change over the last ten years. Between 2010 and today Greece has gone from being the black sheep of Europe to a trusted member state. A lot has changed. Structural reforms have taken place and significant changes in various parts of the economy were adopted that were essential in allowing the country to regain a more competitive profile towards foreign investments. Previous governments implemented reforms too, but they did not believe in the reforms they adopted.
As for recent history, I would be remiss if I did not mention the work that has been done by the Pissarides committee, chaired by the Nobel Laureate LSE Professor and economist Chris Pissarides, was responsible for presenting a report to the Greek government with proposed reforms and policies based on the trends of the Greek and European economy, as a consultancy of the direction in which the Greek economic policy should head. The report contained critical feedback for the government and touched upon many reforms, from social and administrative matters to employment, education, governance and tax-related policy. The government has followed this advice in their plan to improve productivity and has brought reforms into effect that are aimed at economic recovery.
For instance, in the field of taxation, corporate income tax was reduced from 28 percent to 24 and now to 22 percent. Equally, incentives aimed to attract foreign investments coupled with a pro-business approach and philosophy have changed the global perception of Greece. The results of these initiatives became quickly evident. The GDP has gone up, unemployment rates have gone down considerably and real estate market prices are climbing at a rapid pace. These three indicators are clear proof of economic recovery.
Dubbed Greece 2.0, Greece’s COVID-19 relief plan involves over EUR 30 billion in labor reforms, government grants, incentives, and loans in 175 areas of investment aimed at a post-COVID-19 economy, one which is both greener and digitally competitive. What would you tell our international audience about paying attention to Greece’s investment potential and the policy incentives that support it? What will some of the most noteworthy aspects of this labor reform entail and how will multinationals benefit?
Labor laws in Greece are becoming quite competitive with respect to other European member states. Secondly, wages and salaries have always remained more competitive. At the same time, the Greek workforce is of excellent quality. Greeks in the right environment can be exceptionally capable and diligent workers whilst many speak at least one foreign language. I believe our people rank above the European average.
To the international audience of Newsweek, I would say that there are indeed considerable incentives to invest in Greece when it comes to labor reforms, the most important of all being the significant reduction of the social security contributions, coupled with grants which render hiring people in Greece more attractive. The results speak for themselves. Unemployment rates dropped from 28 percent in 2013 to below 14 percent today. This may still be much higher than the European average of about 7 percent, but it is indeed a significant drop and downward trend.
The recent labor law reform adopted by the government aimed to bring long overdue amendments to outdated laws that date back to the 1980’s. The new regime offers more freedom to employees to decide working hours while taking on exploitation, unpaid overtime and undeclared work. The most contentious part of the law introduced flexibility to the eight-hour workday by allowing employees to work up to 10 hours on one day and fewer hours on another or to take time off. It also regulates remote working and includes safeguards against sexual harassment. Further, the reform introduced a “digital employment card” which monitors employer compliance with labor law obligations.
These reforms were deemed as essential, as they bring Greece in line with other EU member states and effectively modernize legislation that dated back to the pre-internet, pre-digital era when remote work, teleconferences or even emails were still nonexistent.
To the new rules for family offices who manage in excess of EUR 1 million – with the new law proposing 1.7 percent effective tax rate and 0 percent VAT on internal transfers – when looking at ‘old wealth’ across the EU and major players from countries like China and Russia where EU presidency is sought after, what does this move hope to accomplish for the Greek economy? What is some feedback you often hear from foreign investors entering Greece and how easy do they find setting up shop here?
We have seen an uptrend in that regard too, but it is part of a combination of many things.
First of all, the golden visa regime has allowed foreign investors to enter the EU through Greece at a low cost. This combined with low tax rates and the political and social stability that Greece offers is an attractive proposition to any foreign investor.
Another tax measure aiming to make Greece an even more attractive destination for HNWI economic activity relates to the introduction of Greek single-family offices providing a wide range of services tailored to meet the needs of HNWIs. In rough lines, such a new regime provides for the management of the wealth of individuals and their family members, tax residents in Greece, which can be carried out by special purpose corporate vehicles (i.e. family offices) that operate in any legal form, except that of non-profit legal entities. The gross income stemming from the services provided by family offices and which can be received only through bank transfers is determined on the basis of the cost-plus method, i.e. with the application of a mark-up set at 7 percent on their total business expenses and depreciations excluding corporate income tax. All expenses, on which the mark up applies,
shall be tax deductible for income tax purposes, on the condition that they are supported by fiscal records complying with the Greek GAAP legislation. Transactions conducted between the family office and family members are considered as incurred within a single entity and therefore fall outside the scope of VAT.
I would say that feedback is still conservative primarily because Greece needs to prove – and this is only a matter of time – that it will not treat family offices differently in the future. In other words, long-term stability is vital for the success of this plan. Secondly, I believe it is obvious that this regime has been explicitly designed to operate in combination with the non-dom structures related to the transfer of tax residency in Greece of HNWIs, which indicates that the target of the government was clearly to incentivize HNWΙs to repatriate in Greece along with their families rather than to simply establish a family office.
EY recently reported that up to 35 percent of FDI entering Greece was in real estate, with Greece jumping from the 35th overall FDI destination to 29th. So too have we seen global ETFs in residential and commercial real estate rebound extremely well over the last few quarters. What does your firm anticipate for the real estate market in Greece and why has Greece proven to be such an attractive investment market for global real estate investors?
We anticipate that the real estate market will continue its upward trend. Right now there is a healthy appetite for everything that is related to real estate and tourism. The underlying reason is our 6-month period of seasonality. The weather between May and October is ideal, which is an element that you will rarely find in other countries. Then there is the fact that the region around us has had some problems. Greece has had its own problems, but they were more financial and did not involve political instability.
Greece has been highly publicized in a negative connotation in the past for all the wrong reasons, but people around the world have heard about Greece turning things around. With the changes in Greece follows a change of perception about the country. We are currently working on a number of important real estate development projects, but investors want to make sure that the numbers reflecting the current trend of tourism will stand the test of time. Greece had more than 20 million visitors in 2019, which went down to five million in 2020 due to travel restrictions. We do not yet know the final figures for 2021, but they are estimated to be close to 10 million. Similarly in residential and commercial real estate the figures are rising and appetite for investments is mounting as is funding for real estate projects by the Greek banks.
The EU is also adapting to the reality of a post-Brexit economy, where mainland economies often compete for regional headquarters to be established in their jurisdiction. We have seen both Ireland and Portugal be successful at this. With Pfizer’s recent investment in Thessaloniki, do you see Greece increasingly being on the radar of multinationals? Do you anticipate more incentives to lure firms to its shores?
There is no doubt that as far as the economy recovers, and provided the country remains competitive and business friendly oriented, Greece will continue to lure foreign investments of all sorts. Pfizer is an example but not the only one. Major deals have taken place lately that equate to votes of confidence. Take for example the Australian infrastructure giant Macquarie which was declared the highest bidder in Greece’s national grid operator deal, the Hellenic Electricity Distribution Network Operator (HEDNO) in a €2,1bn deal or the investments of Mondelēz and Chipita (€1,6bn), and Partners Group which agreed to acquire Pharmathen from the international investment firm BC Partners in another €1.6bn deal. Personally, I am confident that there will be more such investments especially when the credit ratings of Greece are restructured to investment grade.
The residency by investment program, as well as health and wellbeing tourism and the digital nomad visa landscape, could bode well for the country in attracting foreigners to reside, in longer, more sustainable ways, in a market where short-term tourism was severely rocked by COVID-19. If some of our readers are considering either a second home or retirement home in Greece, what would be your legal opinion on the regional competitiveness of Greece’s policies toward this?
There is no doubt that Greece has an advantage in this regard. As long as we have similar tax rates to our contemporaries, our competitive edge is clear. Climate and culture are two key pillars for Greece. The schemes you mentioned certainly affect that. At the end of the day, it all comes down to whether your agenda is competitive or not. If you offer incentives, combined with a stable sociopolitical setting, you are going to have an upper hand over the rest.
Could you offer us a brief overview of the services international readers may benefit from KG Law? What would be the firm’s vision for the long-term?
We are one of the oldest law firms in Greece, going as far back as the 1930s. We were pioneers in the Greek market when in the 1970’s Constantine Kyriakides and Leonida Georgopoulos joined forces with a vision to build one of the strongest and largest law firms in Greece. We invest in our people and our values. Today, we employ about 112 lawyers, and we are active in all practice areas across the legal profession. Apart from our accumulated experience, we are divided in teams that specialize in their respective areas. This allows us to be competitive in terms of pricing, as it takes less time and resources to offer quality services of high standards. According to our clients, it is our on the field experience combined with an efficient organization that gives us our competitive advantage.
Our firm’s vision is to never settle, never stop growing, and never stop anticipating what is next. We value an excellent work environment and being an employer of choice to attract bright minds and build teams that offer impeccable legal services to our esteemed clients.
You have over 20 years of experience as a partner with KG Law, and you have seen Greece steer itself through some of the toughest economic hardships in recent history. The country has ushered in reforms and laws aimed at economic recovery, and slowly but surely is pulling itself up by its bootstraps. How would you assess the current investment climate in Greece? What are the key benefits of the market to foreign investors, and what are some of its main policy advantages over some regionally comparative markets?
I have been practicing as a litigator since early 2000 and have been sitting in this very office since 2009 witnessing so many things change over the last ten years. Between 2010 and today Greece has gone from being the black sheep of Europe to a trusted member state. A lot has changed. Structural reforms have taken place and significant changes in various parts of the economy were adopted that were essential in allowing the country to regain a more competitive profile towards foreign investments. Previous governments implemented reforms too, but they did not believe in the reforms they adopted.
As for recent history, I would be remiss if I did not mention the work that has been done by the Pissarides committee, chaired by the Nobel Laureate LSE Professor and economist Chris Pissarides, was responsible for presenting a report to the Greek government with proposed reforms and policies based on the trends of the Greek and European economy, as a consultancy of the direction in which the Greek economic policy should head. The report contained critical feedback for the government and touched upon many reforms, from social and administrative matters to employment, education, governance and tax-related policy. The government has followed this advice in their plan to improve productivity and has brought reforms into effect that are aimed at economic recovery.
For instance, in the field of taxation, corporate income tax was reduced from 28 percent to 24 and now to 22 percent. Equally, incentives aimed to attract foreign investments coupled with a pro-business approach and philosophy have changed the global perception of Greece. The results of these initiatives became quickly evident. The GDP has gone up, unemployment rates have gone down considerably and real estate market prices are climbing at a rapid pace. These three indicators are clear proof of economic recovery.
Dubbed Greece 2.0, Greece’s COVID-19 relief plan involves over EUR 30 billion in labor reforms, government grants, incentives, and loans in 175 areas of investment aimed at a post-COVID-19 economy, one which is both greener and digitally competitive. What would you tell our international audience about paying attention to Greece’s investment potential and the policy incentives that support it? What will some of the most noteworthy aspects of this labor reform entail and how will multinationals benefit?
Labor laws in Greece are becoming quite competitive with respect to other European member states. Secondly, wages and salaries have always remained more competitive. At the same time, the Greek workforce is of excellent quality. Greeks in the right environment can be exceptionally capable and diligent workers whilst many speak at least one foreign language. I believe our people rank above the European average.
To the international audience of Newsweek, I would say that there are indeed considerable incentives to invest in Greece when it comes to labor reforms, the most important of all being the significant reduction of the social security contributions, coupled with grants which render hiring people in Greece more attractive. The results speak for themselves. Unemployment rates dropped from 28 percent in 2013 to below 14 percent today. This may still be much higher than the European average of about 7 percent, but it is indeed a significant drop and downward trend.
The recent labor law reform adopted by the government aimed to bring long overdue amendments to outdated laws that date back to the 1980’s. The new regime offers more freedom to employees to decide working hours while taking on exploitation, unpaid overtime and undeclared work. The most contentious part of the law introduced flexibility to the eight-hour workday by allowing employees to work up to 10 hours on one day and fewer hours on another or to take time off. It also regulates remote working and includes safeguards against sexual harassment. Further, the reform introduced a “digital employment card” which monitors employer compliance with labor law obligations.
These reforms were deemed as essential, as they bring Greece in line with other EU member states and effectively modernize legislation that dated back to the pre-internet, pre-digital era when remote work, teleconferences or even emails were still nonexistent.
To the new rules for family offices who manage in excess of EUR 1 million – with the new law proposing 1.7 percent effective tax rate and 0 percent VAT on internal transfers – when looking at ‘old wealth’ across the EU and major players from countries like China and Russia where EU presidency is sought after, what does this move hope to accomplish for the Greek economy? What is some feedback you often hear from foreign investors entering Greece and how easy do they find setting up shop here?
We have seen an uptrend in that regard too, but it is part of a combination of many things.
First of all, the golden visa regime has allowed foreign investors to enter the EU through Greece at a low cost. This combined with low tax rates and the political and social stability that Greece offers is an attractive proposition to any foreign investor.
Another tax measure aiming to make Greece an even more attractive destination for HNWI economic activity relates to the introduction of Greek single-family offices providing a wide range of services tailored to meet the needs of HNWIs. In rough lines, such a new regime provides for the management of the wealth of individuals and their family members, tax residents in Greece, which can be carried out by special purpose corporate vehicles (i.e. family offices) that operate in any legal form, except that of non-profit legal entities. The gross income stemming from the services provided by family offices and which can be received only through bank transfers is determined on the basis of the cost-plus method, i.e. with the application of a mark-up set at 7 percent on their total business expenses and depreciations excluding corporate income tax. All expenses, on which the mark up applies,
shall be tax deductible for income tax purposes, on the condition that they are supported by fiscal records complying with the Greek GAAP legislation. Transactions conducted between the family office and family members are considered as incurred within a single entity and therefore fall outside the scope of VAT.
I would say that feedback is still conservative primarily because Greece needs to prove – and this is only a matter of time – that it will not treat family offices differently in the future. In other words, long-term stability is vital for the success of this plan. Secondly, I believe it is obvious that this regime has been explicitly designed to operate in combination with the non-dom structures related to the transfer of tax residency in Greece of HNWIs, which indicates that the target of the government was clearly to incentivize HNWΙs to repatriate in Greece along with their families rather than to simply establish a family office.
EY recently reported that up to 35 percent of FDI entering Greece was in real estate, with Greece jumping from the 35th overall FDI destination to 29th. So too have we seen global ETFs in residential and commercial real estate rebound extremely well over the last few quarters. What does your firm anticipate for the real estate market in Greece and why has Greece proven to be such an attractive investment market for global real estate investors?
We anticipate that the real estate market will continue its upward trend. Right now there is a healthy appetite for everything that is related to real estate and tourism. The underlying reason is our 6-month period of seasonality. The weather between May and October is ideal, which is an element that you will rarely find in other countries. Then there is the fact that the region around us has had some problems. Greece has had its own problems, but they were more financial and did not involve political instability.
Greece has been highly publicized in a negative connotation in the past for all the wrong reasons, but people around the world have heard about Greece turning things around. With the changes in Greece follows a change of perception about the country. We are currently working on a number of important real estate development projects, but investors want to make sure that the numbers reflecting the current trend of tourism will stand the test of time. Greece had more than 20 million visitors in 2019, which went down to five million in 2020 due to travel restrictions. We do not yet know the final figures for 2021, but they are estimated to be close to 10 million. Similarly in residential and commercial real estate the figures are rising and appetite for investments is mounting as is funding for real estate projects by the Greek banks.
The EU is also adapting to the reality of a post-Brexit economy, where mainland economies often compete for regional headquarters to be established in their jurisdiction. We have seen both Ireland and Portugal be successful at this. With Pfizer’s recent investment in Thessaloniki, do you see Greece increasingly being on the radar of multinationals? Do you anticipate more incentives to lure firms to its shores?
There is no doubt that as far as the economy recovers, and provided the country remains competitive and business friendly oriented, Greece will continue to lure foreign investments of all sorts. Pfizer is an example but not the only one. Major deals have taken place lately that equate to votes of confidence. Take for example the Australian infrastructure giant Macquarie which was declared the highest bidder in Greece’s national grid operator deal, the Hellenic Electricity Distribution Network Operator (HEDNO) in a €2,1bn deal or the investments of Mondelēz and Chipita (€1,6bn), and Partners Group which agreed to acquire Pharmathen from the international investment firm BC Partners in another €1.6bn deal. Personally, I am confident that there will be more such investments especially when the credit ratings of Greece are restructured to investment grade.
The residency by investment program, as well as health and wellbeing tourism and the digital nomad visa landscape, could bode well for the country in attracting foreigners to reside, in longer, more sustainable ways, in a market where short-term tourism was severely rocked by COVID-19. If some of our readers are considering either a second home or retirement home in Greece, what would be your legal opinion on the regional competitiveness of Greece’s policies toward this?
There is no doubt that Greece has an advantage in this regard. As long as we have similar tax rates to our contemporaries, our competitive edge is clear. Climate and culture are two key pillars for Greece. The schemes you mentioned certainly affect that. At the end of the day, it all comes down to whether your agenda is competitive or not. If you offer incentives, combined with a stable sociopolitical setting, you are going to have an upper hand over the rest.
Could you offer us a brief overview of the services international readers may benefit from KG Law? What would be the firm’s vision for the long-term?
We are one of the oldest law firms in Greece, going as far back as the 1930s. We were pioneers in the Greek market when in the 1970’s Constantine Kyriakides and Leonida Georgopoulos joined forces with a vision to build one of the strongest and largest law firms in Greece. We invest in our people and our values. Today, we employ about 112 lawyers, and we are active in all practice areas across the legal profession. Apart from our accumulated experience, we are divided in teams that specialize in their respective areas. This allows us to be competitive in terms of pricing, as it takes less time and resources to offer quality services of high standards. According to our clients, it is our on the field experience combined with an efficient organization that gives us our competitive advantage.
Our firm’s vision is to never settle, never stop growing, and never stop anticipating what is next. We value an excellent work environment and being an employer of choice to attract bright minds and build teams that offer impeccable legal services to our esteemed clients.
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