Tax relief: Bonus for mergers of small and medium enterprises, professionals and farmers

Beneficiaries, criteria and conditions

Stronger tax incentives compared to the original plan are provided by the bill of the Ministry of Finance for the mergers and collaborations of small and medium enterprises, professionals and farmers.

Specifically, the bill of the Ministry of Finance that was submitted to the Parliament on Friday night provides for an exemption from paying income tax by 30% or 50% (for farmers) for up to 9 years instead of 3 years originally provided in the case of business transformation, conversion or merger of sole proprietorships, as well as in the case of cooperation of persons. According to the Ministry of Finance, the aim of the bill is to create a modern and stable institutional framework that promotes and gives substantial incentives to business transformations and collaborations, which, in turn, will become more extroverted and increase competitiveness and their productivity, boosting jobs.

For those who merge or cooperate, the tax rate is reduced from the current 22% to 15.5% or 11% for farmers, provided that the new partnership lasts at least 5 years. The measure directly concerns small and medium enterprises, which after the conversion will employ more than 9 employees.

In particular, the draft law of the Ministry of Finance “Incentives for business development, through partnerships and corporate transformations” provides the following:

1. Exemption from income tax on profits, by 30% for 9 years:

– the resulting new company,

– to each cooperating person in the case of cooperation of persons,

– to the new company in case of contribution of a sole proprietorship in any form of company.

The exemption is granted from the following year of the date of completion of the transformation of companies of any form or the date of realization of a contribution of a sole proprietorship in any form of company or of the date of commencement of any form of cooperation.

2. In the case of cooperation of natural persons, mainly farmers by profession, the incentive is exempted from the payment of income tax at a rate of 50% on profits arising from the exercise of individual agricultural business activity, based on tax legislation, under certain conditions.

3. When transferring or registering the relevant deeds of transfer of the assets of the transformed companies in the public ledgers, the payment of only the fixed rights of salaried or unpaid Mortgagees and Heads of Cadastral Offices, amounting to 300 euros, is provided, while any other encumbrance is excluded. , etc.

4. For the merging companies or the merger of individuals, the benefit can reach up to 500,000 euros, while for the cooperation of persons it reaches up to 125,000 euros for each of the collaborating persons.

5. “Cooperation” means a relationship which brings together the following characteristics:

It is created by any form of contract or agreement between unrelated persons, by the establishment of any form of legal entity or other legal entity by two (2) or more persons, including joint ventures, cooperatives, organizations or producer groups regardless of legal form or in the field of contract farming or franchising,

– is intended to jointly promote the business activities of the cooperating companies or persons,

– lasts for at least five (5) years from the date of conclusion of the agreement or establishment of the legal entity or legal entity, and

– the total average turnover of the companies participating in it, taking into account the previous three years, is at least equal to 150% of the turnover of the company with the highest, among the cooperating companies, average turnover of the last three years.

6. It is possible to transfer the losses of the transformed companies to the balance sheet of the new company and the possibility of tax offsetting them with the profits of the new company, the new company is exempted from paying income tax arising from the goodwill of transferring its assets to a third party, the capital accumulation tax is abolished, a deduction of the expenses incurred for the acquisition of securities in the case of acquisition of a company is recognized and the possibility of transfer of administrative licenses of any kind, including personal licenses, in the case of business transformation is provided.

7. In business transformations, in order to get the 30% tax discount they must also have an average turnover of at least 150% of the turnover of the largest of them. In addition, however, the turnover of the new company, ie the sum of the turnover of the transformed companies, must be equal to or greater than 450,000 euros.

8. In case of cooperation of persons, the discount is provided if a new legal entity or other legal entity is established, where each of the cooperating persons contributes at least 10% of the share capital of the new legal entity.

9. In case of transformation of a sole proprietorship into a personal company or in any other form of company or in case of merger of sole proprietorships for the purpose of creating a legal entity, the incentive is given if the sole proprietorship was established at least three years ago, the new company keeps records with diplographic system and – in case of merger of several sole proprietorships – the turnover of the new company is greater than 150% of the turnover of the largest sole proprietorship.

10. A “ceiling” is set on the benefit of tax relief:

– In the case of transformation or merger of companies can not exceed 500,000 euros over a period of 9 years.

– In the case of collaborations can not exceed 125,000 euros for each of the collaborating persons, also for a period of 9 years.

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