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New Tax and Accounting Framework

The adoption by the Parliament of Law 4172/2013, Law 4223/2013 and Law 4308/2014 introduced significant changes to the institutional framework for Leasing in Greece.

More specifically, Law 4172/2013 (New Income Tax Code) provides that, as of 1.1.2014, the lessee entity under each new Financial Leasing contract is liable to depreciation.

Following that, article 26 of Law 4223/2013, clarified that for contracts signed until 31.12.2013, the above provisions shall apply as of 1.1.2019.

Furthermore, in accordance with article 18 of Law 4308/14 (Greek Accounting Standards), the financial lessee entity shall recognise the leased asset on its Balance Sheet, with simultaneous recognition of a liability in the same amount to the lessor entity. Subsequently, the asset shall be accounted for in accordance with the provisions of the law on privately-owned assets. The liability to the lessor entity is handled as an amortised loan. In other words, the “lease” paid is composed of the amount paid towards the principal (which reduces the liability) and of the amount paid as interest (expense). Following that, the asset in question shall be subject to depreciation, as per the relevant provisions of the tax legislation.

Please note that:
According to the new Greek Accounting Standards, Financial Leasing is equated, for accounting purposes, to a loan – i.e. the lessee entity shall from now on recognise on its Income Statement as an expense, and shall deduct from its gross tax income, the following:

ü The interest included in the lease paid, and
ü The depreciation of the leased asset.

The amount included in the lease which is paid towards the principal shall reduce the liability from the financial lease under Liabilities.