Greek government makes a play for retroactive cap gains tax on Greek debt

FXStreet (London) - Greek stocks, as well as the recent 5-year Greek bond issuance, have seen some heavy selling today on news that the Greek government is moving to impose a retroactive capital gains tax on foreign holders of its sovereign and corporate debt.

According to a note from PwC, The Greek Ministry of Finance recently issued a Circular (Circular POL 1117/25.04.2014). The provisions of the Circular refer to both non-resident individual and non-resident legal entities without a Greek permanent residence/establishment that have realised capital gains from Greek debt (including government and corporate debt which is either listed or unlisted) in the period between 29 February 2012 and 31 December 2013.

The tax imposed on such capital gains is 33 percent for legal entities and 20 percent for individuals.

The threat of retroactive capital gains taxes with a very short time frame for compliance adds to Greek risk as its coalition government looks increasingly unstable.

As PwC details, the foreign beneficiaries must remit the tax due within two months from the issuance of the Circular, i.e. by 25 June 2014 by submitting a tax return. The tax return has to be accompanied by documentation issued from its custodian(s) which discloses capital gains/losses realised from Greek debt from February 29, 2012 to December 31, 2013.