Chapter 3 Foreign Direct Investment System and Law

In recent years, some progress has been made towards adopting laws aimed at fostering growth, reducing bureaucratic hurdles and attracting foreign investment. Greece continues to present a challenging climate for investment, both foreign and domestic, even though investment conditions have improved over the years. A number of recent reforms aimed to simplify the investment framework, and the government actively seeks to attract foreign investment to drive the country's longterm economic recovery.

In October 2012, the“Creation of a Business Friendly Environment for Strategic and Private Investments”bill was passed. The bill aimed to attract investors by offering an accelerated and transparent licensing process. Additionally, the bill allowed for“Invest in Greece”to operate as the sole point of contact for investors. Invest in Greece falls under the Ministry of Development and serves as the country's official investment promotion agency, acting as a source of information for investors, reviewing business proposals, and interfacing with other agencies of the Greek government on behalf of investors.

Screening of FDI Law 4146, passed in April 2013 and implemented in early 2014, established the General Directorate of Strategic Investments under the Ministry of Economy, Infrastructure, Maritime, and Tourism as a one-stop shop for investors. Its goal is to be the competent authority for accelerating licence procedures for strategic investments. The Directorate also oversees Enterprise Greece, which evaluates business plan applications from investors and makes recommendations to an Inter-Ministerial Committee on Strategic Investments（ICSI）. Currently, Enterprise Greece has 10 affiliated fast track projects, whereas another five are in the pipeline, including in renewable energy, tourism and mining.

3.1 The one-stop shop law

Law 3853/2010 provides for a“one-stop shop”approach to establishing new businesses. The one-stop shop is operated by Enterprise Greece. Key to the new programme is that the time needed to start a business is reduced from 19 days to one day, costs are reduced by 50-62 percent, and the government hopes Greece's ranking on the World Bank's“Starting a Business”list will improve dramatically. In addition, the Prime Minister said the move would improve transparency, reduce bureaucracy, and unleash the pent up potential to create new businesses in Greece, to the benefit of the national economy and employment（see Tables 1 and 2）.

The programme aspires to make Greece more attractive to investment, and have enterprises operate more responsibly, with chambers playing a much larger role in facilitating entrepreneurship.

3.2 The fast track law

Law 3894/2010（known as“fast track”law）allows Invest in Greece to expedite licensing procedures for qualifying investments in the following sectors:industry, energy, tourism, transportation, telecommunications, health services, waste management or high-end technology/innovation. The law has been amended with Law 4072/2012, Law 4146/2013, Law 4242/2014 and Law 4262/2014. To qualify, investments must meet one of the following conditions：

·The investment's total cost exceeds the amount of EUR 100,000,000; or

·The investment's total cost exceeds the amount of EUR 15,000,000 for investments in the field of manufacturing within already organised receptors, and the amount of EUR 3,000,000 for investments in approved projects within the framework of the JESSICA（Joint European Support for Sustainable Investment in City Areas）portfolio fund; or

·The investment's total cost exceeds the amount of EUR 40,000,000 and at the same time the investment creates at least 120 new employment contracts; or

·The investment creates, in a viable and sustainable manner, at least 150 new jobs or at least 600 jobs are maintained in a viable and sustainable manner; or

·The investment's total cost exceeds EUR 5,000,000 for investments regarding the development of Business Parks provided for in the 2nd part of Law 3982/2011.

A qualifying fast track investor must submit a business plan along with a non-refundable evaluation management fee to Invest in Greece. Invest in Greece has 15 days to evaluate the plan and submit its recommendation to an Inter-Ministerial Committee of Strategic Investments（ICSI）. If the ICSI approves the business plan, the investor pays Invest in Greece the Forwarding Management Fee（0.2 percent of the investment amount）and submits a Guarantee Letter of Participation as well as all supporting documentation to complete the licensing process. As of 2013, Invest in Greece has 11 fast track projects in the pipeline ranging from renewable energy and tourism to gold mining.

Fast Track works as an accelerating and transparency enhancement mechanism for the procedures relating to the implementation of strategic investments in Greece, whether these consist of private-private ventures（a private investment on a private asset, such as a hotel or tourist development, an industry, etc.）or public-private part-nerships（a private investment in a state asset/property such as the development of the old airport of Athens site, the development of Greek state-owned tourism real estate, development of an airport, etc.）. Fast Track accelerates the licensing procedure by（a）creating a legally-binding timeframe for the issuance of licences with significantly reduced deadlines,（b）immediately activating the investment process, and（c）enhancing the speed and efficiency of public bodies'relevant actions.

The law considers as a strategic investment any investment that has quantitative characteristics（e. g. large budget）and/or qualitative characteristics（e. g. promotes innovation）. These investments are expected to deliver high-impact, positive results to the Greek economy and create added value for the country as a whole and its citizens. Fast track applies to major investments with significant multiplier effects on Greece's GDP. It is designed to attract investments that utilise and capitalise on the geopolitical strategic advantage of Greece, both as a domestic investment destination and within the broad context of the global investment map.

The implementation of a strategic investment under Fast Track provisions is voluntary, since a private investment is included in this procedure only if（a）the prospective investor desires this inclusion,（b）the investment fulfils the law's requirements and（c）the investment is approved by the Interministerial Committee for Strategic Investments. If the ICSI does not approve the investment as a Fast Track qualifying venture or if the investor never applied to Invest in Greece, the investor can still forward his plan within the existing procedures（non-Fast Track）defined for the type of investment envisioned.

The ultimate objective is for all investments in Greece to be implemented in a swift and transparent way and to benefit Greece's economy and society. Greece, first and foremost, aims at capitalising on its strategic advantages so that investment becomes the main driver of economic growth and development. Fast Track, in practice, will lead to beneficial and advantageous results, consolidating the investment procedure in Greece. The Fast Track procedure will initially operate as a pilot application, resulting in the simplification and the acceleration of licensing procedures and, ultimately, to be implemented in the entire gamut of business activities in Greece.

The main objective of the Fast Track Law is to promote investments that create added value for the country and preserve the existing national wealth, of which the environment is a vital part. The Law makes clear the need to accelerate the imple-mentation of Strategic Investments in full accordance with the need to protect the environment. The task of the Law is not the abolishment of the existing environmental legislation, but to create a regime of fast processes. Wherever a specific processing time line is provided, the deadline is shortened. This acceleration has also been deemed as essential in the past and has been accordingly applied, in cases of major national priority.

The Fast Track framework does not interfere or overlap with any other existing framework or agency. It has been designed to minimise delays and overlapping risks. Fast Track is not a“financial incentive provision mechanism”. Fast Track does not give money, capital grants, subsidies, etc. Fast Track gives speed, transparency and legal contractual certainty to investors who have a solid, sound and tangible investment and who until today have fallen prey to bureaucracy or corruption.

3.3 The Investment Incentives Law

Law 3908/2011 is the primary investment incentive law currently in force. Incentives are provided in the form of cash grants, lease payment subsidies and tax exemptions. The aim of the law is to harness private investment to promote economic development in Greece by encouraging investments that improve business operations，technological development, competitiveness and regional cohesion. The incentives apply to investments in all economic sectors, with some exemptions, and the type of in-centive depends on the sector in which the investment project falls.

The law builds on previous investment incentives by extending tax breaks to small and medium investment projects（foreign and Greek）for up to six years for investments in existing companies and eight years for start-up companies. Investors seeking capital grants must submit a business plan to the Ministry of Development, which ranks the plan based on several criteria, including the viability of the planned investment. The limited capital grants are awarded to the highest ranked projects. Preference is given to projects in renewable energy, tourism, innovative technologies and“green”projects.

The Investment Incentives Law（IIL）contains a defined annual budget and an aid ceiling. It addresses all sectors of the economy, except those expressly articulated in Article 2 of the Law. It is mindful of scarce public funds by providing incentives through tax exemptions, subsidies, leasing and soft loans. In fact, for every one euro of subsidy provided, three euro of tax exemptions are provided. The law provides for both the electronic submission of every investment plan and the submission in hard copy to the Investor Service Offices.

The law contains specified and fixed application deadlines（April and October）except for Major Investment Plans（more than EUR 50 million）, which are submitted throughout the year. It introduces a new evaluation process by establishing the National Register of Evaluators and Auditors. It focuses on sustainable investment projects that are environmentally friendly, promote innovation, regional cohesion, youth entrepreneurship and create jobs. Finally, it provides for aid rates from 15 percent to 55 percent dependent on the region that the investment is realised and the size of the company.

3.3.1 Which investment categories fall within the scope of the IIL?

Investment plans are divided into the following categories：

（a）General Entrepreneurship

Target Group:all enterprises irrespective of sector.

Provides:tax breaks of up to 100 percent of the maximum allowable amount of aid.

（b）Technological Development

Target Group:enterprises that invest in technological and operational innovation and want to upgrade their technology infrastructure. For further details, see Article 1 of Ministerial Decision 173/2011 of the Minister of Development, Competitiveness and Shipping.

Provides:all forms of aid. The rate of subsidy and leasing subsidy may reach up to 80 percent of the maximum allowable amount of aid. For new enterprises this percentage is increased by 10 percent.

（c）Regional Cohesion

Target Group:investors with projects that address local needs or capitalise on local competitive advantages. For further details, see Article 2 of Ministerial Decision 173/2011 of the Minister of Development, Competitiveness and Shipping.

Provides:all forms of aid. The subsidy rate and leasing subsidy may reach up to 70 percent of the maximum allowable amount of aid. For new enterprises this percentage is increased by 10 percent.

（d）Youth Entrepreneurship

Target Group:investors from 20 to 40 years old.

Provides:aid for virtually all costs（including operational）for five years from the start of the business. Total aid may reach up to EUR 1,000,000.

（e）Large Investment Plans

Target Group:investments with a budget of at least EUR 50,000,000.

Provides:all forms of aid, either in one form or a combination of forms. The level of aid decreases as the amount of investment increases. The percentage of the subsidy may not exceed 60 percent of total aid.

（f）Integrated, Multi-Annual Business Plans

Target Group:companies legally formed at least five years previous to application, to implement integrated multi-annual（two to five years）business plans with a budget of at least EUR 2,000,000 in total.

Provides:technological, administrative, organisational and business modernisation.100 percent of the maximum regional aid applicable shall be granted.

（g）Partnerships and Networking

Target Group:partnerships and networking configurations or clusters. These clusters shall be comprised of at least 10 enterprises in the Regions of Attica and Thessal-oniki and of at least five enterprises in other regions, operating in the form of a consortium.

Provides:for any form of aid.

3.3.2 What sectors are excluded from the aid scheme?

Sectors excluded from the General Block Exemption Regulation（Regulation No. 800/2008 of 6 August 2008, OJ L 214 of 9.8.2008, p.3）are：

（a）the steel sector, as defined in Article 2（29）of the Regulation；

（b）the synthetic fibres sector, as defined in Article 2（30）of the Regulation；

（c）the coal sector, as defined in Regulation No 1407/2002（OJ L 205 of 2.8.2002, p.1）on State aid to the coal industry；

（d）the shipbuilding sector, as defined in the framework on State aid to ship-building（2003/C 317/06 of 30.12.2003, p.11）.

Further, the aid scheme does not apply to the following：

（a）investment plans of public corporations and organisations or their subsidiaries in which they hold over 49percent of the share capital and investment plans of companies in which the State or a public legal person or a firstor second-level local authority holds over 49 percent of the share capital or which are regularly or occasionally subsidised by them, where the subsidized accounts for over 50 percent of their annual revenue；

（b）undertakings which operate in the form of a society, civil partnership or consortium, subject to the provisions of Article 13（1）（d）of the IIL；

（c）firms in difficulty, as defined in the Community guidelines, from time to time in force, on State aid for rescuing and restructuring firms in difficulty（2004/C 244/02 of 1.10.2004, p.2）and the General Block Exemption Regulation for small and medium-sized enterprises；

（d）investment plans implemented at the initiative and on behalf of the State by a private individual on the basis of a works, franchise or service contract；

（e）investment plans of bodies against which an aid recovery order is pending further to a previous decision by the Commission declaring the aid illegal and incompatible with the Internal Market；

（f）certain industries and branches of economic activity（e. g. production of electricity from photovoltaic systems, construction of buildings, and civil engineering）, as defined on the basis of the National Nomenclature of Economic Activities-Activity Code Number 2008, as amended by POL 1086/2009.

Finally, the aid scheme does not apply to investments to：

（a）establish, extend or modernise hotel facilities. This does not include investments to establish, extend or modernise an integrated form of hotel facility belonging to or being upgraded to at least the three-star category, or investments in health tourism. Also excluded are investments to convert traditional or listed buildings into hotel facilities of at least the three-star category, and investments to modernise hotel facilities that operate in traditional or listed buildings belonging to or being upgraded to at least the three-star category；

（b）modernise an integrated form of hotel facility within six years of the date on which the facility opened or the date on which the decision was issued to complete an investment to modernise the facility. The six-year period from when the facility referred to in this subparagraph opened shall also include the period during which the facility operated as rented rooms or apartments, when it is about hotel facilities that resulted from the obligatory conversion of a rented rooms or apartments facility；

（c）erect, extend or modernise self-catering accommodation, rented rooms and rented furnished apartments, regardless of category. Types of investment plans in the fishing and aquaculture industry and in the agricultural sector, may be declared eligible by joint decision of the Minister for the Economy, Competitiveness and Shipping and the Minister for Rural Development and Food.

3.3.3 The types of aid provided

（a）Tax relief:tax relief comprising the exemption from payment of income tax on pre-tax profits which result, according to tax law, from any and all of the enterprise's activities.

（b）Subsidy:gratis payment by the State of a sum of money to cover part of the subsidized expenditure of the investment.

（c）Leasing subsidy:includes payment by the State of a portion of the instalments paid under a leasing agreement executed to acquire new machinery and/or other equipment.

（d）Soft loans by the Credit Guarantee Fund for Small and Micro Enterprises（TEMPME S. A.）:the amount to be covered by a bank loan may be funded by soft loans from credit institutions that cooperate with enterprises.

The aid referred to above shall be aggregated for the purpose of determining the total amount of aid allocated to the investment project. In this case the benefit of the funding above is included in total aid, which may not exceed the limits delineated on the Regional State Aid Map.

3.4 Other relevant legislation

·Law 3919/2011 is a comprehensive reform law, which aims to liberalize more than 150 regulated or“closed-shop”professions.

·Law 3982/2011 reduces the complexity of the licensing system for manufacturing activities and technical professions, and modernises qualification and certification requirements.

·Law 4014/2011 simplifies the environmental licensing process.

·Law 2246/94 and supporting amendments opened Greece's telecommunications market to foreign investment.

·Law 2289/95, which amended Law 468/76, allows private（both foreign and domestic）participation in oil exploration and development.

·Law 2364/95 and supporting amendments govern investment in the natural gas market.

·Legislative Decree 2687 of 1953, in conjunction with Article 112 of the Constitution, gives approved foreign“productive investments”（primarily manufacturing and tourism enterprises）property rights, preferential tax treatment, and work permits for foreign managerial and technical staff. The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor's agreement with the government, but the guarantee does not cover changes in the tax regime.

·Law 2773/99 initially opened up 34 percent of the Greek energy market, in compliance with EU Directive 96/92 concerning regulation of the internal electricity market.

·Law 3175/2003 harmonises Greek legislation with the requirements of EU Directive 2003/54/EC on common rules for the internal electricity market.

·Law 3389/2005 introduces PPPs, creating a market-friendly regulatory environment for PPPs in the service and construction sectors.

·Law 3426/2005 completes Greece's harmonisation with EU Directive 2003/54/EC and provides for the gradual deregulation of the electricity market.

·Law 3427/2005, which amended Law 89/67, provides special tax treatment for offshore operations of foreign companies established in Greece.