Presumptive income, loss carryover and KAD surcharge

FIELD OF APPLICATION
The circular concerns sole proprietorship practitioners as defined in par. 1 of article 28A of the CFE [ελάχιστο (τεκμαρτό) εισόδημα].

The content of circular 2027/2024 is the provision of clarifications on issues concerning: a) the application of the provisions of article 28A of the CPC to natural persons who fall within the scope of application of paragraph f of paragraph 2 of article 12 of the CPC and exception of para. b of par. 6 of article 28A KFE, b) in the application of the addition of para. c of par. 2 of article 28A of KFE and c) to the transfer of losses from business activity, as defined in par. 6 of article 27 of the Civil Code, in case of determination of the minimum amount of net income pursuant to articles 28A to 28D of the Civil Code.

The circular clarifies the following:

1. The provisions of article 28A KFE do not apply for the natural persons who fall within the scope of application of para. f. para. 2 of article 12 of the Tax Code, even in the case that these taxpayers contract with more than three (3) natural or legal persons (income from a pad).

2. Regarding the application of the increase in para. c of para. 2 of article 28A KFE (presumed increase due to KAD)

THE posting on the AADE website of the average annual turnover of the respective K.A.D. of the second degree of the previous tax year, is carried out within one month of the end date of the general deadline for submitting income tax returns of par. 3 of article 67 of each year, or of the date defined as the final date for the submission of personal income tax returns of each tax year year, as well as that the posting is based on the data of the initial and amending income tax returns submitted within the above deadline. Especially for the implementation of the above provisions for the declarations of the tax year 2023, given that already at the time of the publication of Law 5073/2023 on 11.12.2023, the deadline defined above for the posting on the AADE website of the M .THE. of the annual turnover of the respective K.A.D. second degree of the tax year 2022, the posting will take place before the start of the electronic filing of income tax returns for the tax year 2023, based on the data of the initial and amending income tax returns for the tax year 2022 submitted by September 4, 2023.

Furthermore, given that the sales of the tobacco products referred to in paragraph a) of paragraph 4 of article 30 of the VAT Code, do not result from the data available to the Tax Administration for the years prior to the publication of Law 5073/2023 , so that they are not taken into account for the determination of the average annual turnover of the K.A.D. of tax year 2022, for tax year 2023, point c) of paragraph 2 of article 28A of the Tax Code will not be applied for the debtors who realize the highest income in the C.A.D. “general convenience store operation (47.19.10.01)”, “stand operation (47.19.10.02)” and “retail trade of tobacco products in specialized stores (47.26)”.

3. Regarding the transfer of losses from business activity in case of determination of the minimum amount of net income in application of articles 28A – 28D of the Civil Code (par. 6 of article 27 of the Civil Code).

With the provisions of paragraph 1 of article 27 of the Tax Code, it is defined that if the result is a loss within the tax year by determining the profits from business activity, this loss is transferred to be set off against the business profits consecutively in the next five (5) tax years, and that the loss of the earlier year is set off in priority over the loss of a later year.

Therefore, the carried forward loss is offset in any case against the declared profits from business activity, regardless of whether the minimum annual income of articles 28A to 28D of the CPC or the declared income of article 21 CPC is taken into account for determining the tax. However, it is clarified that, for the comparison of presumptive and declared income of par. 1 of article 28A of the Tax Code, the declared profits from business activity of each tax year are taken into account, before offsetting them with any carried forward loss of previous years pursuant to par. 1 of of article 27 of the Civil Code, as the amount determined pursuant to the provisions of articles 28A to 28D of the Civil Code, is presumed to be the minimum income from the exercise of the business activity for the specific tax year.

Following the above, in case there are declared net profits from the exercise of business activity and carried forward loss from previous years:

a) if the minimum amount of net income of articles 28A to 28D KFE exceeds the declared profits from business activity, the tax is determined on this incomeand the carried forward loss of previous years is set off against the declared profits and if there is a balance of loss, it is carried forward to the following years in accordance with paragraph 1 of article 27 of the Tax Code,

b) if the amount of the declared profits exceeds the minimum amount of net income of articles 28A to 28D of the Tax Code, the tax is determined on these profits, after offsetting them with any loss carried forward from previous years, even if the final amount that will result falls short of the minimum net income, as long as there is no remaining loss, this is carried over to the following years in accordance with par. 1 of article 27 of the Tax Code.

Furthermore, in case there is a declared loss of the current year from the exercise of business activity and a carried forward loss of previous years, the tax is determined on the minimum amount of net income of articles 28A to 28D of the CPC, and the carried forward loss of previous years is added to the declared loss of the current year and is successively transferred to the next five (5) tax years for offsetting, in accordance with par. 1 of article 27 of the Tax Code.

For a proper understanding of the above, the following examples are listed:

Example 1:

A sole proprietorship presents losses for the tax years 2021 and 2022, while for the tax year 2023 profits from business activity as follows:

Suppose that in the tax year 2023, the minimum annual income of articles 28A to 28D of the Tax Code was determined at €25,000, then, the minimum annual income (€25,000) exceeds the declared profits (€20,000) and therefore the tax is determined on this income. The loss carried forward from previous years (€13,000) is set off against the declared profits (20,000) and there is no balance of losses to be carried forward to the following years.

Example 2:

A sole proprietorship presents losses for the tax years 2021 and 2022, while for the tax year 2023 profits from business activity as follows:

Suppose that in the tax year 2023, the minimum annual income of articles 28A to 28D of the Tax Code was determined at €25,000, then the declared profits (€30,000) exceed the minimum annual income (€25,000) and therefore the tax is determined on the declared profits, but after these are offset against the loss of previous years. Therefore, in this case, the tax is determined on an income of €17,000 (€30,000 – €13,000), even though the amount resulting after netting (€17,000) is less than the minimum annual income (€25,000).

Example 3:

A sole proprietorship presents losses for the tax years 2021 and 2022, while for the tax year 2023 profits from business activity as follows:

Suppose that in the tax year 2023, the minimum annual income of articles 28A to 28D KFE was determined at €25,000, which exceeds the declared profits (€20,000) and therefore the tax is determined on this income. The carried forward loss of previous years (23,000) is set off against the declared profits and the remaining loss amount of €3,000 (20,000 – 23,000) is carried forward to the following years in accordance with the provisions of par. 1 of article 27 of the Tax Code.

Example 4:

A sole proprietorship presents losses from business activity for the tax years 2021, 2022 and 2023:

Suppose that in the tax year 2023 the minimum annual income was determined at €25,000, then, the tax is determined on the minimum annual income and the carried forward loss of previous years (€13,000), after first being aggregated with the use losses (€15,000), i.e. amount €28,000 (15,000+13,000), is transferred to the following years in accordance with the provisions of par. 1 of article 27 of the Tax Code.

See the circular in the tax file of the node