Bond Loan Issuance in Greece: Who, When, Requirements and Benefits (2025 Guide)

Bond Loan Issuance in Greece: Who, When, Requirements and Benefits (2025 Guide)

🔹 1. What is a Bond Loan?

A bond loan is a method of corporate financing, whereby a business – typically a Société Anonyme (S.A.) – raises funds from investors through the issuance of bonds. Bonds are debt securities representing the company’s obligation to repay the principal amount received, as well as interest (the so-called “coupon”) at predetermined intervals.

A bond may carry various terms, such as:

• Fixed or floating interest rate

• Convertible into shares (convertible bond)

• Callable or redeemable by the company (callable bond)

• Collateral or third-party guarantees

A bond loan is an alternative to bank financing and allows a business to access new sources of capital without losing equity control. Investors treat it as a low-risk investment (compared to equity participation), as it provides for repayment and predetermined yield.

🔹 2. Who Can Issue a Bond Loan?

Natural persons: Not entitled to issue bonds.
Sociétés Anonymes (S.A.): Allowed under Articles 59 to 74 of Law 4548/2018, upon General Assembly resolution.
Private Capital Companies (IKE) & Limited Liability Companies (EPE): Not allowed to issue tradable bonds, but may enter into simple loan agreements.

🔹 3. Issuance by a Foreign Entity

The ability for foreign entities to issue a bond loan in Greece depends on their country of origin and the applicable regulatory and tax framework:

➤ Within EU / EEA: Allowed to issue bond loans via:

• Establishment of a branch in Greece (Law 4919/2022 and Codified Law 4308/2014)

• Incorporation of a subsidiary (typically an S.A.) that undertakes the bond issuance pursuant to Articles 59–74 of Law 4548/2018

In such cases, publicity, accounting and documentation obligations must be fulfilled under Greek law (Income Tax Code, Greek GAAP, Tax Procedure Code).

➤ Outside EU / Third Countries: Permissible under the following cumulative conditions:

• A Double Tax Treaty (DTT) exists between Greece and the foreign company’s country to avoid double taxation on interest (Articles 12 & 11 of DTTs).

• The foreign company has substantial activity (economic substance), including operational structure, personnel, and business presence.

• The country of origin is not listed in non-cooperative or high-risk jurisdictions under Annex III of Regulation (EU) 2023/1114, the FATF list, or the corresponding AADE list.

Violation of the above entails:

• Non-recognition of interest deductibility by the Greek tax authority (Article 38 ITC – artificial arrangements)

• Imposition of 15% withholding tax (Article 64 ITC)

• Potential audit by the High Wealth Audit Unit or the Tax Authority for sham transactions or money laundering (AML)

Note: For secure and lawful bond loan issuance by a foreign entity, it is advisable to incorporate a Greek S.A. subsidiary that will comply with local regulations.

🔹 4. Conditions for Issuance

Issuing a bond loan requires compliance with specific procedures and approvals ensuring legality and financial transparency:

General Assembly Resolution
The S.A.’s General Assembly approves the issuance by simple quorum and majority, unless otherwise stipulated in the Articles of Association or when the investor participates in profits (Article 72, Law 4548/2018).

Determination of Issuance Terms
The loan amount, term, interest rate, repayment terms, collateral, call or conversion clauses, and type of bond (common, secured, convertible, profit-linked) are specified.

Execution of Bond Agreement
A contract is signed between the company and the investors or their representative (bondholders’ representative), detailing all issuance terms. Special covenants may bind the issuer for the bond’s entire term.

Accounting Entry
The issuance and fund flow are recorded in the issuer’s accounting books in accordance with Greek GAAP, as liabilities with separate interest recognition.

Publication in G.E.MI. (if required)
For public offerings or stock exchange listings, the issuance is registered with the General Commercial Registry (G.E.MI.) and, if applicable, a prospectus is submitted to the Hellenic Capital Market Commission per Regulation (EU) 2017/1129.

Registration with Central Securities Depository (optional)
For tradable bonds, registration in the Dematerialised Securities System (DSS) and assignment of an ISIN code occurs, enabling listing on the Athens Exchange or other regulated markets.

🔹 5. Possible Clauses and Collateral

Clauses and guarantees in a bond loan serve as investor safeguards and risk management mechanisms, enhancing issuer credibility:

• Mortgage or Pre-notation Clause: Bonds may be secured by mortgages or pre-notations on properties of the issuer or affiliates, granting bondholders priority in insolvency. Regulated under Civil Code and Law 4548/2018 (esp. Arts. 59 & 62).

• Profit Yield Clause (Art. 72, Law 4548/2018): Enables repayment based on a percentage of accounting profits instead of fixed interest, subject to General Assembly approval. Aligns issuer–investor interests.

• Convertible Clause (Convertible Bond): Allows bondholders to convert bonds into ordinary shares within a set period and at a specific conversion ratio. Governed by Article 70 of Law 4548/2018.

• Third-Party or Parent Company Guarantees: The issuer may enhance creditworthiness by securing guarantees from related entities or the parent company. Must be registered with G.E.MI. if material.

• Call Option Clause: Grants the issuer the right to repurchase bonds before maturity, either on a specific date or upon achieving performance targets (e.g. increased EBITDA). Offers issuer flexibility, but must be fairly priced to protect investors.

These clauses make the bond loan a flexible financing tool while promoting transparency and investor confidence.

🔹 6. Advantages over Bank Financing

Choosing a bond loan over traditional bank debt offers significant strategic and financial advantages:

• Financing Flexibility: Unlike bank requirements (mandatory collateral, risk assessments, covenant compliance), bond loans can be tailored to the company and investors’ needs—terms like duration, rate, call options, and guarantees are negotiable.

• Lower Cost of Capital: Especially when secured or highly creditworthy, companies can access cheaper funds than banks, minimizing the overall cost of capital.

• No Equity Dilution: Unlike equity capital increases, bond issuance does not dilute existing shareholders’ control or voting rights.

• Attraction of Strategic Investors: Investors seeking participation without equity involvement can fund the company via bond loans, earning fixed returns with limited risk. Ideal for partnerships in real estate, infrastructure, or startups.

🔹 7. Interest Taxation and Coupon

Interest paid to bondholders is subject to strict tax documentation and arm’s length standards:

Interest / Coupon Rates:
Rates deemed reasonable for tax purposes typically range from 6% to 12% annually, depending on collateral, risk profile, and maturity.

Tax Deductibility of Interest:
Interest is deductible from gross revenue if all the following are met:

• Contractual provision: Terms must be expressly stated in the bond agreement and shareholder resolution or prospectus.

• Arm’s length documentation: Yield must reflect market conditions per Article 50, Law 4172/2013 (transfer pricing).

• No artificial arrangements: Relationship must be genuine, not aimed at tax avoidance (Art. 38, Law 4172/2013 – GAAR).

• Interest Limitation Rule: Subject to Article 49, Law 4172/2013, net deductible interest is limited to 30% of EBITDA.

Filing and documentation:
If paid to related parties or foreign investors:

• A transfer pricing study is required.

• Intercompany declaration must be submitted per Article 21, Law 4174/2013.

🔹 8. Subsidiaries, Parent and Related Companies

Bond issuance within a corporate group is subject to special tax rules:

Interest Limitation Rule:
Under Article 49, Law 4172/2013, net interest is deductible up to 30% of taxable EBITDA. Excess can be carried forward for 5 years.

Transfer Pricing Obligation:
If lender and borrower are related (Article 2, Law 4172/2013), then:

• A transfer pricing study must be prepared.

• Intercompany transaction declaration must be filed with AADE (Art. 21, Law 4174/2013).

• Terms must meet the arm’s length standard.

Substantive Repayment Obligation:
Lender-borrower relationship must be genuine:

• Real capital transfer must occur.

• Contract terms must be honored.

• Repayment schedule, accounting, and financial documentation are required.

Care is essential in related-party interest deductions, especially cross-border, to avoid classification as artificial arrangements (Art. 38, Law 4172/2013).

🔹 9. Withholding Tax on Interest

Interest paid by a Greek entity to a foreign person is generally subject to withholding:

• Standard rate: 15% per Article 62 para. 1, Law 4172/2013.

• Exemption: 0% withholding may apply if:

Double Tax Treaty (DTT):
If a lower or zero rate applies under a bilateral DTT (e.g. Greece–Cyprus: 0%).

Parent–Subsidiary Directive (2003/49/EC):
If requirements are met, including:

• The recipient is a related EU entity.

• It owns ≥25% for at least 2 years.

• Submission of AADE form (e.g. withholding exemption application).

Exemption Procedure:
Application must be submitted before or at the time of payment.
If no exemption is granted in time, the payer must withhold the tax provisionally.

Note: In all cases, proof of the recipient’s tax residence and a valid exemption application are required.

🔹 10. Digital Transaction Fee (A.1149/2024)

From 01/12/2024, stamp duty is replaced by the Digital Transaction Fee per Decision A.1149/2024.

Applicable rates:

• 3.6% for loans between individuals

• 2.4% for loans between natural/legal persons engaged in business, or where at least one party is an S.A., EPE or IKE

• 1.2% for entries in legal entity books relating to deposits/withdrawals

• 2.4% for bond loans under Law 4548/2018 unless listed on regulated markets or MTFs

Exemptions:

• Interest and repayments on bonds listed on regulated markets or MTFs

• Intra-group loans, if Article 13A ITC conditions are met

Otherwise:

• The fee applies to the transaction amount

• Payable solely by the payer

• Paid via payment provider or declared via myAADE

• The fee does not affect tax deductibility of related expenses

🔹 11. Application Example

Company ALPHA GREEN S.A. decides to issue a bond loan of €500,000 for 3 years at 10% annual interest.

Collateral: Mortgage on real estate with objective value €800,000.
Lender: Cypriot parent company.
Interest: €50,000 annually – paid semi-annually.

Tax Treatment:

• No withholding applies under the Greece–Cyprus DTT.

• No Digital Fee applies if bonds are listed per A.1149/2024.

If not listed, then 2.4% Digital Transaction Fee applies on the loan amount.

Note: Granting a mortgage to a foreign lender may not be feasible immediately unless there is a final legal claim.

➡️ Typically, contractual financings (such as bond loans) are secured via pre-notation of mortgage, which:

• Requires notarial deed and court approval

• Needs prior debtor consent and proof of contract

• Commonly used for foreign investor protection, as it can be converted into a mortgage upon enforceable title

✅ Pre-notation is more functional for bond loan security and provides effective protection for non-resident lenders.

🔹 12. Conclusions – Pros & Cons of Bond Loan Issuance

Issuing a bond loan is among the strongest financial tools for Greek and international businesses. It combines capital raising with cost control, without equity dilution, and aligns with Greek investment and tax frameworks.

✅ Advantages:

• Control Retention: No share or voting rights dilution

• Favorable Tax Treatment: Interest is deductible under Articles 22, 23, 49, Law 4172/2013 (conditions apply)

• Term Flexibility: Rate, duration, and clauses can be tailored

• Attracting Strategic Investors: May include bonuses, collateral or profit participation (Art. 72, Law 4548/2018)

• Stock Market Listing Option: Improves liquidity and credibility

• Withholding Tax Exemption: Possible under DTTs or EU directives for related EU entities

⚠️ Potential Disadvantages:

• Complex legal and tax structuring: Requires contracts, documentation, and G.E.MI. filings

• Obligation to pay interest: Even in loss-making years

• Digital Transaction Fee burden: If not listed, 2.4% fee applies (A.1149/2024)

• Subject to Tax Audits: Especially in related-party or cross-border arrangements

🔚 Summary Assessment

Bond loan issuance:

✅ Is a capital-raising tool with financial and accounting value
✅ Provides structural and investor-based flexibility
✅ Can form part of a tax-efficient plan with proper documentation

🧾 Parent–Subsidiary Directive (2003/49/EC)

Exemption from Withholding Tax on Interest

The exemption from withholding tax on interest payments between associated enterprises in EU member states, as provided in Directive 2003/49/EC, applies only if the following cumulative conditions are met:

🔹 1. Ownership Requirement

• The parent company must directly hold at least 25% of the capital of the subsidiary.

• This holding must be maintained continuously for at least two (2) years.

🔹 2. Tax Residence and Qualifying Entities

• Both companies must be tax residents of EU member states.

• They must be subject to tax on their total profits (without full exemption).

• They must not be fiscally transparent entities.

• They may not be subject to preferential tax regimes (e.g. IP boxes, offshore structures, or low-substance regimes).

🔹 3. Substantial Activity – Beneficial Ownership

The exemption does not apply if there is an artificial arrangement, such as:

• Conduit companies with no real business presence,

• Chains of ownership solely aimed at transferring interest without substantial control or risk.

To apply the exemption, the following are required:

• Substance test: Proof of genuine operational and economic activity of the parent company.

• Beneficial owner: The interest recipient must be the actual holder and beneficiary of the economic value from the interest (not a nominee or intermediary).

---

🏛 Bond Loan Listing on Stock Exchange & Obligation to Publish in G.E.MI.

The publication of the bond issuance act in the General Commercial Registry (G.E.MI.) is not mandatory in every case. The obligation applies only when:

• The issuance is made through a public offer to investors, in accordance with Regulation (EU) 2017/1129 (Prospectus Regulation), or

• It is expressly required in the company’s Articles of Association or internal operating regulations that every bond loan financing must be disclosed to G.E.MI., or

• The issuance is accompanied by collateral or other legal acts requiring publicity.

✅ In cases of private placement or issuance without a public offer, publication in G.E.MI. is not mandatory, unless otherwise required by special provisions or by the content of the bond agreement.

---

 

 

---