Gov’t tables deferred tax law

Amendment provides for extending the deferral period from 5 to 20 years, opening the way for 2016 reports

The government yesterday tabled in Parliament the eagerly awaited amendment to the law on deferred tax assets and tackling bank losses by writing off or selling nonperforming loans.

The extension of the deferred tax period for losses from NPLs to 20 years is one of the major pending issues for the sector that the head of the Single Supervisory Mechanism (SSM), Daniele Nouy, also referred to during her visit to Athens this week.

It was due to this outstanding matter that financial report authors refused to allow the publication of banks’ reports for last year, and none of the lenders has announced yet when it will issue its 2016 results, with the deadline for that being the end of this month.

In the proposed amendment, the Finance Ministry explains that it concerns the improved handling of the deferred tax requirement already acknowledged by the banks and other institutions regulated by the Bank of Greece or the SSM. It allows a 20-year period for the amortization of losses from debt writeoffs in any way they may have taken place, but also stresses that the tax deferral concerns only those losses.

Bank officials note that this amendment does not constitute a new tax benefit, but rather only extends the previous period of five years (introduced after the PSI haircut in 2012) to 20. They add that the issue of deferred tax assets as well as that regarding the extrajudicial settlement of debts are necessary interventions without which the banks cannot act to tackle the NPL problem efficiently. Banks have pledged to reduce their NPL stock by about 40 per- 1.0726 cent within three years, from the current level of 108 billion to 65 billion euros.

The settlement of the deferred tax issue opens the way for the publication of the banks’ financial reports. Bank sources say this might start at the end of next week and will likely take place in the last few days of March. The 2016 results will show the banks’ return to profits after many years in the red.