The Greek tax authority (AADE) is launching a new sweep operation on old debts, withdrawing from its books debts worth €6 billion that are now considered uncollectable. These are mainly debts from bankrupt businesses and deceased taxpayers that have remained uncollected for decades.
AADE: Debts classified as uncollectable reach €41.2 billion
With this move, the total amount of debts that have been included in the “uncollectable” status is expected to reach €41.264 billion, an amount that corresponds to over 36% of total overdue debts to the Tax Administration, which stand at €114.516 billion.
What does “uncollectable” classification mean for a debtor
The inclusion of a debt in this category does not entail its write-off, but suspension of collection actions for a period of ten years from the end of the year of registration. During this period, the statute of limitations is essentially “frozen,” while debtors and co-liable persons are not entitled to tax clearance certificates, only debt confirmation certificates.
At the same time, all bank and investment accounts are frozen in their entirety, as well as any safe deposit boxes, while the State retains the right to return with collection measures or offsets if assets emerge.
Three categories of decisions based on debt amount
Specifically, for a debt to be characterized as uncollectable and registered in the special books, a specific procedure is required depending on the amount of the basic overdue debt:
• For debts up to €300,000, a decision by the head of the tax office or customs office is required, following a recommendation from the Legal Department.
• For debts from €300,000 to €3 million, a decision by the AADE administrator is required, following a recommendation from the competent head of collection centers, tax office, or customs office.
• For debts over €3 million, a decision by the AADE administrator is required, following a recommendation from the Collection Operations Unit.
What are the criteria for classifying a debt as uncollectable
According to the Public Revenue Collection Code (PRCC), for overdue debts to the State and confirmed debts to third parties to be characterized as “uncollectable,” the following conditions must be cumulatively met:
* Investigations must have been completed without locating assets of the debtor or co-liable persons, nor their claims against third parties.
* Criminal prosecution must have been filed where provided, or impossibility of filing it must be established.
* Objective inability to collect the debt must have been confirmed after relevant inspection.
When debts can be included even with existing assets
With the latest provisions voted last summer that amended the PRCC, the criteria for characterizing debts as uncollectable were expanded. Now, debts can be included in this category even when there are assets of the debtor or co-liable persons, provided that specific criteria are cumulatively met.
Specifically:
• The total value of real estate and other property rights of the debtor and co-liable persons must be considered particularly low in relation to the basic overdue debt. Specifically, it cannot exceed 5% of the debt and, in any case, the amount of €100,000. The value is derived either from a certified appraiser’s valuation or from the taxable value used to calculate property tax.
• Similarly, the total value of movable property of the debtor and co-liable persons – even in cases where seizure was not possible – must not exceed €30,000 and must be considered disproportionately small in relation to the amount of the basic debt.
For how many years is debt collection “frozen”
Debts characterized as “uncollectable” are not permanently written off but are placed under a collection suspension regime for a period of ten years from the end of the year of their registration in the special books of the tax administration.
During this ten-year period:
• The statute of limitations on the debt is automatically suspended.
• Tax clearance certificates are not issued to the debtor and co-liable persons for any reason, only debt confirmation certificates.
• No other certificate required for transfer of assets is issued, unless it concerns sale of property for the purpose of debt settlement.
At the same time, all bank and investment accounts are frozen, as well as the contents of safe deposit boxes in banks and credit institutions of the debtor and co-liable persons. The State, however, retains the right to proceed at any time with enforcement measures or offsets if assets are located even after the debt’s registration in the uncollectable books.
