Abacus ABS—Expertise, Experience, & Excellence in Business Advice

SEP-OCT 2013|BY RAYMOND MATERA
Theodoros Psaros, Senior Partner of Abacus Audit & Business Solutions, speaks to Business Partners on three key issues—domicile, M&A, taxation and legal planning.

What are some of the key business issues in Greece today?

First, Greece can be an attractive place to do business. It has been one of the freest economies in the world for years and a gateway to investment in the Middle East and East Europe. Strong rules of law and respect for property rights make Greece a strategic platform, including for U.S. companies seeking to do business in this region, which can be challenging.

Since 1981, when Greece became a full member of the European Union (EU), it has been well located as an entry point to the EU from the Middle East, North Africa, Asia, and some Balkan countries.

Although Greece is going through a period of economic and social reforms required to support its new and emerging economy, conditions are being introduced to foster new investment, to create new jobs, and to boost healthy competition. As the government privatizes public entities, such as utilities, public transportation, and banks, more opportunities become available for investors interested in real estate, enterprises, and major infrastructure projects.

Over the last decade a number of key Greek enterprises have moved abroad. 3E decided to set up its HQ in the canton of Zug, the Fage group moved headquarters to Luxembourg and other Greek businesses are perhaps planning to leave Greece. Is this a major topic?

These companies are not the first to choose a domicile abroad. But we need to recognize that their activities and production still remain in Greece. Leading companies choose cross border corporate restructuring to compete more effectively in the global marketplace, to reduce exposure to the Greek financial crisis, and to play on favorable tax environments.

As local financing remains out of reach, many entities are forced to seek capital abroad, having better access to equity and bank funding. The insecure fiscal framework in Greece, and statements made by the ratings agencies—Standard & Poors’s and S&P—that there is at least one in three chance of Greek Eurozone exit, explain how the change in domicile status of prominent Greek entities affects their rating “positively” from a credit standpoint.

But I’d like to focus on a few areas that I am especially familiar with—areas in which Abacus Audit & Business Solutions has extensive expertise and experience: domicile, M&A, taxation and legal planning.

Mergers and acquisitions (M&As) have gained in popularity in recent years. Do you believe that this type of diversification strategy opens new ground for Greek companies?

Mergers are likely to have a range of useful applications and I expect they will be particularly effective for group reorganizations. A merger provides an effective method by which assets and liabilities can be transferred from one company of a group to another, with the added advantage of there being no requirement to liquidate the transferor company.

Furthermore, where the intention of a merger is to transfer the economic risk and benefit of all assets and liabilities of a business, a merger removes the risk of failing to identify or effectively transfer relevant assets and liabilities and so provides for greater certainty to shareholders.

Finally, in a merger, all assets and liabilities are transferred automatically from the transferor to the transferee and that allows the safe transfer of a business without the need to re-negotiate any contract (resulting in avoiding risk, timing and financial consequences). This may be particularly useful where the business involves a large portfolio of retail business or an insurance and banking portfolio.

Developing and managing a successful portfolio of business requires full knowledge of the business environment. Do you believe taxation is a major factor for selecting a particular structure in a transaction?

It is imperative to understand the pros and cons of each choice and to learn which is the most appropriate for a successful corporate strategy, whether that choice means a merger, an acquisition, a division or a transfer of nationality of a business.

For example, the core principle of choosing a merger is to defer taxation of profits and gains relating to assets and liabilities transferred, and to shares allotted in the merger until those assets, liabilities and shares are disposed of by the receiving entities or shareholders. But there are certain indirect tax aspects that should be examined under further legislation, EU or local. i.e., when real estate transfers take place, we need to closely examine the nature of their usage (self usage, idle assets or assets leased to third parties) when applying any exemption from the real estate transfer tax.

An acquisition has different tax consequences. The gain related to the transfer (sale) of particular assets is added to the taxable income of the seller and is subjected to corporate taxation. The gain raised by the transfer of a segment (contractual or deemed gain) is subjected to capital gain tax of 20%.

It seems that effective legal and tax planning for a merger, acquisition or for any other transaction helps a business to avoid complicated legal and regulatory tax issues and also creates greater shareholder value and leads to significant tax savings.

There is a demand of access to a full range of tax and legal insight delivered by professionals who have industry-leading comprehension and extensive M&A experience.

Our team delivers effective support, related to strategic objectives, such as:

  • Due diligence services
  • Deal structuring services
  • Advance tax-ruling requests
  • Negotiating with tax authorities
  • Transaction structuring
  • Post-acquisition reorganization and/or integration

We need to accept that there doesn’t seem to be a magic “trick” in corporate mergers, acquisitions or other reorganizations. They can be inherently risky, and without the proper strategy, intuition, and knowledge, can get, well, ugly. That’s why expert advice should be a first priority.

Theodoros Psaros, Senior Partner of Abacus Audit & Business Solutions, has more than 30 years of experience helping companies develop time-tested strategies. Before becoming a partner at Abacus ABS, Theodoros served PWC as a partner from 1993 to 2005 and prior to that served for 19 years at SOEL SA.

Theodoros Psaros

ABACUS Audit & Business Solutions S.A.

1Α Pierias Str. Metamorfossis, 144 51, Greece

Tel: +30 210 2812 564 , +30 6932 730 398

Fax: +30 210 2815 960

Mail: tpsaros@auditabacus.gr

Find details at: www.abacusnetwork.gr

Abacus Audit & Business Solutions (Abacus ABS) was founded in 2005 by ex-partners of PWC and delivers measurable value to clients through its professional who offer proven audit, tax, consulting, enterprise risk and financial advisory services.

Abacus ABS’ accountants, tax & legal consultants, and auditors, have professional expertise and extensive experience across a broad spectrum of business disciplines and are uniquely focused on providing practical, cost-effective and value-added solutions to each client’s needs.

The Abacus ABS client roster includes a wide range of large and middle-sized Greek and multinational manufacturing, commercial and services companies as well as financial institutions, public sector corporations and governmental organizations.

Abacus ABS specializes in:

  • Accounting services
  • Payroll administration
  • Tax
  • Audit and assurance services
  • Management & business consultancy services
  • Small and medium enterprise (SME) support

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