What Is an Angel Investor?
An Angel Investor is a high-net-worth-individual (HNWI) who provides financial support for small Start-Up companies, in exchange for partial ownership equity in said company. The financial contribution that these individuals provide, may be a one-off financing motion in order to help an innovative business idea take off, or a continuous cash injection in order to help elevate the company at a certain level.
Angel Investors in Greece?
With effect from 29 July 2020, Deputy Minister of Development and Investments, Mr. Christos Dimas, Deputy Minister of Finance, Mr. Apostolos Vesyropoulos, and the Administrator of the Independent Authority of Public Revenue, Mr. George Pitsilis signed the Joint Ministerial Decision outlying the terms and conditions for the classification of an individual as an “Angel Investor”. More specifically, individuals who contribute capital to a legal entity that is registered in the National Start-Up Registry (Elevate Greece), are offered a tax deduction equal to 50% of their total contribution, on their declared taxable income with effect on the fiscal year in which the contribution took place. Each individual will have the opportunity to invest up to EUR 300,000 per tax year, divided in up to three start-ups with a maximum investment of EUR 100,000, per start-up.
It is specifically noted that the Angel Investor is defined as the taxpayer–individual, a tax resident of Greece or abroad, holder of a Greek Tax Identification Number, who contributes capital to registered start-up businesses in order to further support their development, in accordance with imposed legal and financial guidelines.
If after an audit it is proved that the capital contribution has been made to obtain a tax advantage that defeats the purpose of the provision (i.e., the provision of investment funds and support during the early stages of operation of a start-up in order to increase investment activity), a fine, equal to the amount of the tax benefit sought, will be imposed.
Deduction Procedure and Compliance
The requirements imposed on Angel Investors and on each capital contribution, are described in the Joint Decision, along with the tax deduction procedure, the audit process for enforcing compliance with the obligations of Angel Investors and start-up businesses with regard to the absolute application of article 70A of L.4172/2013 (Income Tax Code).
The deduction procedure begins with the indication of the precise amount of capital contribution, in the Annual Income Tax Return Application during the fiscal year in which the contribution was made. In case capital is contributed after the deadline for submission for the annual income tax return of the fiscal year in which the payment was made, the deduction takes effect for the fiscal year in which the contribution was completed.
The necessary documents proving the realization of a capital contribution or the return of the capital are :
- 1. Certificate of the legal representative of the start-up, regarding the carried-out capital increase procedure, the details of the “Investment Angel”, the amount and exact time of contribution, the number and the nominal value of the acquired equity, and any corresponding amount of reserve formed in favor of the premium.
- 2. The decision of the Board of Directors, or any other legal body holding relevant authority, of the start-up for the pursuit of a capital increase motion, upon which the precise reason for said motion is to be specifically noted.
- 3. A certificate from the General Commercial Registry (Γ.Ε.ΜΗ.) of the registration of the capital increase decision, in accordance with the relevant provisions governing the capital increase process.
- 4. The receipt issued from the banking institution for the deposit of the contributed capital.
- 5. A copy from the General Commercial Registry (Γ.Ε.ΜΗ.) of the certificate of payment of the effectuated capital increase motion, or a copy of the relevant registration, in accordance with the relevant provisions governing the process of capital increase.
- 6. In case of capital return, the respective supporting documents resulting on the amount of capital return corresponding to each Investment Angel.
Finally, it is noted that the Independent Authority of Public Revenue (A.A.D.E.) holds complete authority over all auditory procedures, as they will monitor compliance with the preordained obligations of both interested parties, Investment Angels and start-ups. In the event that it is discovered that a capital contribution has been made for the purpose of gaining an unlawful tax advantage, the Joint Decision designates the imposition of a fine on the “Investment Angel”, equal to the amount of the benefit sought from said capital contribution.