Greece’s Council of State has ruled that interest on loans used to finance shareholder dividends is not tax deductible, confirming that such costs fall outside ordinary business operations under Article 22 of the Income Tax Code and aligning with previous court decisions.
Greece’s Council of State issued Decision No. 370/2026 on 11 September 2026, which clarified that companies cannot deduct interest paid on loans borrowed to finance dividend payments to shareholders. The Second Chamber of the council rejected an appeal from a company that had sought this deduction.
Why the interest is not deductible
The company had borrowed funds from a related group entity to pay dividends because it lacked sufficient cash reserves. The council found this arrangement problematic. Paying dividends, according to the ruling, represents a shareholder obligation rooted in corporate law, not a business expense. The council held that dividend payments fall outside the scope of ordinary commercial operations and therefore do not qualify for tax deductions.
Under Article 22 of the Income Tax Code (Law 4172/2013), qualifying expenses must serve the company’s business interests and occur during ordinary operations. The council determined the dividend payments met none of these requirements. Because Article 22 was not satisfied, the court declined to examine whether other provisions might apply, specifically Articles 49 (thin capitalisation rules) and 50 (intragroup transaction rules), both of which depend on Article 22 as a foundation.
Consistent precedent
Decision 370/2026 aligns with earlier rulings. Decision 1803/2023 and Decision 1804/2023 reached identical conclusions on this question. The consistent outcome establishes case law in Greece that interest on dividend-financing loans remains non-deductible.
The same principle extends to loans obtained to fund share capital reductions, the council noted. These transactions, like dividend payments, arise from shareholder relationships rather than productive business activity and would receive identical treatment under tax law.
