February 17 2009
In October 2008 the Ministry of Economy and Finance issued guidelines regarding the definition of the term ‘commencement of implementation’ for projects for which an application has been made for consideration under the Investment Law and for the grant of associated subsidies. The guidelines have been issued following long debates on when expenditure on a project is deemed to start, particularly as such commencement relates to the permitted start of works or the commencement of implementation under the Investment Incentives Law (as amended).
According to Article 5(6) of the law, the implementation of a project is deemed to commence either when construction work begins or following the first definitive undertaking to order equipment for the project (excluding any feasibility studies undertaken by the investor in this respect). In practice, the implememtation of a project is deemed to begin when spending from the project's budget begins. Investment expenditures are allowed only after publication of the ministry’s decision approving submission of the project under the provisions of the law.
However, project implementation may commence by way of exemption immediately after the publication of eligibility approval by the ministry (ie, the certificate issued to confirm that a completed application for the grant of a subsidy in accordance with Article 7(5) of the Investment Law has been submitted), as this constitutes preliminary approval of the a priori eligibility of a project. Project costs incurred on the basis of an eligibility approval are at the investor’s sole and complete risk, without prejudice to the final evaluation of the project application.
Any deviation from these rules leads to the rejection of the whole application file, including the entirety of the project, not only the sections of the project for which costs were incurred before the issuance of approvals.
This provision is stricter than the provisions of earlier versions of the Investment Incentives Law, which allowed the implementation of a project and the commencement of investment expenditure immediately after the submission of an application for the grant of a subsidy. According to the earlier law, undertaking costs before the date of submission of an application would not lead directly to the rejection of the whole application file, but only to the rejection of costs undertaken before the submission of the application.
The strict provisions of the newer law ensure that only investments that could not be undertaken without state support are subsidized.
In the new legal environment, two separate actions are interpreted as commencement of implementation and thus lead directly to the rejection of the whole application file if related costs are undertaken before the issuance of submission or eligibility approval.
The first is the commencement of project investment expenditure (eg, construction of part of a building’s facilities such as the storage room) or the purchase of relevant machinery, irrespective of the extent of such expenditure and its proportion of the investment plan as a whole. Construction works that must be finalized for the purposes of implementing the investment plan shall not be held to constitute commencement of implementation, provided that they began in advance and are part of a previous investment plan. Any works related to landscape reinstatement on the project site (eg, demolition works) may not be subsidized and therefore shall not be interpreted as commencement of a project's investment expenditure.
The second is advance payment for the supply of machinery equipment or for construction work - for example, pursuant to a private contractor agreement that is the first necessary step for the commencement of construction work. Both actions are considered to be definitive undertakings and therefore may not be undertaken before a project’s submission or eligibility approval.
Conversely, the ministry has expressly exempted the following actions from the scope of the restrictions on commencement of implementation as they do not jeopardize the eligibility of the investment application:
For further information on this topic please contact Sotirios Douklias at Kyriakides Georgopoulos & Daniolos Issaias by telephone (+30 210 8171 500) or by fax (+30 210 6856 6578) or by email (email@example.com).
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