The Issuance Of Tax And Social Security Clearance Certificates Within The Framework Of Law 4738/2020

Upon becoming subject to the provisions of Law 4738/2020 and successfully completing the arrangement of debts, critical transactional capacities of the debtor, which until recently had remained inactive, are effectively “unlocked”. Perhaps the most significant beneficial consequence of the arrangement lies in the immediate recovery of tax and social security clearance, which constitutes the necessary “passport” for the exploitation of assets and the liquidity of the business. However, differences arise depending on the regulatory regime under which the debtor undertaking is placed, which are presented in this article.

A. The Issuance of Tax and Social Security Clearance Certificates within the Framework of Debt Arrangement through the Platform of the Out-of-Court Debt Settlement Mechanism — Articles 6–30 of Law 4738/2020

The arrangement of debts through the platform of the Out-of-Court Mechanism under Law 4738/2020 currently constitutes one of the most important tools for the definitive settlement of debts owed to financial institutions, the State and Social Security Institutions, offering a viable way out for debtors who are unable to meet their obligations.

Upon the signing of the restructuring agreement, significant legal effects arise, the most important being the suspension of enforcement measures, such as seizures and auctions, the deactivation of attachments in the hands of third parties, following submission of a relevant request to the Tax Administration, and the issuance of tax and social security clearance certificates, thereby ensuring the debtor’s long-term viability and smooth reintegration into economic life.

At the outset, it should be noted that, upon the final submission of the application for admission to the Out-of-Court Mechanism pursuant to Article 18 of Law 4738/2020, which indeed entails the suspension of enforcement measures, the debts owed to the State and to Social Security Institutions for which arrangement is requested are not placed under suspension of collection, but remain overdue. Consequently, at this stage, no tax or social security clearance certificate is granted to the debtor.

By contrast, upon the signing of the debt restructuring agreement, which constitutes, for the State and the Social Security Institutions, an “instalment payment arrangement” pursuant to Article 23, points d and e, of Law 4738/2020, it becomes possible to issue a tax clearance certificate and a social security clearance certificate respectively, in accordance with the applicable provisions both of the Tax Procedure Code and of the regulations of the competent institutions. Moreover, “[…] for the issuance of a clearance certificate, any debts to be written off, as specified in the above agreement, shall not be taken into account […]”.

It follows from the above that the restructuring agreement under Law 4738/2020 is treated as an instalment payment arrangement. This means that the debtor may obtain a tax clearance certificate in accordance with the general provisions of the Tax Procedure Code, namely Article 12 thereof, provided that there are no other overdue debts owed by the debtor to the State. The same applies accordingly in the case of the issuance of a social security clearance certificate.

A significant distinction that must be highlighted in this article, regarding the possibility of issuing tax and social security clearance certificates within the framework of the Out-of-Court Debt Settlement Mechanism as opposed to the rehabilitation agreement, which is analysed in the immediately following section, is that in the former case a tax or social security clearance certificate is issued subject to the applicable withholding, as provided for in the Tax Procedure Code and in Decision No. 1162/2023 of the Governor of the Independent Authority for Public Revenue, Article 8 thereof, as recently amended by Decision No. A. 1072/2025 of the Governor of the Independent Authority for Public Revenue. This is in contrast to the case of debt arrangement through the conclusion of a rehabilitation agreement under Articles 31–64 of Law 4738/2020, where it is possible to issue a tax or social security clearance certificate in accordance with the provisions of the ratified rehabilitation agreement, which may provide for a lower or even zero withholding rate.

More specifically, under the applicable provisions of the Tax Procedure Code and the above decision of the Independent Authority for Public Revenue concerning the issuance of a tax clearance certificate, the Tax Administration, following the debtor’s compliance with an arrangement programme, is required to impose a withholding condition in cases where the clearance certificate is issued for the collection of money, the transfer of real estate, or the creation of a right in rem over real estate for valuable consideration.

In the case of the transfer of real estate or the creation of a right in rem over real estate for valuable consideration, the clearance certificate is issued by the Tax Administration as follows:

A. with a withholding amount equal to 70% of the consideration, provided that the consideration is not lower than the objective value; and

B. where the consideration is lower than the objective value and the withholding amount, calculated on the consideration, is lower than the debts, then the withholding percentage is calculated on the objective value and not on the consideration.

A significant development in the above regime was introduced by Decision A. 1072/2025, which establishes an exceptionally favourable provision facilitating transfers, by limiting the withholding rate to the exceptionally low level of 5% of the consideration for specific categories of debts, namely debts that are under suspension of collection by virtue of a court decision or a decision of the Dispute Resolution Directorate. The application of this reduced rate is subject to the condition that the remaining debts, corresponding to the difference between the amount ultimately withheld at 5% and the amount corresponding to 50% of the consideration, are fully secured by guarantees or rights in rem, such as the provision of real estate for the registration of a first-ranking mortgage. Finally, where debts under suspension by reason of a court decision or a decision of the Dispute Resolution Directorate coexist with debts under suspension for any other reason, the withholding rates apply proportionally to each category.

A further decisive reform in the field of exploitation of debtors’ real estate assets was introduced by the recent Law 5293/2026, which added Article 47A to the Tax Procedure Code, establishing the possibility of lifting a seizure imposed by the Tax Administration so that the real estate may be transferred free of encumbrances for valuable consideration, namely by sale, provided that the conditions set out cumulatively in that provision are met. These include the requirement that, at the time of release, the general conditions for the granting of a clearance certificate under Article 12 of the Tax Procedure Code must be satisfied.

Furthermore, in the case of collection of money by a taxpayer whose debts have been included in an arrangement, the amount of withholding depends on the percentage of the debt already repaid, ranging from 10% to 70%. This gradation essentially “rewards” the compliant debtor, so that the more the debt is reduced, the smaller the part of the collected amount withheld by the Tax Administration. At the same time, the debtor’s actual repayment capacity is also taken into account, through a further increase of the withholding rate, as assessed on the basis of the debtor’s financial data, thereby ensuring the faster collection of State claims from higher-risk debtors.

B. The Issuance of Tax and Social Security Clearance Certificates within the Framework of the Rehabilitation Agreement — Articles 31–64 of Law 4738/2020

The business rehabilitation procedure, as regulated by Law 4738/2020, constitutes a critical tool for rescuing viable economic entities. Its success depends on securing the necessary liquidity for the viability of the business. One of the most critical tools for achieving this purpose is the possibility of issuing tax and social security clearance certificates on favourable terms, by way of derogation from the general provisions.

The basic provision on this issue is found in Article 60 paragraph 6 point c of Law 4738/2020, concerning the effects of ratification of the rehabilitation agreement, which provides that:

“The debts owed to the State and to the Social Security Institutions, including e-EFKA, which are regulated by the rehabilitation agreement, shall be deemed current, subject to compliance with the rehabilitation agreement, and the competent authorities shall be obliged to issue the corresponding clearance certificates, in accordance also with the provisions of the rehabilitation agreement.”

The same issue is also addressed in Circular E. 2117/28.05.2021 of the Independent Authority for Public Revenue.

The above provisions establish a clear obligation of compliance on the part of the Tax Administration and e-EFKA with the terms of the judicially ratified rehabilitation agreement, even where such terms deviate from the general conditions for the issuance of tax and social security clearance certificates.

B.1. The General Rule on the Issuance of Tax Clearance Certificates: Mandatory Withholding under the Tax Procedure Code

According to Article 12 of the Tax Procedure Code, now Law 5104/2024, as mentioned above, where the debtor has been included in an arrangement programme, the Tax Administration is obliged to impose a withholding condition in the following cases:

• collection of money;
• transfer of real estate for valuable consideration;
• creation of a right in rem over such real estate.

The withheld amount is taken into account for the coverage of one or more instalments under the debt arrangement programme.

Correspondingly, Law 4611/2019, Articles 14 and in particular 25, subject to the following distinctions concerning whether or not the arranged debt is secured, provides that, specifically for the transfer of real estate for valuable consideration or for the creation of a right in rem over such real estate, the following conditions apply:

a. If there is an arranged debt and the terms of the arrangement are being complied with, a social security clearance certificate is granted, provided that the debt is secured in accordance with the conditions laid down in the decision referred to in Article 29 paragraph 1. The debt is deemed secured in particular where a right in rem security is provided over another property owned by the debtor or where a letter of guarantee from a credit institution of equal value is submitted.

b. If the debt is not secured, a certificate of debt is granted, which serves as a social security clearance certificate, subject to the withholding from the consideration of an amount up to the amount of the debt.

In this latter case, therefore, e-EFKA does not issue a social security clearance certificate, but rather a “certificate of debt”, which serves as social security clearance solely and exclusively for the purpose of the specific transfer and bears a condition requiring withholding from the sale consideration of an amount up to the total amount of the debt, namely potentially 100% of the debt if the consideration suffices, and the obligation of its immediate remittance to the social security institution by the notary drawing up the deed.

B.2. The Special Rule: Derogation through the Rehabilitation Agreement

Circular E. 2117/2021 of the Independent Authority for Public Revenue, entitled “Provision of clarifications and instructions regarding the application of the provisions of Law 4738/2020 regulating the pre-bankruptcy rehabilitation procedure”, expressly clarifies in Chapter 11 that the rehabilitation agreement may include special terms regarding the issuance of a clearance certificate, such as:

• a lower withholding rate than that provided for by law;
• zero withholding.

These terms, insofar as they concern debts regulated by the agreement, acquire binding force from the moment of judicial ratification of the rehabilitation agreement. The Tax Administration is obliged to comply with the ratification judgment, applying the general provisions only on a supplementary basis and only insofar as they do not conflict with the agreement.

B.3. Practical Issues of Application

Many rehabilitation agreements provide for withholding, for example 25%, only in respect of specific real estate assets of the debtor undertaking, which have already been prenoted and are intended for sale in order to satisfy the claims of the creditors participating in the rehabilitation agreement. In practice, this rate is set so that the rehabilitation agreement complies with the principles of non-deterioration of the creditors’ position and equal treatment of creditors, in the sense that public entities must receive, in the event of liquidation of the asset, the amount they would have received in the event of compulsory liquidation. It is therefore a special provision concerning the “transfer proceeds” of restrictively listed assets.

For any other asset, including real estate that may be acquired subsequently, the general rule of the rehabilitation agreement applies, which usually provides for the issuance of tax and social security clearance certificates without withholding or with a lower withholding rate than that provided for by law.

At this point, it is also worth referring to the preventive measures that apply automatically from the filing of the rehabilitation agreement for ratification until the issuance of the court decision ratifying or refusing to ratify the rehabilitation agreement, pursuant to Article 50 paragraph 1 of Law 4738/2020 concerning the automatic suspension of enforcement measures.

More specifically, it is prohibited, inter alia, to withhold current debts owed to the debtor on account of claims that arose before the filing, including withholdings by a public authority for the issuance of certificates and attestations. Consequently, both the Independent Authority for Public Revenue and e-EFKA are obliged to issue clearance certificates without withholding amounts from the debtor’s collections, thereby safeguarding the debtor’s liquidity.

Conclusion

In summary, becoming subject to the provisions of Law 4738/2020 offers the debtor the possibility of recovering tax and social security clearance, which constitutes a critical factor for viability and economic reintegration.

While the Out-of-Court Mechanism equates the restructuring agreement with an instalment payment arrangement, with the result that the withholdings provided for by the Tax Procedure Code are imposed, subject however to the significant exception of the new possibility of limiting the withholding to 5% pursuant to Decision A. 1072/2025 of the Independent Authority for Public Revenue for debts under judicial suspension or suspension by the Dispute Resolution Directorate, the Rehabilitation Agreement provides a more flexible framework, allowing the issuance of tax and social security clearance certificates with a lower or even zero withholding rate, by way of derogation from the applicable statutory provisions.

This dual framework forms a clear strategic direction, particularly in the case of businesses, depending on their size and business objective.