Greece: Tax on Foreign Holders of Bonds Won't Be Imposed Retroactively

Greek 10-Year Yields Spiked By More Than Half a Percentage Point to 6.72%, Highest in Seven Weeks

The Wall Street Journal

By MATINA STEVIS

May 15, 2014 11:45 a.m. ET

LONDON—The Greek finance ministry said Thursday a tax on foreign holders of Greek bonds that had caught investors' attention wasn't being imposed retroactively.

Greek 10-year yields spiked Thursday by more than half a percentage point to 6.72%, the highest in seven weeks. Traders said the reversal began when the finance ministry circular caught investors' attention. Other euro-zone bond markets also sold off, with 10-year yields up more than 0.2 percentage point in Portugal, Italy, and Spain.

In a statement, the finance ministry said no tax would be imposed on capital gains realized by foreign holders of Greek bonds.

But capital-gains tax still applies to foreign holders under a regime in place from Feb. 29, 2012 to Dec. 31, 2013. That tax rate is 33% for legal entities and 20% for individuals.

Companies and individuals domiciled abroad holding Greek bonds bought during that period could still be exempt from the old tax, if the country they are based at has a double-tax agreement with Greece.

Greece has double-tax agreements with more than 50 countries, including the U.K., San Marino, Luxembourg and Cyprus, which aims to make sure individuals and companies don't pay a levy on the same transactions twice.

The circular that raised concerns had been published April 25 but only grabbed investors' attention Wednesday. Greek government bondholders experienced severe losses in May 2012 as the country retroactively enforced special clauses in its bonds—issued under Greek law—to carry out the biggest debt restructuring in history.

—Tommy Stubbington contributed to this article.

Write to Matina Stevis at matina.stevis@wsj.com