How a Change in the Out-of-Court Mechanism’s Calculation Tool Brings More Favorable Arrangements for Debtors - Law Firm Psarakis & Kefalas

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Legal Insight

May 2025

George Kefalas, LLM mult., MSc.

(republished from taxheaven.gr)

Summary: Since its inception, the out-of-court debt settlement mechanism has undergone continuous changes. Among the most recent updates—announced in January 2025 and implemented through a newly issued Ministerial Decision—are modifications to the algorithm calculating presumed available income for legal entities and self-employed individuals. These changes aim to secure more favorable terms under the out-of-court mechanism and apply to multilateral arrangements.

1. Introduction

In a recent article (see here), we discussed the changes brought by Joint Ministerial Decision (J.M.D.) No. 77522 EX 3.6.2024 to the calculation tool for bilateral arrangements (settlements solely with the State and/or EFKA). This decision introduced a presumption for bilateral settlements whereby the legal entity’s income is deemed to be 10% of its turnover. Consequently, if a legal entity reports losses or profits below 10% of its turnover in a fiscal year, its repayment capacity is adjusted to that percentage for purposes of the out-of-court mechanism.

A similar provision existed—and to some extent still applies—to multilateral arrangements (i.e., those involving at least one financial institution, usually a bank or loan servicer).

This article presents the changes introduced by J.M.D. No. 43666 EX 13.3.2025 regarding the calculation tool used for multilateral arrangements.

2. Previous Regulation on Multilateral Arrangements

The technical details of the out-of-court mechanism's calculation tool for multilateral arrangements (also referred to as the “second calculation tool” or “creditors' counterproposal”) are provided in J.M.D. No. 77697 EX 2021. This decision outlines the contractual content financial institutions must adopt to participate in the mechanism under Chapter A of Part Two, Book One of Law 4738/2020.

It established an income presumption for both self-employed individuals and legal entities, based on their turnover. Specifically, Article 7, para. 7.1, case 4 stated: “If the individual engages in business activity and the stated amount (i.e., available annual income) is lower than the ‘reasonable profit margin on turnover,’ the income shall be adjusted accordingly.” An identical provision applied to legal entities under Article 7, para. 7.2, case d.

Annex h of J.M.D. 13243 EX 2024, titled “Detailed Methodological Parameters for the Automated Out-of-Court Debt Settlement Solution (Creditors’ Counterproposal),” specifies that: “The reasonable profit margin is indirectly derived from E3 filings as 10% of turnover, based on field ‘sales of goods and services’ (code 500).”

Hence, a 10% turnover income presumption was used for both self-employed individuals and legal entities, regardless of actual profits or losses.

This same presumption was later adopted for bilateral arrangements with the State/EFKA under J.M.D. 77522 EX 2024.

3. Amendments Introduced by J.M.D. 43666 EX 13.3.2025

J.M.D. 43666 EX 2025 introduced significant amendments to the presumption. The revised Article 7, para. 7.1, case 4 now states:

“If the individual engages in business activity and the stated income is lower than the reasonable profit margin on turnover, it shall be adjusted accordingly, and the maximum number of installments per debt category shall apply for each creditor.”

Similarly, para. 7.2, case d, now reads:

“If the income is lower than the reasonable profit margin on turnover for small legal entities (annual turnover under €2.5 million for each of the last three years, as per E3 form, code 500), it shall be adjusted accordingly, and the maximum number of installments per debt category shall apply.”

As a result, the following now apply:

For self-employed individuals and small legal entities (annual turnover < €2.5 million), the 10% presumption still applies. However, the tool now ensures that the maximum installment number is applied per creditor category. This means that while the presumption may increase repayment capacity and prevent debt write-offs, it no longer restricts installment counts.
For large legal entities (annual turnover > €2.5 million in any of the past three years), the 10% presumption is abolished. Repayment capacity is now calculated based on actual declared profits.

Thus, the lawmaker demonstrates trust in the financial reporting of large businesses, while maintaining cautious assumptions for smaller businesses and self-employed individuals.

Ultimately, these amendments are beneficial for all debtors. Large legal entities benefit from a potentially more realistic (and possibly lower) repayment assessment. Small entities and individuals benefit from longer repayment periods even when the 10% income presumption is applied.

4. Conclusion

The recent changes to the out-of-court mechanism, particularly for multilateral arrangements, introduce more favorable settlement terms through revisions to the turnover-based income presumption. It’s worth noting, however, that these changes currently apply only to multilateral processes (with at least one financial institution involved). There has been no corresponding amendment for bilateral arrangements, where the 10% presumption still uniformly applies to all legal entities.