UPDATE 2-Greece denies plan for retroactive tax on foreign bondholders

Thu May 15, 2014 5:27pm EDT

* 10-year bond yields rose to two-month high

* Govt says revokes government circular that spooked investors

* Govt says document tried to clarify previous regime (Adds finance ministry statement)

By Lefteris Papadimas

ATHENS, May 15 (Reuters) - Greece's government on Thursday denied it had instituted a retroactive tax on foreign holders of Greek bonds, and revoked a tax document that spooked investors and sent yields to near two-month highs.

Traders cited a document detailing a retroactive tax on non-resident holders of Greek bonds as the reason for Greek 10-year bond yields shooting up.

Greek officials, however, said that document - a government circular - had only sought to clarify that the previous tax regime of 33 percent on foreign legal entities and 20 percent on individuals had been abolished starting this year.

A finance ministry official had said the document was "probably misinterpreted" but the ministry later in a statement said it had revoked the document. It did not provide details clarifying the impact of the withdrawal.

In an effort to make Greek bonds attractive to foreign investors, the Greek government passed a law in March scrapping taxation on capital gains from Greek bonds from the start of 2014.

"There is no taxation on capital gains from transfers of Greek government bonds by foreign investors that took place from January 1, 2014 onwards," a statement from the finance ministry said, confirming what finance ministry officials told Reuters earlier on Thursday.

"Consequently, the reports referring to retroactive taxation or intention for retroactive taxation are completely untrue."

Greek 10-year yields rose as high as 6.84 percent, up 53 basis points on the day.

A copy of the document published on the Deutsche Boerse website and seen by Reuters was last updated on May 5.

Greece returned to international bond markets in April, raising 3 billion euros ($4.11 billion) through the sale of a five-year bond, its first since the country plunged into a debt crisis in 2010.

It is also considering tapping bond markets again in the next 12 months to raise between 3 and 6 billion euros.

($1 = 0.73 euro) (Writing by Deepa Babington; Editing by Andrew Roche and Eric Walsh)

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