- The legal framework in force
Since 2019, in an effort to attract in Greece tax residents (referred to as non-domiciled residents or non-dom)[1], specific tax initiatives have been incorporated into the Law 4172/2013, the Greek Income Tax Code (hereinafter referred to as “ITC“).The purpose of a non-dom tax regime is to designate the destination country (in the present case Greece) as the state responsible for the full taxation of the individual by applying a lump-sum tax for foreign-sourced income[2] (regardless of the level of their foreign source income).
The process of transferring tax residency to Greece is governed by the general principles of the OECD, while the taxation of foreign-sourced income and any possibilities for tax credits or exemptions are regulated by the applicable Double Taxation Avoidance Agreements (DTAA) between Greece and other countries. In most cases, the individual files an income tax statement exclusively in the country of residence for their worldwide income from all sources[3].
- The Provided Tax Incentives
The ITC provides favourable provisions related to the tax treatment of individuals transferring their tax residency to Greece. These provisions are specifically set out in Articles 5A, 5B, and 5C of the ITC, analysed below.
- Alternative Taxation Method for High Net Worth Individuals and Investment Residence Permit Holders (Article 5A ITC)
In order for an individual transferring their tax residence to Greece to benefit from the alternative taxation method, the following conditions must be cumulatively met:
(a) the individual must not have been a Greek tax resident for 7 out of the 8 years preceding the transfer of their tax residence to Greece, and
(b) must demonstrate that they or a close relative (i.e., spouse, ascendants, or descendants in a direct line), or a legal entity in which they hold a majority of shares or interests, invests at least €500,000 in real estate, businesses, securities, shares, or interests in legal entities based in Greece.
It is worth mentioning that the investment must be completed within a period of 3 years from the application date. Also, the condition to invest €500,000 does not apply if the individual holds and maintains a residence permit due to investment activity in Greece under Article 16 of Law 4251/2014.
Once an individual is admitted to this alternative taxation method, they are required to pay a lump sum tax of €100,000 on an annual basis for their total foreign-sourced income, with the option to include family members under the regime for an additional annual lump-sum tax of €20,000 per relative. Settlement of the annual lump sum exhausts any further tax liability on foreign-sourced income, but the individual remains liable for tax on Greek-sourced income under the ITC[4]. Additionally, there is an exemption from donation and inheritance tax on any foreign assets, as well as from the obligation to justify incoming foreign currency transfers to Greece. This tax regime may be applied for a maximum period of 15 years.
The application for the transfer of tax residence under the alternative taxation method must be submitted to the competent Tax Authority. (specifically, to the Tax Office for Foreign Residents & Alternative Taxation of Domestic Tax Residents) by March 31 of the relevant tax year. It must be accompanied by evidence of transferring the minimum €500,000 investment amount to a financial institution established in Greece. Applications may also be submitted by individuals who meet the above conditions and have already transferred their tax residence to Greece within the previous tax year. The Tax Authority examines the application and issues a decision by the last working day of June of the year the application was submitted.
- Alternative Taxation for Foreign Pensioners (Article 5B ITC)
Article 5B of the ITC aims to attract foreign pensioners by providing an alternative taxation method for income earned abroad. A foreign pensioner may benefit from this alternative taxation method if they meet the following conditions:
(a) they receive pension income from abroad,
(b) they were not a Greek tax resident for 5 out of the previous 6 years preceding the transfer of their tax residence to Greece, and
(c) they transfer their tax residence from a country with which Greece has an active administrative cooperation agreement in the field of taxation.
If these conditions are met, the pensioner is subject to an annual flat tax rate of 7% on their total foreign-sourced income for a period of 15 years.
The pensioner must submit the application for the transfer of tax residence under this alternative taxation regime to the competent Tax Authority (specifically, the Tax Office for Foreign Residents & Alternative Taxation of Domestic Tax Residents) by March 31 of the relevant tax year.
III. The Case of Employees and Self-Employed Persons (Article 5C ITC)
Article 5C of the ITC aims to repatriate Greeks living abroad and attract highly skilled foreign professionals. Under this provision, individuals transferring their tax residence to Greece may benefit from a 50% exemption from income tax and the special solidarity contribution on employment income and business activity income earned in Greece, for 7 consecutive tax years.
Specifically, the applicant must meet the following criteria:
(a) not have been a Greek tax resident for 5 out of the previous 6 years preceding the transfer of their tax residence to Greece,
(b) transfer their tax residence from an EU/EEA member state or a country with which Greece has an active administrative cooperation agreement in the field of taxation,
(c) provide services in Greece under an employment contract (or start a business activity in Greece) in a new job position, and
(d) declare their intention to stay in Greece for at least two years.
Individuals who meet these requirements are granted a 50% exemption on employment or business income, covering both income tax and the solidarity contribution. Additionally, the annual objective expenditure rules for housing and private cars do not apply[5].
For employment starting after July 2 of each year, the application must be submitted for the following year by the end of that year. The Tax Authority examines and issues a decision within sixty (60) days from the application date.
Following this series of tax incentive measures, Law 4778/2021 introduced Article 71H to the ITC, establishing clear rules for the creation and operation of ‘Family Offices’, special purpose companies focused exclusively on managing and supporting the assets and investments of individuals and their families[6].
Text edited and authored by: Thalia Dolka, lawyer in Athens, holds an LLM in Civil Law and is an LLM candidate at the Law School of Strasbourg.
[1] Papadakis I., The first applications of the favorable regimes under Articles 5A, 5B, and 5C of the Income Tax Code, Legal journal “Theory & Practice of Administrative Law 10/2022”, p. 1058.
[2] Skouzos Th., Dafouli E., The non-dom tax residency regime in Greece and the arising issues, Legal journal “Business and Corporate Law” 11/2020, p. 1273.
[3] Stoupakis K., Taxation of Greek expatriates & immigrants from the USA in Greece, Legal journal “Business” 194/2022, p. 612.
[4] Skouzos Th., Dafouli E., ibid., p. 1272.
[5] Pantzopoulos P., Sideromenou K., Kalampaliki K., On the Type of Taxes… A Look at the Impact of Recent Developments in Taxation in Greece and the World, Law Journal “Attorney”, 144/2021, p. 93.
[6] Papadakis I., ibid., p. 1058.