Tax incentives for persons who transfer their tax residence in Greece:
The Greek Income Tax Code, Law 4172/2013 introduced incentives for persons who are non- tax residents in Greece in order to transfer their tax residence in Greece. Those provisions are aimed at specific categories of persons: investors, pensioners and employees or entrepreneurs.
1. Tax incentives for investors transferring their tax residence in Greece
Article 5A of the Greek Income Tax Code provides for the alternative taxation of income arising abroad, for natural persons who transfer their tax residence in Greece.
More particularly, a tax payer, being a natural person, who transfers his/ her tax residence in Greece, may be subject to an alternative way of taxation for the income arising abroad, consisting in paying an amount of 100 000 euros, for each fiscal year, notwithstanding the amount of income earned abroad.
It may be applied to extend this regime to a relative of this person, and in that case, an amount of 20 000 euros is payable per relative, and the provisions regarding the taxation of donations, inheritance and parental gifts shall not apply.
- The applicant/ taxpayer was not a Greek tax resident for the previous 7 out of 8 years before the transfer of the tax residence to Greece, and
- The applicant provides proof that he/ she or a relative or through a legal entity in which he/ she has the majority shareholding, invested in real estate or enterprises or securities or shares, or share parts in legal entities having their seat in Greece.
- The amount of the investment must be at least 500 000 euros.
- The investment must be completed within 3 years from the date of submission of the application.
It is important to note that the above provisions regarding the investment are not required, provided that the applicant has obtained and maintains a residence permit for investment activity in Greece, in accordance with the provisions of article 16 of the Greek Immigration Code.
Another important note is that the applicant/ taxpayer, is subject to taxation for the income earned in Greece, in accordance with the general provisions of the Greek Income Tax Code.
Eligible types of investment:
- Investment in real estate in Greece.
- Purchase of existing or creation of new fixed establishments in Greece for the exercise of business activity through a personal business.
- Acquisition of participation securities in a Greek company, which must be non-listed and must develop a business activity in Greece.
- Purchase of Bonds of the Greek Public Sector.
- Capital contribution for the participation in an Alternative Investment Fund.
- Purchase of securities or corporate bonds of Greek companies, of ETFS shares and/ or bonds of the Greek public sector which are subject to trade in regulated markets or multilateral trading mechanisms operating in Greece.
The application of these provisions begins as of the first fiscal year for which the application is submitted, and expires after 15 fiscal years.
With the payment of the abovementioned flat- rate amount, every tax liability of the applicant who is subject to the provisions of the present is extinguished for the income arising abroad and the said natural person is exempted of inheritance or donation tax regarding assets located abroad.
2. Tax incentives for pensioners transferring their tax residence in Greece
Article 5B of the Greek Income Tax Code provides for the alternative taxation of income arising from pensions abroad, for natural persons who transfer their tax residence in Greece.
More particularly, the applicant/ taxpayer shall, in this case, pay each fiscal year, tax equal to 7% for his income arising abroad.
- The applicant/ taxpayer was not a Greek tax resident for the previous 5 years out of 6 before the transfer of the tax residence
- The applicant/ taxpayer transfers his tax residence from a country with which there is an agreement for administrative cooperation in tax matters with Greece
The application of these provisions begins on the following year from the fiscal year in which the application is submitted, and expires after 15 fiscal years.
3. Tax incentives for employees or entrepreneurs transferring their tax residence in Greece
Article 5C of the Greek Income Tax Code provides for a special way of taxation of Greek income from employed activity or entrepreneurship of natural persons who transfer their tax residence to Greece.
More particularly, such person shall be exempt from income tax and special contribution tax for 50% of his/ her income from employed activity earned in Greece within the fiscal year. This applies also to entrepreneurs who transfer their tax residence to Greece in order to exercise a personal business activity.
- The applicant/ taxpayer was not a Greek tax resident for the previous 5 out of 6 years before the transfer of the tax residence to Greece.
- The applicant transfers his/ her tax residence from an EU or EEA member- state or from a country having entered into an agreement for administrative cooperation with Greece in tax matters.
- The applicant/ taxpayer provides services in Greece within the framework of an employed relationship, either exercised at a Greek legal entity or a permanent establishment in Greece of a foreign business.
- The applicant/ taxpayer declares that he/she will reside in Greece for at least 2 years.
The provisions of the present are applicable to the income of the tax year for which the application is submitted and expires after 7 fiscal years.
It is worth noting, that the above provisions concern exclusively new employment positions.
Greek tax residents:
According to Greek tax law, a natural person is considered to be a Greek tax resident if:
a) Such person has his/ her permanent or main residence or usual residence or the center of his/ her vital interests, i.e. his/ her personal and financial bonds in Greece, or
b) Such person is a consular or diplomatic or similar public employee serving abroad.
Subject to the foregoing, a natural person residing in Greece for over 183 days per any 12- month period, is a Greek tax resident as of the date of his/ her arrival in Greece. This does not apply to persons who are in Greece exclusively for touristic, medical, therapeutic or similar private purposes, provided that their residence does not exceed 365 days, including short stays abroad.
*The above content is for informational purposes only, and does not constitute legal or tax advice.