Executive Summary

A recently proposed Tax Bill amending the Greek Income Tax Code (Law 4172/2013) has been ratified by the Greek Parliament with an aim to attract foreign direct investments. Strong tax incentives are given to foreign individuals who transfer their tax residence to Greece while earning their pension income abroad. The provision follows the direction set last year via the introduction of significant tax exemptions benefitting foreigners making large monetary contributions to the Greek economy.

I. Introduction

After the conclusion of the Greek Parliament’s deliberations following the proposal made by the Ministry of Finance in July 2020, the Greek Income Tax Code has been amended for the second time within a year.  Being in the process of attracting foreign investment, and, in particular, of prompting foreigners to register Greece as their sole tax domicile while retaining their primary domicile in another country, the Greek government has consecutively added two key provisions for alternative taxation into its income tax legislation (Law 4172/2013), each catering for two different categories of foreign individuals. The most recently added provision (Article 5B) covers pensioners earning their pensions in their country of origin but transferring their tax residence to Greece, whereas the 2019 amendment (Article 5A) is centered at high net-worth individuals whose earnings are taxed in their country of origin but their tax residence is located in Greece.

II. Main Provisions

a. An Income Tax Rate of 7% for Foreign Pensioners

Initially, foreign individuals earning their pensions abroad but shifting their tax residence to Greece are entitled to benefit from the alternative income tax regime. The novel provision (Article 5B), allows pensioners to qualify for the beneficial 7% rate provided that they have not been Greek tax residents over at least five out of six financial years before their tax relocation.  It is worth noting that pensioners shall have the advantage of being covered under this law for fifteen consecutive years, despite the initial declaration of the draft bill being ten years.

b. A Single Annual Lump Sum and Exemptions for Foreign Large-Sum Investments

The second alternative taxation method specifically targets high-net worth individuals willing to reside in Greece. It is noted, however, that Greece has already implemented a ’golden visa’ program that provides for five-year residence permits to non-EU citizens when making an investment in Greece (minimum thresholds apply depending on the type of the investment).

The cumulative conditions in order for high-net worth individuals to benefit from the new tax regime are (i) proof of non-previous Greek tax residency for the seven out of eight years preceding the transfer of his tax residence to Greece (Art. 5A(1)(a)) and (ii) proof that they or their relatives or legal entity in which they hold the majority of their shares, invests in real estate or moveable assets or shares of legal entities based in Greece. The amount of the investment must exceed EUR 500,000 and must be completed within a period of three years (Art. 5A(1)(b)). The latter condition is not required in case of an individual who has obtained a residence permit due to investment activity in Greece (based on Article 16 of Law 5251/2014). Individuals qualifying for the tax rate may remain subject to the provision for fifteen consecutive years. Following the acceptance of an individual’s application for qualification under the alternative tax provision, a lump sum of EUR 100,000 is deemed to be payable on an annual basis, regardless of the level of their foreign source income (Art. 5A (2)). Notably, settlement of the annual lump sum tax exhausts any further tax liability for the individual on their foreign source income, whilst any tax paid abroad is not offset against any Greek tax liabilities. Furthermore, the individual is exempt from inheritance and donations tax on any foreign assets.

A crucial element for the efficient application of the aforementioned benefits is that the contemplated relocation in both categories shall originate from a country with which Greece has a valid agreement of administrative cooperation on tax issues (double taxation treaty). 

III. Concluding remarks

Since the introduction of the above amendments, Greece has been sparking the interest of multiple foreigners considering relocation of their tax residence. Of course, coupled with genuine interest for economic investment comes the need for strategic management and effective planning of incoming wealth.