The new tax incentives for investors in Greece inaugurated by the Tax Draft Bill issued on 07.11.2019

The recent Tax Draft Bill, which was raised today in public consultation, inaugurates new tax incentives a) for high net-worth individuals willing to invest in Greece and b) for Greek Holding companies.

Alternative income taxation resulting from foreigners who transfer their tax residence in Greece

Significant incentives are introduced in Greek Income Tax Code (Law 4172/2013) in order to transform Greece into a more attractive place for investments. More specifically, along with the simplification of tax residency conditions for individuals, new provisions with respect to the taxation of foreign income aiming at investments exceeding EUR 500,000 are introduced.

The said provision, which will be entered into force from its ratification date (i.e. within November 2019 and onwards), is addressed to individuals who are willing to transfer their tax residence and also to invest (themselves or their relatives) in Greece as long as:

1. They are living abroad for the last consequent seven (7) years before the transfer, and
2. It is proved that the investment is effected and does not fall under EUR 500,000.

In that case, the foreign income could be taxable in Greece at a flat-tax amount of 100.000 € for every FY in one-off payment.

The tax residence transfer claim should be filed until the 31th of March of each FY and the tax due is payable in one-off.

Even though the said regulation seems quite attractive, it should be taken under consideration that the application of said provision addresses to a limited range of individuals, only those with high net worth portfolio. Another issue that arises is that the said provision is favorable only for those cases that the worldwide income of the foreigner is taxable in Greece.

Introduction of Greek Holding company

A favorable provision for holding companies is introduced in Greek tax law, which could be considered very attractive for international investors when deciding which jurisdiction to set up a holding company.

More specifically, capital gain from the transfer of shares paid to a legal entity which is a Greek tax resident is totally exempted from income taxation. The said regulation will apply for income earned from 01.01.2020 and onwards.

The same favorable tax treatment applies to distribution and capitalization of profits, which continue to be exempted from any taxation. The requirement to be met in order the said provision is applicable relates to the legal entity whose shares are transferred by and indicates that the following conditions are cumulatively applied:

1. The latter legal entity should be included in the list of companies referred to the Council Directive 2011/96/EU;
2. The legal entity should be tax resident in a EU member state;
3. The legal entity is subject to one of the taxes mentioned in to the Council Directive 2011/96/EU;
4. The latter legal entity holds directly at least 10 percent of the equity shares (nominal value or number of share capital or voting rights) of the subsidiary company;
5. The minimum shareholding right should have been held for at least 36 months

Therefore, by these provisions, Greece is becoming competitive to Cyprus and Malta an ideal gateway for investments between the European Union.