Establishment of a Family Office in Greece

Introduction

The Greek government has introduced a legal framework via L.4778/2021 (as in force) to integrate Family Offices into the Greek business landscape.

In a nutshell, Family Offices (FO) are Special Purpose Vehicles (SPVs), incorporated by (Ultra) High Net Worth Individuals – (U)HNWI to manage their family assets. Therefore, this framework may assist HNWI, residing in or relocating to Greece, to manage their assets more efficiently and effectively.

The FO scheme concludes a measures package for brain gain and attraction of HNWI and strategic investors, following the implementation of Articles 5A, 5B, 5C of Income Tax Code (L. 4172/2013).

Definition and purpose of Family Offices

According to the Greek Law, a Family Office is a Special Purpose Family Asset Management Company. This legal entity is established with the exclusive scope of managing assets and investments (located either in Greece or abroad), owned by individuals and their family members, who are tax residents of Greece.

A family office runs a multifaceted business, as it integrates asset management, expenses management, and wealth preservation into a cohesive framework that supports the family’s financial objectives and lifestyle choices. By addressing these key functions, a family office not only seeks to enhance the family’s wealth but also to ensure its longevity and sustainability for generations to come. Thus, the operation of a FO requires the employment of high-level personnel with a deep understanding of the business and financial environment.

Establishing a Family Office in Greece: 4 key points

1. Legal Structure: The family office can operate under any legal form, except as a non-profit entity. If a family office already exists in a foreign country, it can transfer its registered office to Greece.

2. Tax Residency: The individual and their family members must be tax residents of Greece or have transferred their tax residency to Greece.

3. Shareholders/Partners: Shareholders, partners, or members of the family office can be:

• The family members themselves (including spouses, partners in cohabitation agreements, parents, and their unmarried children)
• Legal entities or legal entities in which the Greek tax residents or their family members hold a majority stake, whether in Greece or abroad.

4. Operational Requirements:

• The family office must employ at least five (5) people in Greece within 12 months of its establishment. Close family members cannot be employed by the family office.
• The family office must incur operational expenses of at least 1,000,000 euros annually in Greece.

Tax Regime

It must be noted that FO must declare, upon its formation, its primary and sole activity falling under the activity code 66301102 (“Family Wealth Management Services”). FO are not allowed to provide other services or incur expenses that are not related to their scope.

The calculation of taxable income involves several steps. First, the gross revenue of a Family Office is determined either by corporate books or by adding a profit margin of 7% to the total expenses, whichever is higher. Depreciation costs and all expenses documented by invoices (or equivalent documents) and paid through the company’s bank account are considered deductible. The income tax is then assessed by applying the corporate rate of 22%.

It is important to note that transactions between the Family Office and related parties (shareholders etc.) are considered as transactions within the same entity not being subject to VAT.

Compliance Procedure:

Generally, there is no specific procedure to establish a FO, besides the activity code but in order to qualify in this scheme, Family Offices have to submit, until the end of the month following the submission of the income tax declaration, the following documents to Tax Authorities:

• Evidence of employment data of the Family Office’s employees for a period of 12 months;
• A copy of the financial statements;
• A solemn declaration duly signed by the legal representative stating the members (partners/shareholders) of the FO and that the company provided supporting services exclusively to family members and has not engaged in any other business activity;
• Documents proving any changes to the status of family members (marital status, child status, custody and maintenance decisions); and
• Bank statements as evidence of expenses and income transactions.

Non-compliance with the abovementioned procedure within the deadline may trigger a tax audit.

Conclusion

There will be a follow-up article on this topic, which will offer a more thorough analysis comparing similar schemes in other EU and non-EU countries. This comparison aims to highlight differences and similarities in practices, policies, and outcomes, providing a broader context and deeper understanding of how such frameworks operate in various jurisdictions.