New incentives for obtaining Greek tax residency by employees and freelancers: requirements and procedures
All the details on the proposed favorable tax regime for foreign individuals who are willing to transfer their residency in Greece
The Ministry of Finance tabled to the Parliament a new Tax Bill. Including -among others- the introduction of new tax incentives for obtaining Greek tax residency by employees and freelancers. The new Tax Bill defines the requirements and compliance procedures for falling under the beneficial income tax scheme, in view of the forthcoming implications by Brexit on 1 January 2021.
Requirements
According to the proposed Article 5C of Income Tax Code (law 4172/13), the interested individual shall meet the following requirements:
a. Be a non-Greek tax resident for the previous 7 out of 8 years
In particular, we may identify three cases which may require the delivery of relevant documentation or not.
| Case | Documents required |
| The individual has obtained a Greek Tax Identification Number (TIN) and has been registered to the Tax Office for non-Greek tax residents for the last 7 years | No |
| The individual applies for a Greek TIN for first time | No |
| The individual was considered as a Greek tax resident, i.e. he has not disclosed his current tax residence to the Tax Authority | Tax resident certificates for all years under consideration |
b. Transfer his tax residency from an EU Member – State or a State of the EEA or a State with which Greece has signed an administrative cooperation agreement
c. Has entered into an employment contract (for new job positions only) as per article 12 par. 2 of Income Tax Code (L. 4172/2013) with a Greek legal entity or a foreign legal entity having a permanent establishment in Greece or is a self-employed in Greece
d. Declares that he will stay in Greece for at least two years.
Tax Benefits
Under the proposed provisions, 50% of the employment or individual entrepreneurial income derived in Greece will be exempted from income and special solidarity tax. This tax exemption is significant. Taking into consideration that the current tax brackets for employment income range from 9% up to 44%.
Note that any other income generated by Greek sources is still taxed under the general provisions of the Income Tax Code. For instance, dividends from Greek companies are subject to withholding tax at a rate of 5%. As for the income from foreign sources, the provisions of the relevant Double Tax Treaty and Greek Income Tax Code are applicable.
To be noted that this tax exemption is granted only for seven (7) fiscal-calendar years and cannot be extended.
Example
Consider a single individual who is willing to change his tax residency from another EU country to Greece on 01.01.2021 and will receive an annual salary of 50,000€ from a Greek permanent establishment of an EU legal entity.
The tax clearance of this individual that falls under the incentives scheme and the general provisions respectively is as follows:
| Alternative tax scheme | General provisions | |
| Salaries | 50,000 | 50,000 |
| Taxable Income | 25,000 | 50,000 |
| Income Tax | 3,983 | 13,883 |
| Special Solidarity Tax | 426 | 2,076 |
| Total tax due | 4,409 | 15,959 |
| Tax benefit | 11,550 | |
Procedure
The procedure is quite simple and transparent. The interested individuals may apply to the tax administration until the 31th day of July. If the competent Tax Office approves the application of the individual, the Greek Tax Authority shall inform the competent Tax Authority of the other State on the new tax residency status of the taxpayer, in accordance with the international administration cooperation.
Revocation
Even if the proposed provisions do not make a relevant remark. However we consider that the taxpayer may at any time submit a revocation request in order to become once again a foreign tax resident of another country.
If at any time, the conditions c and d stipulated here above does not met the application of the said favorable tax regime cease to apply.
Concluding remarks
The proposed favorable tax regime completes the favorable regime already be in force under the articles 5A (foreign wealthy investors) and 5B (foreign pensioners) of Income Tax Code. These tax incentives focus on reversing the brain drain of Greek highly qualified people and attracting foreign professionals to work with Greek companies. Moreover, due to Brexit, this beneficial tax scheme is expected to attract many UK citizens who are willing to live in the EU territory.
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