Favorable Income Tax Provisions for Foreign Individuals under the Greek Income Tax Legislation (Law 4172/2013) – Alternative taxation of foreign source income earned by individuals who transfer their tax residence to Greece

Being in the process of attracting foreign investment, and, in particular, of prompting foreigners to register Greece as their sole tax domicile, 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 first (Article 5A) is centered at high net-worth individuals whose earnings are taxed in their country of origin but their tax residence is transferred to Greece, whereas the second (Article 5B) covers pensioners earning their pensions in their country of origin but transferring their tax residence to Greece.

The first alternative taxation method specifically targets high-net worth individuals. The cumulative conditions that such individuals shall meet primarily require proof that the given individual was not a Greek tax resident for the seven out of eight years preceding the transfer of his tax residence to Greece (Art. 5A(1)(a)). Secondly, the individual shall prove 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 3 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 provisions, 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.

In addition to the above measures favoring foreign individuals investing a specific amount in Greece, pensioners earning their pensions abroad but transferring their tax residence to Greece are also entitled to benefit from the income tax regime. The novel provision (Article 5B), submitted to Parliament and introduced into law in July 2020, 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.

A crucial element for the efficient application of the 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). 

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.

By Nicholas D. Moussas, Moussas & Partners Law Firm, Greece, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact greecelabor@transatlanticlaw.com

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