Introduction:
The Greek Income Tax Code, by virtue of Article 5C, has introduced a beneficial tax regime for individuals relocating their residence to Greece. The tax regime has been elaborated and supplemented in its details by the Independent Authority for Public Revenues (hereinafter referred to as “IAPR”), which has issued decisions A.1087/2021 and A. 1089/2022 (partially amending A. 1087/2021), as well as circulars Ε.2224/2021 and Ε.2029/2022. The following is an overview of the beneficial tax regime, as it stands today.
Beneficial tax regime for individuals relocating their tax residence to Greece
The individuals who transfer their tax residence to Greece are exempted from income tax and the special solidarity levy applicable to 50% of their income from employment or from business activity generated in Greece starting on the tax year in which they applied for their inclusion in the regime. The maximum duration of the regime is 7 (consecutive) years, upon expiration of which the individual’s income is automatically taxed based on the general tax provisions.
Eligibility criteria and supporting documentation:
The beneficial tax regime may only be granted to individuals if they can demonstrate fulfilling all the following requirements:
| Eligibility requirements | Supporting documentation |
Non-Greek tax residents for at least five of the six years prior to relocation | No Greek tax registration number or registered as tax resident abroad in the data base of IAPR If the individual does not have a Greek tax registration number or if they appear as tax resident abroad for the relevant period in the database of the IAPR (e.g. if they have been filing income tax returns in Greece as a non-Greek tax resident), no further documentation is required relating to their previous tax residence. • Tax residence certificate Otherwise, a tax residence certificate is required (or a double taxation avoidance treaty claim form, which incorporates the tax residence certificate), or if this is not as a rule issued by the foreign tax authority, an income tax clearance certificate or, in absence of that, the income tax return. If none of the above can be issued, the taxpayer shall provide documentation by a state or municipal or other authority proving the taxpayer resided in a fixed and permanent manner in that state. All documents must be translated and apostilled as appropriate. |
| Previous tax residence either in: a. an EU or EEA country; or b. a country, between which and Greece, there is an administrative cooperation agreement in the field of taxation in force. | This will be examined ex officio by the IAPR, based on the application filed by the individual. |
| Employment status: salaried individuals, employed in Greece by a Greek legal person or entity or a Greek permanent establishment of a foreign undertaking and the employment position must be a newly-created* one; or self-employed individuals registered with the IAPR; or members of the board of directors or managers of legal persons and legal entities; or Managers(1) of private limited liability companies and their shareholders who provide services to them; or representatives and partners of partnerships. | In the event of provision of salaried employment services to a Greek legal person or entity or permanent establishment in Greece as a result of the creation of a new employment position. The employment agreement, or the notice of commencement of the employment relationship filed with the competent employment authorities, or the publication in the commercial registry of the resolution whereby the taxpayer is appointed as manager or director of the legal person or entity, together with a solemn declaration by the employer that the taxpayer covers a newly-created* employment position. Employment services in Greece, for the purposes of Greek Income Tax Code, include among others those provided: in the context of an employment contract, in accordance with labor law; as a manager or member of the board of directors of any legal person or legal entity; and as a lawyer under salary for the provision of legal services. • For self-employed individuals (sole traders) in Greece. The certificate of commencement of business as a self-employed person with the IAPR. |
| Intention to stay in Greece for at least two years. | A solemn declaration to this effect. |
*Regarding the meaning of a newly-created employment position:
A newly-created employment position exists:
- in case of an increase of the overall number of employees, on the date the taxpayer requesting their inclusion in the provisions of this article commences their employment,
- and in case the taxpayer is hired to fill a newly-created position in an existing department or in an existing specialty or to fill a new specialty or position in a new department in the organizational chart of the domestic legal entity or the permanent establishment of a foreign entity in Greece, even if the overall number of employees does not increase.
In either of the above scenarios, it is further required that there is no subsequent reduction of employment positions in the same specialty or of the same duties as the one occupied by the person subject to these provisions for a reasonable time period, no less than six months. The overall number of employees may decrease without affecting the validity of the employment position as a newly-created one in the following instances:
- the voluntary resignation of an employee;
- the termination of fixed term employment agreement;
- the retirement of an employee;
- the termination of an employment contract for cause relating to the employee.
In case of successive fixed-term contracts between the taxpayer and the same employer, it is not considered that the employment position of the taxperson has changed. The taxpayer will thus continue to benefit from the beneficial provisions.
An employee who is seconded or loaned by a foreign undertaking to a Greek one where the Greek employer: a) is liable for the payment of the employee’s salary, and b) exercises effective control over the provision of the employee’s services, regarding the location, the time and the way in which they are offered, will count towards the increase of the number of employees.
Application procedure and deadlines
For an individual to be included in this regime in a given fiscal year (FY), they must have commenced employment or established a business in Greece until July 2nd of that FY and apply until the end of that FY. In any other case (i.e. either if commencement/establishment is placed after July 2nd or if the application is filed after the end of commencement/establishment year), they are eligible for the regime on the following FY and shall apply until the end of that following FY.
If the application file is not complete, the individual is duly notified so as to submit any required documents within 30 days upon notification. The Tax Authority shall issue a decision approving or rejecting the application within 60 days upon reception of the application. If the documentation required is consequently received by 31 March of the year following the application, the decision rejecting the application due to the lack of documentation is revoked and a new decision shall be issued within 60 days upon reception.
The individual may request to be subject to the beneficial tax regime for both income categories (salary income and income from business) either by filing one application or by filing two different applications, provided that they are both referring to the same FY and are submitted within the deadlines set above.
The applications and all supporting documentation may be filed electronically via the IAPR’s digital platform ((https://www1.aade.gr/gsisapps5/myaade/#!/arxiki), by post or courier and physically at the tax office. The competent tax office for the filling of the application is the Tax Office for Residents Abroad and for Greek Tax Residents Subject to Alternative Taxation.
Exceptional extension of deadlines for FYs 2021 and 2022:
Specifically for the year 2022, the deadline to submit all documentation for the revocation of the rejecting decision was extended to April 29, 2022.
Pending applications or applications filed until June 30, 2022 and referring to commencement of employment or establishment of business occurring until July 31, 2021, would be examined by the competent tax authority as applicable for the FY 2021.
Pending applications or applications filed until July 29, 2022 and referring to commencement of employment or establishment of business occurring after July 31, 2021 and until December 31, 2021, will be examined by the competent tax authority as applicable for the FY 2022.
Clarifications on certain tax benefits of the special tax regime
Withholding of the income tax and solidarity levy
i. Income from salaried employment
If the employee is deemed to qualify for the special tax regime of article 5C of the ITC, they shall provide their employer with the approval decision issued by the competent tax office. Upon receiving the approval decision, the employer shall withhold the appropriate income tax and special solidarity levy calculated on 50% of the employee’s salary, given that the remaining 50 % is tax exempt. Τhe individual is subject to tax withholding on 50% of their salary only by the employer mentioned in the approval decision.
n the event that a change occurs concerning the identity of the taxpayer’s employer, the individual is eligible for the special tax regime if their new employment position fills the same requirements as the original one. In that case, they will need to repeat the original process (by providing a solemn declaration by their employer to the competent Tax Office and presenting their employer with its approval decision).
ii. Income from a business activity
The taxpayers are exempted from income tax and the special solidarity levy for 50% of their income from business activity acquired in Greece. Thus, the remaining 50% is taxed according to the progressive tax rates of para. 1 of Article 15 of the ITC aggregated with any other income from employment or from business activity taxed on the same scale.
On the above income, withholding is carried out at the rate of twenty percent (20%) on the total gross wages and not on the fifty percent (50%) thereof. The exemption provided for in article 5C of the ITC will be provided upon the clearance of the income tax return of each tax year.
To be noted: The individual is entitled to the beneficial tax treatment upon issuance of the decision accepting their application; hence, if they have already filed an income tax return for said fiscal year, they may file an amending tax return until the end of the year within which the decision was issued. The competent tax authorities will then implement the regime and the individual’s income for said year will be accordingly tax exempt.
Electronic transactions
Eligible individuals are not exempt from their obligation to carry out an established quota of their transactions through electronic means of payment, which applies to their entirety of their income (100%). That includes all income of the taxpayer arising from salaried services and business activity (both taxed under the provisions of article 5C of the ITC and tax-exempt), as well as capital generated by real estate.
Deemed income
Starting on 1 January 2021, the annual objective expenditure arising on the basis of residence (primary and secondary) and/or private passenger cars (regardless of the number of vehicles of the individual) is not part of the basis of calculation of the taxpayer’s deemed income.
Forfeiting the benefits of the special tax regime
If the taxpayer ceases to provide salaried labour in Greece covering a newly-created employment position or ceases to be self-employed in Greece for more than 12 months, the taxpayer will be taxed under normally applicable income tax rules as of the year in which the salaried employment or self-employment ceased. If the taxpayer continues to be tax resident in Greece, she/he may re-enter the special regime upon finding qualifying employment or re-registering as self-employed for the remainder of the seven-year period for which the preferential tax rules apply. The same is true, in theory, if she/he changes tax residence, but in practice this would be difficult in most cases, as the “5 out of 6 years” rule regarding tax residence abroad will again apply in this case.
A taxpayer who is both self-employed and in a salaried employment relationship at the same time may benefit under the special tax regime under either both these capacities or under only one of them, if only one qualifies.
Author:
Katerina Stathakarou,
Eleonora Ligoutsikou
