Articles 5A, 5B and 5C of Law 4172/2013 (Income Tax Code) provide tax incentives for residents abroad, who transfer their tax residence to Greece, to the extent that they meet the criteria provided by law. Those are essentially individuals investing in Greece, pensioners and salaried or entrepreneurs.
a) Individuals investing in Greece
This category is the first, where tax incentives were provided. Therefore, according to article 5A of the Income Tax Code, natural persons who transfer their tax residence in Greece, can be subject to an alternative tax regime of their income that arises abroad, provided that cumulatively:
a) they were not tax residents of Greece for the previous 7 of 8 years (before the transfer of the tax residence in Greece) and b) they prove that either themselves or their relatives, or through a legal entity in which they hold the majority of shares or stakes, invest in real estate, companies, transferable securities, shares or stakes of legal entities established in Greece. Exceptionally, the latter condition is not required for individuals who have obtained and maintain a residence permit for investment activity in Greece (according to article 16 of Law 4251/2014).
The amount of the investment must be at least 500,000 euros and the investment must be completed within 3 years from the date of submission of the application for the transfer of the tax residence and the inclusion in the alternative method of taxation.
In case the relevant application is accepted, the individual shall pay each tax year a lump sum of 100,000 euros, regardless of the amount of income earned abroad. The natural person also has the opportunity to request the extension of the alternative method of taxation to his relatives, in which case an amount of 20,000 shall be paid for each relative. With the payment of the above amounts, any tax liability for income arising abroad is exhausted, while the exemption also applies to inheritance and property donation tax for property located abroad.
Τhe inclusion in these provisions may last up to 15 tax years, without possibility of extension.
As it results from article 5B of the Income Tax Code, natural persons-beneficiaries of pension income abroad, who: a) transfer their tax residence to Greece by a state with which an administrative cooperation agreement in the field of taxation with Greece is in force and b) were not tax residents of Greece during the previous 5 of 6 years, they may be subject to an alternative way of taxation with a low tax rate of 7% on their income from pensions abroad. With the payment of this tax, any tax liability for this income is exhausted.
The size of the favorable taxation is better understood if we compare it with the tax rate applicable to pensions, in accordance with the general provisions of the Income Tax Code, ranging from 9% to 44% (for those with income from pensions exceeding the amount of 40,000 euros). On the contrary, the beneficiary of the favorable regulation will be taxed at a rate of 7% regardless of the amount of his/her pension income abroad with a duration of 15 years.
In both cases of alternative taxation in case of non-payment of the total amount of tax in any tax year, the individual ceases to be subject to the favorable provisions of this article and is hereafter taxed on his global income under the general provisions of the Income Tax Code. Moreover, the natural person has the possibility to submit an application for the revocation of his/her subordination to the provisions of these articles at any time. In that case he/she will be taxed in accordance with the general provisions of the above Code for the tax year of the revocation.
c) Employees and entrepreneurs
The last provision of alternative taxation, recently added with Article 5C of the Income Tax Code, concerns the taxation of income arising from employment and business activity in Greece. This article provides tax incentives for individuals to come to work and open their businesses in Greece, with the obvious purpose of repatriating Greeks and not only, who during the crisis moved their tax residence abroad.
The conditions required to be met cumulatively are the following: a) the applicant has not been a tax resident of Greece for the previous 5 of 6 years, b) the applicant shall transfer his/her tax residence in Greece from an EU or EEA Member State or from a state with which an administrative cooperation agreement in the field of taxation with Greece is in force, c) he shall provide services in Greece in the context of an employment relationship in accordance with article 12 par. 2 of the Income Tax Code (provision of services under an employment contract, provision of services as a director or member of the board of directors of a company, provision of legal services by a lawyer for a fixed fee, provision of services or work contracts, as specifically defined in article 12 par.2 f etc. and d) he has to declare that he will remain in Greece for at least two years.
If the application is accepted, the individual is exempt from income tax and the special solidarity contribution for a percentage of 50% of the income that he/she acquired from the said employment relationship in Greece within the tax year. The inclusion in those provisions can last up to 7 tax years, without the possibility of extension.
Similarly, the above apply in case an individual transfers his tax residence in Greece, in order to conduct individual business activity.
However, if the natural person does not meet the above conditions under items c and d (provision of services in Greece and stay for at least two years) during any tax year, he ceases to be subject to this favorable regime and will be taxed for all his income from paid work acquired in Greece.
Undoubtedly, all the above provisions provide important tax incentives that are able to attract several stakeholders to invest, come or return to our country.