Family Offices is the most recent attempt of the Greek Government to turn the country into an attractive “tax destination”. This initiative completes the framework of the incentives offered to the so-called HNWI, such as “non-dom” and the special tax regime of salaries/wages and business profits, so that they will move their tax residence in Greece. Considering that the national economy will benefit from the establishment of entities, which will manage the family wealth of highly prosperous persons, Greece tries to attract them by offering not only a favorable, but also a firm tax regime, which can offer a notable opportunity for an efficient tax planning.
- What is a Family Office?
Family offices are legal entities established for a single purpose: to support Greek tax residents (individuals), as well as their family members, for managing their wealth. Members of these entities can be the aforementioned individuals, whether directly or indirectly, through other legal entities. It is not clear though, if someone, who is not a family member, can be a partner or a shareholder of a family office.
- How a Family Office can be established in Greece?
First and foremost, the establishment of a family office in Greece requires an individual, who is a Greek tax resident. These persons, their spouses (or partners through a civil partnership), as well as their children and their parents, are considered as members of a family and can be partners/shareholders of a family office.
The services of a family office can be provided by its employees or assigned to third parties, even if they are not situated in Greece. However, at least 5 people should be employed in Greece. The law provides that a partner/shareholder of a family office cannot be an employee of it.
Since Greece is aiming to achieve economic prosperity not only by imposing taxes on family offices’ income, but mostly through the side effects of the capitals, which can be channeled to the internal market by such an entity, a main requirement for the establishment of a family office is to spend at least €1,000,000 per annum in operating expenses in Greece.
- How the income of a Family Office will be assessed and taxed?
A broad outline to address this issue is that the income of family offices is going to be assessed indirectly, according to the expenses of the entities. The law provides that their gross income will be a notional amount, which will be the outcome of all the expenses and depreciation costs (except the income tax) plus a 7% profit margin over them. Finally, for the assessment of the tax base (net income), the expenses of the entity will be deducted from the gross income, on the condition, that these are booked in accordance with the relevant provisions of the law N. 4308/2014 (Greek Generally Accepted Accounting Principles). The tax will be assessed over this amount by applying the tax rate for legal entities (currently 24%).
However, if the actual gross income of a family office, as it is results from its accounting books, exceeds the notional one, then the Greek tax authorities will use the higher amount as the calculation base of the net income. Besides the actual income of the entities can be crosschecked through their bank statements, since any payments to them must be made by bank remittances.
It is also important to note, that a VAT is not imposed on any transactions between the partners or shareholders of a family office and this office itself.
- Are Family Offices an opportunity for efficient tax planning?
It seems that this new tax scheme can offer the HNWIs an opportunity to transfer the management center of their wealth to a “tax environment”, in which these taxpayers can benefit from two of the main advantages of a tax regime: competitiveness and predictability. Τhis initiative used in combination with other recent legislative measures can lead to the intended result for the taxpayers, but also for Greece, during a period of significant rearrangements in Europe, especially due to the BREXIT. The decisions of the Minister of Finance and the Governor of the Independent Authority for Public Revenue will specify the details for the implementation of the latest provisions of the Greek Income Tax Code and give a clearer picture of the new regime and the possibility to be a useful tool for a solid tax plan.
Due to the restructuring of tax legislation in Greece, issues such the currently discussed are of increasing interest. Nexus Law Firm participates as a legal consultant in several competent cases in Greece and acquires the updated knowledge and experience regarding those pertinent procedures.
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