The new taxation regime for wages/salaries and business profits of individuals in Greece

After the introduction of the “non-dom” tax regime, as well as other initiatives to attract “high net-worth” individuals, Greece is now offering more inducements for them to develop their financial activity in the country. By the new legislative measures, significant benefits have been brought in, concerning the taxation of salaries/wages or business profits of individuals, arising in Greece.

What benefits can someone have from this new taxation regime?
In a nutshell, individuals who currently are not Greek tax residents, can be exempted from taxes for the 50 % of their salaries/wages or business profits arising from their activities in Greece, under the condition, that they will transfer their tax residence in the country. Thus, highly remunerated employees, as well as self-employed individuals, with high revenue, can enjoy the privileges appertaining to this favorable tax regime. On the other hand, legal entities, which intend to offer their personnel the opportunity to avoid a significant part of the tax burden, can achieve it by transferring their establishment in Greece.
Furthermore, under this alternative taxation scheme, main indirect tax methods, that are included in the Greek tax system for the estimation of the taxable revenue, are not applicable. As a result, individuals, who will choose to be Greek tax residents, will also benefit from a further decrease of the tax base.

How someone can apply and which are the requirements?

According to the new Ar. 5C of Greek Income Tax Code, there are four substantial requirements for a taxpayer to become a Greek tax resident:

• One must not be a Greek tax resident for the past 5 out of 6 years, prior to the transfer of tax residence in Greece.

• Their previous tax residence should be either in EU or EEA (European Economic Area) Member-State or in a state, which has concluded a convention for mutual administrative assistance in tax matters with Greece.

• One must provide their services as an employee to a Greek legal entity or to a permanent establishment of a foreign entity in Greece or, in the case of a self-employed taxpayer, to develop their activity in Greece. It is important, that the applicant should be employed only in new working positions.

• One must declare, that they will stay in Greece at least for two years.

If these requirements are met, an individual can apply to become a Greek tax resident. The application should be filed until July, 31st of the year, referring that the taxpayer begins to develop their financial activity in Greece and it will be examined by the tax authorities within 60 days. After the approval, the taxpayer is considered to be a Greek tax resident for a time period of 7 years. During this period, they not able to provide their services to an entity established in another state, otherwise, this special tax regime will be terminated for the following years.

Is this an option for efficient tax planning?
This attractive taxation scheme should be considered, beyond doubt, as a useful “tool” for efficient tax planning. For individuals, whose exclusive or main source of income is their occupation, the transfer of their tax residence in Greece is an effective way to increase their savings. Moreover, this tax incentive could be a part of the employment policy of legal entities in Europe, whose plans are rearranged, especially due to the BREXIT.
However, the potential applicants should pay attention to this major change of their tax status, since being a tax resident of Greece, also means, that the worldwide revenue will be taxed according to the Greek Laws. Taking that into consideration, it is understood, that solid tax planning requires a concerted effort of legal and financial advisors.
The new legislation will be in force by January 1st, 2021.