New incentives to attract foreign tax residents (income tax exemption & solidarity contribution for 50% of income)

Looking back at the steps of this effort, the first step was taken with Law 4646/2019, which introduced for the first time the institution of "non-resident resident" (Non-Dom), with the aim of attracting foreign tax residents and investors, who benefited from their alternative global income tax regime. Subsequently, Law 4714/2020 extended the scope of the alternative income tax to foreign retirees who transfer their tax residence to Greece.

Completing the palette of incentives to attract foreign tax residents, article 40 of the bill submitted to the Parliament, provides an alternative way of taxing income from salaries and business activities arising in the country, for individuals who have moved their tax residence in Greece.

1. Conditions of the new regime

In particular, the provisions of par. 1 of the proposed article 5C stipulates that the taxpayer, an individual, who transfers his tax residence to Greece, is subject to reduced taxation, as defined in par. 2, for the income from paid work that acquires in the country within the meaning of circumstance a 'of par. 1 of article 5, if cumulatively:

• He was not a tax resident of Greece for the previous seven (7) of the eight (8) years before the transfer of his tax residence to Greece,
• Transfers his / her tax residence from an EU or EEA Member State or from a country with which an administrative cooperation agreement in the field of taxation with Greece is in force,
• Provides services in Greece in the context of an employment relationship within the meaning of paragraph 2 of Article 12, exercised either in a domestic legal entity or in a permanent establishment of a foreign company in Greece and
• Declares that he will remain in Greece for at least two years.

The concept of permanent establishment of a foreign company in Greece includes the offices of law 89/1967, which can employ individuals who transfer their tax residence in Greece in order to be subject to the provisions of this article.

Finally, a new indent is added to Article 33 of the KFE, in order not to specify an annual objective cost of housing and a passenger car for private use for individuals subject to the provisions of Article 5C.

2. Tax incentives

 If the taxpayer's application in accordance with the procedure provided for in paragraph 3 is accepted, the individual is exempt from income tax and the special solidarity contribution of article 43A for fifty percent (50%) of his income from salaried work acquired in Greece during the tax year, subject to paragraphs 60 and 61 of article 72. Article 67 applies to the submission of the declaration and the payment of the tax of the individual.

3. Deadline for the submission of the application

 The application for the transfer of the tax residence for inclusion in the provisions hereof is submitted to the Tax Authorities by the individual within the year of assuming his service in accordance with circumstance c 'of par. 1 and not beyond the 31st of July of this year .

Within sixty (60) days from the submission of the application, the Tax Authorities examines the application and issues a decision, approving or rejecting it, depending on the coinciding or not of the conditions of par.1.

The individual declares in his application the state in which he had his last tax residence until the submission of his application. The domestic Tax Authorities shall inform the tax authorities of that State of the aforementioned taxpayers’ residence transfer in accordance with the provisions on international administrative cooperation as they apply.

4. Entry into force and duration

The provisions of the present apply to the income of the tax year for which the application of the individual is submitted in accordance with par. 3 and expires after the end of seven (7) total tax years. Subjection to the provisions hereof may not be extended beyond seven (7) tax years.

If in a tax year does not meet the conditions of cases c 'and d' of par. 1, the taxpayer ceases to be subject to the provisions of this article from the relevant tax year and henceforth is taxed for all his income from paid work he obtains in Greece.

Paragraphs 1 to 6 apply exclusively to the filling of new jobs.

Paragraphs 1 to 5 shall apply mutatis mutandis to the natural persons who transfer their tax residence to Greece, in order to carry out individual business activity in Greece. Fifty percent (50%) of their income from business activity they acquire in Greece, within the tax year is exempt from income tax and the special solidarity contribution of article 43A for seven (7) consecutive tax years. The application for transfer of tax residence for inclusion in the provisions hereof is submitted to the Tax Authorities by the individual within the tax year of commencement of operations in Greece and not later than July 31 of that year.

Mazars' View

The aim of the government and the aforementioned bill is for the country to individuals from other EU or EEA Member States or countries that have concluded an administrative cooperation agreement with Greece in the field of taxation and to make them, under certain conditions, tax residents, in order for their worldwide income to be to be taxed in the country.

The evaluated regulation completes the framework for attracting foreign individuals, to transfer their tax residence in Greece (articles 5A and 5B of the CCA). The new Article 5c is expected to operate in combination with the end of the transitional period for the final exit of the United Kingdom from the European Union from 1 January 2021, as a lever for attracting foreign tax residents.