Everything you need to know about non-dom in Greece

The introduction of the alternative tax regime for natural persons transferring their tax residency in Greece is an important basis for attracting ‘high net worth’ people to Greece

By Dimitris Stamatopoulos

 

General comments and grounds for the introduction of special provisions attracting tax residents

Τhe models of the place of residence have been altered by the new conditions. The main residence may be in one country and the holiday or secondary residence in another. Even the family housing model is changing. From the traditional model where the couple with their children had one residence in one country, there are now more and more frequent cases where one spouse works and resides permanently in another country and the other resides with the rest of the family. Also, we also have the phenomenon of employees who do not reside in the same country as they work and offer their services but in another country, made possible through technology and the provision of services from a distance.

Also, very large entrepreneurs active through investments in many countries around the world, move from country to country and do not reside permanently in one place. In the context of tax planning, a state should aim to finance the needs for its operation, to create or strengthen conditions of economic development, to create good working conditions, to maintain economic and social cohesion and of course to pursue and serve specific objectives according to the circumstances prevailing in the country and the international environment.

It is also incumbent on states through taxation to seek to attract international investment and tax residents and generally promote a higher and more efficient level of economic activity.

To achieve the above objectives it is necessary to constantly examine and introduce incentives to attract tax residents. States both internationally and within the EU are granting tax incentives to attract tax residents of high status, with a view to increasing public revenues and achieving various collateral benefits. For special tax residents, the phrase non-domicile is used.

In our tax law, article 2 introduces the distinct concept of a special tax resident, with the aim of attracting foreign tax residents who, through their international activity, are essentially displaced in many countries and their economic and social interests are not in a single country. That is, we are talking about citizens of the world and businessmen with activities in multiple countries. Attracting such tax residents will bring revenues that will add to existing ones because without these incentives there would be no specific tax inhabitants and any benefits thereof. These incentives will enable the creation of investment units or the participation in investment schemes or companies. Funds will also be introduced for real estate.

The special tax residents are taxed in the same way as the other tax residents of Greece for their incomes from every source found in Greece. Their different taxation is that for foreign incomes they pay a lump sum (100,000 euros) and are not required to declare in Greece the amounts abroad and of course they are not granted the right to deduct the tax paid abroad. For these persons, no specific period of residence is given by Greece, i.e. the condition of the residence of 183 days in the country is not considered. These people can request the transfer of their tax residence abroad by submitting an application and providing the necessary documents for residence in another country. If they do not, they are certainly not controlled by the Greek tax authorities.

 Analysis of the provisions on special tax residents

The provisions of Article 5A of the law are more specific than all others and supersede the provisions of article 4, which generally refer to the tax residence. In other words, the provisions of article 4 with those laid down in Article 5A should not be confused, because these provisions are autonomous and regulate comprehensively and in a distinct manner.

Conditions for entry

  • The natural person shouldn’t be a tax resident of Greece in the previous seven (7) of the eight (8) years prior to the transfer of his tax residence to Greece and
  • To prove that he or she invests himself or herself, or through a legal person or legal entity in which he or she, respectively, has a majority of the shares or shares, in real estate or business or securities or shares in legal entities. The amount of this investment may not be less than €500,000. The investment must be completed within three (3) years from the date of submission of the application for the transfer of the tax residence to the alternative method of taxation. This condition is not required if it is a natural person who has acquired and maintains a residence permit for investment activity in Greece, in accordance with the provisions of article 16 of law 4251/2014, as in force.

 Procedure

  • Submission of application by the natural person until 31 March of the tax year concerned.
  • The application is approved or refused in an exclusive period of 60 days by the Greek tax administration
  • Informing the tax authorities of the State which declared that it had its tax domicile until the submission of the application to the natural person concerned, in accordance with the provisions on international administrative cooperation.
  • Payment of the annual income tax on non-resident income within 30 days from the approval of the relevant request.

Special Status

  • Exhaustion of tax liability for all foreign-sourced incomes by paying an annual flat-rate tax of one hundred thousand euro (€100,000) irrespective of the amount of income acquired abroad.
  • The natural person has the possibility to request the extension of the application of the scheme and for each dependent member of the family by contributing a flat-rate additional tax amount for each member (€20,000).
  • By paying this tax, any tax liability of the natural person subject to the provisions of this special scheme for income arising abroad is exhausted.
  • The tax shall be paid each tax year in one instalment until the last working day of July and shall not be offset against other tax liabilities or any credit balances of persons subject to the alternative method of taxation.

For the first year of entry the natural person must pay the lump sum tax within thirty (30) days of the approval of the application.

  • Any tax paid by the same persons abroad for the income covered by the alternative way of taxation is not offset against any tax liabilities in Greece.
  • The natural person, a special tax resident, is exempt from inheritance tax or property donations that are abroad.
  • There is no obligation to justify the foreign exchange rate that is imported from abroad.
  • The special residents only submit income tax declaration for their income in Greece for which they are taxed, just like the other Greeks.
  • The application of the provisions on the alternative way of taxation of the special residents starts from the first tax year for which the application is submitted and expires after fifteen (15) tax years. If, in a tax year, the tax resident does not pay the entire lump-sum tax, it ceases to be subject to the specific provisions of Article 5A and is henceforth taxed for their global income under the general provisions.
  • Also the special tax resident has the right is in any tax year to apply (essentially declare) a revocation of entry to the special provisions and to be subject to taxation under the general provisions.

 

Finally, a joint decision of the Finance and Development and Investment ministers defines the eligible investment categories, the retention time in Greece, the process of proof of investment, the monitoring of the preservation of the investment and any necessary detail for the application of these provisions. Also by a joint decision of the Minister of Finance and the commander of the Independent Public Revenue Authority, the procedure for entering these specific provisions, including the transfer of the tax residence, is determined by the competent authority for submission, examination and approval of the application, the supporting documents accompanying the application, the revocation, the submission of the income tax return, the payment of the tax, as well as any other necessary matter or details.

  

By Dimitris Stamatopoulos is a writer – honorary general manager of Taxation Dept at the Ministry of Finance in Greece

 Source: economix.gr/

 

 

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