Notion of tax residence
According to article 4 of Law 4172/2013, a natural entity is a tax resident of Greece, provided that:
1.a) has his permanent or main residence in Greece or his habitual residence or the center of his life’s interests i.e. his personal or economic or social ties, or, b) he is a consular, diplomatic or a public official of a similar status or a civil servant of a similar status or a civil servant who has the Greek citizenship and serves abroad.
2.has a physical presence in Greece for a period of more than one hundred and eighty-three (183) days within any twelve-month period, continuous or interrupted, he is a tax resident of Greece for the tax year during which the twelve-month period is completed.
The supporting documents required are the following:
-certificate of tax residence (in practice it is customary if that is not available, then certificate of tax residence or an attestation of tax residence, is requested
-in addition an employment contract or a certificate from an employer), or
-a copy of the clearance of the tax return or
-in the absence of tax clearance, a copy of the tax declaration.
In case the taxpayer does not work abroad, either as an employee or as a self-employed person, etc., and thus he cannot produce the previous ones, a certificate is submitted by any other public or municipal or other recognized authority showing the habitual residence of the taxpayer.
For the authenticity of foreign public documents, which have been drawn up in the territory of the foreign state, a Hague seal(apostille) is required, as well as an official translation into Greek either from an approved translation center (or the Translation Service of the Ministry of Foreign Affairs) or from a lawyer. This procedure excludes the certificates of tax residence issued by the tax authorities of the USA and Turkey, within the framework of the related agreements/conventions that have been concluded with our country.
The documents relating to the tax residence or residence of natural persons when they come from states that have signed the relevant International Convention that exempts them (ratifying Law 4231/2014 – A’ 19), are being excluded from the obligation to be ratified with the seal of Hague, provided that they bear a date and signature and, where appropriate, the stamp of the competent Authority of the state that granted them.
The states that have signed the above convention are: Austria, Spain, France, Italy, Luxembourg, Netherlands, Portugal, Turkey, Poland and Greece.
Note: While China is now an international destination with several economic migrants, it has not signed the Hague Convention (except for Hong Kong and Macau province) and so the person concerned should contact the Greek consulate there. Similar is the case of Canada where the person concerned must validate the Canadian documents either by the Ministry of Foreign Affairs in Canada, or through the Embassy in Greece.
After the submission of the supporting documents for the transfer of tax residence, the Tax Office must decide within a period of two months.
Tax resident of Greece
The tax resident of Greece is taxed in Greece on his/her worldwide income.
Therefore, in the event that someone acquires income from abroad, he/she must declare this income in his/her tax return and be taxed based on the provision that exists in the Treaty for Avoidance of Double Taxation between Greece and the state from which the income originates.
In cases where income is obtained from a state without a Treaty as per above with Greece or from non-cooperating states, then problems may arise and there may be double taxation.
The tax incentives for establishment in Greece include the provisions of law 4758/2020, which aim to attract foreign workers and self-employed, as well as Greeks who left the country during the economic crisis.
After article 5B of Law 4172/2013 (A 167) a new article 5C is added as follows:
1. The taxpayer, a natural entity, who transfers his/her tax residence to Greece is subject to taxation, as defined in para. 2, for the income from paid employment acquired in Greece within the meaning of period a’ of para. 1 of Article 5, cumulatively provided that :
a) was not a tax resident of Greece for the previous seven (7) out of the eight (8) years prior to the transfer of his/her tax residence to Greece,
(b) transfers his/her tax residence 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) provides services in Greece in the context of an employment relationship within the meaning of para. 2 of article 12, which is exercised either in a domestic legal person or legal entity or in a permanent establishment of a foreign enterprise in Greece and d) declares that it will remain in Greece for at least two years.
2.If the taxpayer’s application in accordance with the procedure provided for in para. 3 is accepted, the natural entity is exempted from income tax and from the special solidarity contribution of article 43A for fifty percent (50%) of his income from paid employment acquired in Greece within the tax year.
3. The application for the transfer of tax residence for the inclusion in the provisions of the present shall be submitted to the Tax Administration by the natural entity within the year of assumption of his/her service in accordance with case c’ of para. 1 but not beyond 31 July of that year.
Within sixty (60) days from the submission of the application, the Tax Administration examines the application and issues a decision approving or rejecting it, depending on whether or not the conditions of para. 1.
The natural entity declares in his application the state in which he was last resident for tax purposes until the submission of his application.
4.The provisions hereof apply to the income of the tax year for which the application of the natural person is submitted in accordance with para. 3 and expires after the end of a total of seven (7) tax years. The inclusion in the provisions of the present cannot be extended beyond seven (7) tax years.
5.The natural person who is included in the provisions of the present, if in a tax year he does not meet the requirements of per. c’ and d’ of para. 1, it ceases to be subject to the provisions of this article from the relevant tax year onwards and is taxed on the total of its income from paid employment acquired in Greece.
7.Paras. 1 to 5 apply accordingly to natural persons who transfer their tax residence to Greece, in order to exercise an individual business activity in Greece. Fifty percent (50%) of their income from business activity acquired in Greece during the tax year is exempt from income tax and from the special solidarity contribution of article 43A for seven (7) consecutive tax years. The application for the transfer of tax residence for the inclusion in the provisions of the present is submitted to the Tax Administration by the natural person within the tax year of commencement of his/her operations in Greece and not beyond the 31st of July of that year.
8. By a joint decision of the Minister of Finance and the Head of the Independent Authority of Public Revenue, the procedure for the submission to the provisions hereof, including the transfer of tax residence, the competent service for the submission, examination and approval of the application, the supporting documents accompanying the application, the supporting documents for the proof of compliance with the conditions of the present, are determined.
as well as any other matter or detail necessary for the application of the provisions of this Article.’
2. In article 33 of Law 4172/2013, a new case is added. (j) as follows:<a) In the case of natural persons subject to the provisions of Article 5c, for the amount of the annual objective expenditure incurred on the basis of the residence or passenger car for private use.’
The interest in being subject to the new provisions is increased, given that they provide for individuals who transfer their tax residence and will be employed in new jobs or will start their activity as self-employed, an exemption from income tax and from the special solidarity contribution of 50% of the income they will earn in Greece for seven years. Despite the adverse circumstances of the pandemic, the impact of the new tax incentives is extremely encouraging.
Already, for 2020 and 2021, approximately 90 applications have been submitted by investors and their relatives, with the amount of the assessed tax reaching 4.5 million euros for the first two years of application.