N.5313/2026: A New Tax Framework for carried interest and Alternative Investment Funds

N.5313/2026: A New Tax Framework for carried interest and Alternative Investment Funds

Law No. 5313/2026 (Government Gazette, Issue A, No. 102 of 25 June 2026) seeks to make Greece more attractive to teams managing alternative investments. The relevant provisions address three areas: they extend the favourable tax treatment of the additional return (carried interest) to a broader range of investment structures, restore the correct cross-reference in the provision governing Alternative Investment Funds (AIFs), and extend the favourable AIF regime to third-country funds and managers. The ultimate aim is to enable fund management to be carried out from Greece without creating a taxable presence (permanent establishment) in Greece for foreign funds, while offering competitive terms to the executives undertaking that management.

Previous Regime

Article 42 par. 9 of the Income Tax Code — Carried Interest

Before the new law, the favourable tax treatment of the additional return applied exclusively to individuals who were members of the team of the manager of a Venture Capital Mutual Fund (AKES). This income was taxed as capital gains from the transfer of capital at a rate of 15% (Article 43 of the Income Tax Code). Employees of Greek companies providing services to foreign managers were outside the scope of this regime.

Article 56 of Law No. 4706/2020 — AIFs and Their Managers

The previous version of Article 56 of Law No. 4706/2020 applied the tax regime laid down in paragraphs 21 through 23 of Article 7 of Law No. 2992/2002 (the AKES regime) to Greek AIFs. For EU AIFs, it referred to the “first sentence” of paragraph 21 and to paragraphs 22 and 23 of that Article.

New Provisions

• Carried interest received by employees of Greek companies providing services to affiliated managers of EU AIFs or corresponding third-country managers is taxed as capital gains from the transfer of capital at a rate of 15% (Article 42 par. 9 of the Income Tax Code).
• A reduced tax rate of 5% applies to persons who transfer their tax residence to Greece pursuant to Article 5C of the Income Tax Code, for seven tax years, provided that their employer incurs expenses of at least €3 million annually in Greece (Article 43 par. 2 of the Income Tax Code).
• The employer may deduct carried interest as a business expense in respect of expenses incurred from 1 January 2026 (Article 47 par. 11 of the Income Tax Code).
• The cross-reference applicable to EU AIFs is corrected: instead of the “first sentence” of Article 7 par. 21 of Law No. 2992/2002, the provision now refers to point (b) of that paragraph and to paragraphs 22 and 23, with retroactive effect from the 2025 tax year (Article 56 par. 1 of Law No. 4706/2020).
• The favourable regime is extended to corresponding third-country investment funds, provided that their registered office is not in a non-cooperative state and they are supervised, directly or through their supervised manager, by an authority accredited with the International Organization of Securities Commissions (IOSCO) (Article 56 par. 1 of Law No. 4706/2020).
• The management, delegation of management and portfolio management of those funds do not establish a place of effective management in Greece. The protection extends to foreign special-purpose entities in which the funds hold an interest of at least 95%, and to the funds unitholders (Article 56 par. 2 and 3 of Law No. 4706/2020).
• The provision of those services by legal persons established in Greece does not, in itself, create a permanent establishment in Greece for the funds. Nor do portfolio management and advisory services provided in the ordinary course of business by legal persons established in Greece create a permanent establishment for EU AIF managers or corresponding third-country managers (Article 56 par. 4 and 5 of Law No. 4706/2020).

Analysis

1. Carried Interest Received by Employees: 15% Tax Rate (Article 96 of Law No. 5313/2026)

Article 42 par. 9 of the Income Tax Code now also treats the additional return received by employees of legal persons established in Greece, provided that it is paid to them pursuant to a contractual right, as capital gains from the transfer of capital taxable at a rate of 15%. The employer must provide services to an affiliated manager, within the meaning of Article 2(g) of the Income Tax Code, of an EU AIF subject to Directive 2011/61/EU, or to a corresponding third-country manager. In the latter case, the manager must not have its registered office in a non-cooperative state (Article 65 of the Income Tax Code) and must be supervised by an authority accredited with IOSCO.

2. Reduced 5% Tax Rate Subject to Conditions (Article 96 of Law No. 5313/2026)

The new Article 43 παρ. 2 of the Income Tax Code reduces the tax rate on the same additional return to 5%, provided that the following conditions are met cumulatively. First, the employee must enter into an employment relationship with the legal person established in Greece and, on the basis of that employment, transfer their tax residence to Greece pursuant to Article 5C of the Income Tax Code. Second, the employer must incur expenses in Greece of at least €3 million in each tax year. Where the obligation to incur expenses applies for less than twelve months in a tax year, the threshold is calculated proportionately.

The favourable regime applies for seven tax years, beginning with the tax year for which the individual submits an application under Article 5C par. 3 of the Income Tax Code; it cannot be extended. Furthermore, the part of the return attributable to a period before the transfer of tax residence and the commencement of the employment relationship is not subject to tax in Greece.

3. Deduction of Carried Interest (Articles 8 and 96 par. 3 of Law No. 5313/2026)

Under the new Article 47 par. 11 of the Income Tax Code, a legal person that pays its employees the additional return referred to in the second sentence of Article 42 par. 9 of the Income Tax Code may deduct it as a business expense. The deduction is conditional on an equivalent amount having been recognised as business income of the paying legal person and applies to expenses incurred from 1 January 2026.

4. Tax Regime for AIFs (Article 97 of Law No. 5313/2026)

For EU AIFs, the reference to the “first sentence” of Article 7 par. 21 of Law No. 2992/2002 is replaced by a reference to point (b) of that paragraph, together with paragraphs 22 and 23. In other words, the fund itself is not taxed; taxation takes place at the level of its unitholders. The correction applies retroactively to tax years beginning on or after 1 January 2025, when the restructuring of paragraph 21 under Law No. 5162/2024 took effect. This, together with the explanatory memorandum’s reference to the “restoration of legislative drafting consistency”, confirms that the change is a correction rather than a new rule.

From the 2026 tax year, the same regime is extended to corresponding third-country investment funds, provided that their registered office is not in a non-cooperative state within the meaning of Article 65 of the Income Tax Code and they are supervised, directly or through their supervised manager, by an authority accredited with IOSCO.

5. Place of Effective Management (Article 97 of Law No. 5313/2026)

Under the new Article 56 par. 2, the management, the delegation of management or any part of it, and portfolio management — and only those activities — in relation to EU AIFs and eligible third-country investment funds do not constitute the exercise of effective management in Greece within the meaning of Article 4 par. 4 of the Income Tax Code. The same protection extends to foreign legal persons and entities in which the funds hold, directly or indirectly, an interest of at least 95% and which exist solely to hold assets or invest capital for the benefit of those funds (special-purpose entities), as well as to the funds’ unitholders.

In addition, paragraph 3 provides that, solely in respect of their activities as EU AIFs or corresponding investment funds, Article 4 par. 3 and 4 of the Income Tax Code do not apply to those funds. Those provisions also do not apply to the other persons referred to in paragraph 2.

6. Permanent Establishment (Article 97 of Law No. 5313/2026)

The permanent establishment provisions are entirely new; the previous text contained no corresponding rule. Under the new Article 56 par. 4 of Law No. 4706/2020, the provision of the services referred to in paragraph 2 by legal persons established in Greece is not, in itself, deemed to create a permanent establishment in Greece within the meaning of Article 6 of the Income Tax Code for EU AIFs, corresponding third-country investment funds, or the other persons referred to in paragraph 2, namely special-purpose entities and unitholders. The words “in itself” mean that this protection is not absolute: if there are additional elements of activity in Greece, the existence of a permanent establishment must be assessed under the general rules.

Finally, under the new Article 56 par. 5 of Law No. 4706/2020, portfolio management and advisory services provided in the ordinary course of business by legal persons established in Greece to EU AIF managers subject to Directive 2011/61/EU, or to corresponding third-country managers meeting the same registered-office and supervision requirements, do not constitute a permanent establishment of those managers in Greece.

Effective Dates

From the 2025 tax year: only the correction of the cross-reference applicable to EU AIFs (the second sentence of Article 56 par. 1 of Law No. 4706/2020).

From the 2026 tax year: all the remaining provisions, namely the taxation of the additional return at 15% or 5% (the second sentence of Article 42 par. 9 and Article 43 par. 2 of the Income Tax Code), the extension of the regime to corresponding third-country investment funds, and the rules on effective management and permanent establishment. The deduction under Article 47 par. 11 of the Income Tax Code applies to expenses incurred from 1 January 2026.

 

* The information is accurate to the best of our knowledge as at the time of writing. We have no obligation to update it. We accept no responsibility against any third party who is not a client of the firm and has not signed the terms of our engagement.