Alternative taxation method for recipients of pension income who transfer their tax residency in Greece – procedure and documentation
Article 5B of Law 4172/2013 states that a natural person – retiree who transfers their tax residence to Greece is subject to an alternative taxation method for income generated abroad. More specifically, they pay a flat rate tax for each tax year at a rate of 7% for all income generated abroad, and no special solidarity levy is imposed under Article 43A of Law 4172/2013.
In order to join this scheme, all the following conditions must be met:
- a) the applicant must not have been tax resident in Greece in 5 of the 6 years prior to the transfer of their tax residence to Greece and
- b) the applicant must transfer their tax residence from a state with which an administrative cooperation agreement in the field of taxation with Greece is in effect.
Tax must be paid for each tax year in one instalment by the last working day of July and cannot be offset against other tax liabilities.
As far as the documents required are concerned, in order to prove the capacity of retired persons abroad, it is necessary to submit to the tax authority any document from the social security provider or other public authority or professional fund or insurance company showing payment of a pension abroad, in other words from a main and supplementary mandatory social security provider, from professional funds established by law, or payment of a lump-sum or periodic benefit in the context of group pension policies.
On the contrary, in order to ascertain that the requirement that the applicant was resident abroad for the last 5 years from 6 years has been met, an audit is carried out by the tax authority on their records. More specifically:
- If the natural person requests a Greek Tax ID No. for the first time, or they appear in the records of the Tax Administration as being tax resident abroad in 5 out of the 6 years prior to the application to transfer their tax residence, the supporting documents need not be submitted.
- Where the records of the Greek Tax Administration do not show the taxpayer as being tax resident abroad in 5 of the 6 previous years prior to the application for transfer of tax residence to Greece, they must submit the following information for each year for which there is no available data:
(a) A tax residence certificate from the competent tax authority of the State in which they declare tax residency showing that they are tax resident in that State. If the taxpayer was a resident of a State with which there is a convention on the avoidance of double taxation (hereinafter the Convention), instead of the certificate they may submit the requisite application to apply the Convention, which incorporates the tax residence certificate duly filled out, signed and stamped by the competent foreign tax authority or
(b) Where it is not specified that the competent tax authority will issue the above, a copy of the statement of income tax payable or, in the absence of such statement, a copy of the income tax return submitted to the other State by that person as a tax resident in that State.
(c) Where it is not possible to submit some of the said supporting documents (points (a) or (b)) because the foreign tax authority is proven not to issue them, a certificate from any other public or municipal or other recognized authority is required demonstrating that the applicant has a fixed and permanent establishment in the other State.
Those foreign public documents, as defined in the provisions of Article 1 of Law 1497/1984 (Government Gazette 188/A) must be submitted in accordance with international law (Regulation (EU) 2016/1191, an Apostille stamp, consular stamp, attestation by the Greek consulate in accordance with the provisions of international conventions ratified by law by Greece, as appropriate).
As far as the procedure is concerned, the application to transfer tax residence under the scheme referred to in Article 5B must be submitted to the competent Department of Application for Alternative Taxation of Residents of Greece / Residents Abroad Tax Office by the natural person / pensioner by 31 March of each tax year.
Within 60 days from submission of the application, the Tax Administration shall examine the application and if any shortcomings are identified, shall inform the applicant that it must be supplemented or the correct supporting documents submitted. Supporting documents must be submitted within that deadline. Moreover, within the same deadline the tax authority shall issue a decision approving or rejecting the application.
The natural person subject to the provisions of Article 5B may not be brought within the scope of Article 5A of Law 4172/2013. Moreover, if the natural person has been brought within the scope of the provisions of Article 5A of Law 4172/2013, they cannot be brought within the scope of the provisions of Article 5B because the first condition on being resident abroad is not met. Moreover, a taxpayer who is subject to the provisions of Article 5B is obliged to declare all income generated in Greece.
The scheme starts to apply from the next tax year for which the natural person’s application for inclusion under the provisions hereof is submitted, and expires after the end of 15 tax years.
However, in any tax year during the 15-year period, a natural person may submit a request to withdraw their inclusion from the scheme under these provisions. In the case of withdrawal, the natural person shall be taxed in accordance with the general provisions applicable in the tax year in which the request for withdrawal is submitted.
It should also be noted that these provisions apply from the 2020 tax year onwards. Note that these provisions do not affect the application of the conventions on the avoidance of double taxation which have been entered into with Greece.
* 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.