Procedure, requirements and supporting documents for inclusion in the favourable tax scheme for digital nomads

(Ministry of Finance Decision No. 1087/2021 on Article 5C of the Income Tax Code)

 

Competent body

1. The tax office responsible for taking receipt of, examining, approving and rejecting applications for inclusion within the provisions of Article 5C of the Income Tax Code, for taking receipt of and examining the relevant supporting documents accompanying the applications and supporting documents to prove that the requirements in this Article are met, and for entering the data in the relevant electronic application is the Tax Office for Residents Abroad and Alternative Taxation for Greek Tax Residents, of the Independent Authority for Public Revenue (IAPR).
2. The body responsible for informing the tax authorities of the state in which the interested party had his/her last tax residence until the application was submitted, relative to the transfer of that residence, in accordance with the provisions on international administrative cooperation as in force, is the International Economic Relations Directorate of the IAPR. Once the application is approved, the Tax Office for Residents Abroad and Alternative Taxation for Greek Tax Residents shall promptly inform Department C / International Administrative Cooperation in the Taxation Sector of the IAPR’s International Economic Relations Directorate about the state of last residence for tax purposes of the natural person who is subject to the provisions of Article 5C of the Income Tax Code.

 

Requirements for inclusion and supporting documents required

1. A natural person who transfers his/her tax residence to Greece shall be subject to taxation regarding income from salaried work acquired in Greece where all the requirements below are met:
   1. he/she was not tax resident in Greece in 5 of the 6 years prior to transfer of his/her tax residence to Greece;
   2. he/she transfers his/her tax residence from a Member State of the EU or EEA or from a state with which an administrative cooperation agreement in the field of taxation with Greece is in effect;
   3. he/she provides services in Greece in the context of an employment relationship at either a Greek legal person or legal entity or at a permanent establishment of a foreign undertaking in Greece; and
   4. he/she declares that he/she will remain in Greece for at least 2 years.
2. Compliance with this condition (that the interested party was not a resident of Greece in previous years in line with the above) is ascertained based on the records held by the tax administration. If the natural person requests a Tax Reg. No. for the first time, or if he/she appears in tax administration records as being tax resident abroad in 5 out of the 6 years prior to the application to transfer his/her tax residence, the supporting documents need not be submitted. Where the IAPR records do not show the taxpayer as being tax resident abroad in 5 of the previous 6 years prior to the application for transfer of the tax residence to Greece, he/she must submit the following information for each year for which there is no available data:
   1. A tax residence certificate from the competent tax authority of the state in which he/she declared him/herself to be tax resident. 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, he/she may submit the requisite application to apply the Convention, which incorporates the tax residence certificate (bilingual forms) duly filled out, signed and stamped by the competent foreign tax authority or
   2. 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.
   3. Where it is not possible to submit some of the said supporting documents because the foreign tax authority is proven not to issue them, a certificate from any other public or municipal or other recognised authority is required demonstrating that that person has a fixed and permanent establishment in the other state.
3. The said foreign public documents must bear an Apostille, consular stamp, certification from the Greek consulate in accordance with the provisions of international conventions which have been ratified by law by Greece, as appropriate, and clear photocopies of copies thereof certified by lawyers, or certified by notaries public based on the original copies thereof in accordance with the applicable provisions, or by a person, authority or department entitled to do so by law, shall also be accepted.
   Applications to apply the Conventions, as in force for states with which Greece has concluded conventions on the avoidance of double taxation, are excluded from the certification procedure in accordance with international law and from translation requirements. Special provisions govern applications to apply the Conventions with the USA, Turkey and Moldova, as outlined in circulars Nos. ΠΟΛ. 1107/1999, ΠΟΛ. 1092/2005, ΠΟΛ.1210/2015, respectively, for each state.
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5. In order to prove that services are being provided in the context of an employment relationship, supporting documents such as the following must be submitted: a fixed-term or open-ended employment contract, a contract under which the natural person acquires an employment relationship with another person who is entitled to set and control the manner, time and place such services are to be provided, the recruitment notice form, publication in the General Commercial Register of the decision appointing the person as director, member of the Board of Directors of a company or any other legal person or legal entity, or a contract for the provision of legal services in return for a fixed retainer fee.
6. Interested parties are obliged to submit a solemn declaration along with their application stating that they will remain in Greece for at least 2 years commencing from 1 January of the first year in which they join the scheme.
7. In order to meet the condition that a new job position is being filled, a solemn declaration from the employer must be submitted confirming that the applicant is filling a new job position.
8. In the case of natural persons who transfer their tax residence to Greece in order to engage in individual business activity in Greece, in order for the provisions to apply, a declaration of commencement of business for a sole trader must also be submitted to the local tax office.
9. A natural person who acquires income from salaried work and from business activity in Greece may also be subject to the special taxation method in Article 5C of the Income Tax Code for all such income, provided the other requirements in this Article are met for each of the said income categories. Where the relevant requirements for one of the two income categories are not met, the provisions shall only apply to the income category for which the requirements are met.
10. A natural person may be subject to the provisions of Article 5C of the Income Tax Code even though he/she has been subject to the provisions of Articles 5A or 5B of the Income Tax Code and vice versa, where at the time of inclusion the requirements in each Article are met. These points also apply in cases where the application for inclusion within each scheme is made at the same time.
11. A natural person who transfers his/her tax residence to Greece is tax resident in Greece within the meaning of the conventions on the avoidance of double taxation which Greece has entered into.

 

Procedure for inclusion within the provisions of Article 5C of the Income Tax Code

1. The natural person shall submit an application during the year in which he/she takes up salaried work or during the year in which work commenced, no later than 31 July of that year, to the Tax Office for Residents Abroad and Alternative Taxation for Greek Tax Residents. Applications submitted after 31 July of each tax year shall be accepted and examined in the next tax year. The applicant shall submit the relevant supporting documents along with the application form as appropriate and shall state his/her home address in Greece.
2. The application and supporting documents shall be submitted in scanned form, by email to the competent department referred to in Article 2(1) hereof or (in hard copy) by post or registered mail or courier. It is also possible to submit applications to the protocol office of that department.
3. Having received the said application and the supporting documents accompanying it, the Tax Office for Residents Abroad is obliged to enter the data in the relevant online application which will be monitored throughout the time the taxpayer is subject to the arrangements in Article 5C of the Income Tax Code.
4. The application shall be accepted even if, at the time it is submitted, it is not accompanied by the relevant supporting documents required, it shall be examined and if shortcomings are identified the applicant shall be promptly informed about whether the necessary supporting documents need to be added to or submitted by the 60-day deadline specified by law for issuing the decision. The head of the Tax Office for Residents Abroad and Alternative Taxation for Greek Tax Residents shall issue a decision approving or rejecting the application, depending on whether the requirements in Article 3 hereof are met or not, by that 60-day deadline. Once the application is approved, the natural person shall be deemed to be tax resident in Greece in accordance with the provisions of Article 4 of the Income Tax Code.
   The head of that tax office shall inform him/her in a decision expressly approving inclusion of the taxpayer within the provisions of Article 5C of the Income Tax Code that after the passage of 7 years he/she automatically ceases to be subject to Article 5C of the Income Tax Code and shall be taxed in accordance with the general provisions.
5. Where a natural person who has been included in the provisions of Article 5C of the Income Tax Code does not meet the requirements laid down herein in any tax year, he/she shall cease to be subject to the provisions of Article 5C of the Income Tax Code from the relevant tax year onwards and shall be taxed for all income from salaried work or business activity acquired in Greece in accordance with the general provisions of the Income Tax Code.
   Where during the period specified in paragraph 3 of this Article, and for a period not exceeding 12 months, the natural person ceases to provide services in Greece in the context of an employment relationship or ceases to engage in individual business activity in Greece, he/she shall continue to be subject to the provisions of Article 5C of the Income Tax Code provided that, within that period of 12 months, he/she concludes a new employment contract or embarks on new personal business activity as a sole trader and informs the competent tax office accordingly. Where a natural person ceases to provide services in Greece in the context of an employment relationship within the meaning of Article 12(2) of the Income Tax Code, or ceases to engage in personal business activity in Greece for a period of more than 12 months, his/her inclusion within the provisions of Article 5C of the Income Tax Code shall be terminated commencing from the tax year in which the employment relationship ceases or the business activity ends. For the said tax year and thereafter, he/she shall be taxed for all income based on the general provisions and the provisions of Article 5(6) hereof shall cease to apply.
6. In all cases where the job position of the natural person who is subject to the provisions of Article 5C(1) of the Income Tax Code changes, the taxpayer shall inform the competent department referred to in Article 2(1) hereof about the change in employer and submit a solemn declaration from the new employer that a new job position has been filled so that he/she may continue to be subject to the special taxation method in Article 5C of the Income Tax Code for the balance of the 7-year period that has not been completed. The taxpayer who has been included in the scheme under Article 5C of the Income Tax Code as an employee and then loses that position but within a period of 12 months commences business activity as a sole trader shall inform the competent department about that change so that he/she can continue to be subject to the special taxation method under Article 5C of the Income Tax Code for the balance of the 7-year period that has not been completed. Likewise, a taxpayer who was subject to the said provisions due to starting business as a sole trader but who subsequently ceases that activity and undertakes salaried work shall inform the competent department referred to in Article 2(1) hereof about that change and shall continue to be subject to the provisions of Article 5C of the Income Tax Code where the requirements in Article 5C(1)(c) and (6) of the Income Tax Code are met, for the balance of the 7-year period that has not been completed.
7. The natural person may be included within the scope of Article 5C of the Income Tax Code once again if he/she has been removed from the scheme provided that the new application for inclusion is submitted at any time within the 7-year period. Where the taxpayer remained tax resident in Greece, the requirements in Article 5C(1)(a) and (b) of the Income Tax Code are not examined again. Where the taxpayer became a tax resident abroad in the meantime, he/she may submit an application but all requirements shall be re-examined. In each of the above cases, if the application is accepted, the inclusion shall apply for the balance of years left until the end of the said period, i.e. until seven years have elapsed from initial inclusion.
8. The inclusion of a taxpayer within the scope of Article 5C of the Income Tax Code does not automatically entail a change in the tax residence of other persons related to him/her, only the person subject to those provisions.

 

Submission of income tax return, issuing of tax calculation administrative decisions and payment of tax

1. Where the application is accepted in accordance with the procedure laid down herein, the natural person shall be exempt from income tax and from the solidarity levy under Article 43A of the Income Tax Code for 50% of his/her income from salaried work and business activity acquired in Greece during the tax year.
2. The taxpayer is obliged to declare all income arising in Greece and any income arising abroad.
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8. The natural person who has been included within the scope of the provisions of Article 5C of the Income Tax Code is not exempt from inheritance or gift tax for assets located abroad.

 

First year of application – Transitional provisions

1. In the case of applications submitted in 2021 in particular, the deadline for submitting the application and supporting documents required to be submitted along with it is 30.9.2021. The Tax Office for Residents Abroad and Alternative Taxation for Greek Tax Residents shall examine these applications and issue a decision by 30.11.2021. Applications submitted after 30.9.2021 will be examined to include the taxpayer in the next tax year.
2. Natural persons who have already transferred their tax residence to Greece and have concluded employment contracts or have commenced business activities within the 2020 tax year may submit an application if they were not tax residents of Greece in the years 2015 to 2019 inclusive. In the case of such persons, where they have undertaken salaried work or have commenced a business activity before 4.12.2020, the employment contract need not be accompanied by a solemn declaration from the employer confirming that the applicant is filling a new post. The deadline for submitting the application and supporting documents required to be submitted along with it is 30.9.2021. The Tax Office for Residents Abroad and Alternative Taxation for Greek Tax Residents shall examine these applications and issue a decision by 30.11.2021. The inclusion of those natural persons, even if they took up work in the 2020 tax year, their inclusion in the special taxation method shall commence for income acquired from 1.1.2021 onwards, and in the required solemn declaration in which they declare that they will remain in Greece for at least 2 years, the 2-year period will commence from 1.1.2021.
3. Applications for inclusion in the scheme shall be received even if not accompanied by the relevant supporting documents at the time they are submitted, where a solemn declaration is submitted in which the taxpayer declares that he/she meets the conditions and that he/she is unable to submit them in the requisite manner, and in accordance with international law, because the relevant services have been suspended or their operations have been restricted as a consequence of the COVID-19 pandemic. The taxpayer shall be obliged to submit the supporting documents to supplement his/her file within a reasonable time, and no later than 22.11.2021.