“Refund procedure of the excess withheld tax for employees who transfer their tax residence in Greece (5C tax regime)”
The individuals who transfer their tax residence to Greece and acquire income from employment or business activity arising in Greece may be subject to the special tax regime of article 5C of the Income Tax Code (hereinafter “ITC”), under which an exemption from income tax and the solidarity contribution of Article 43A of the ITC is provided for fifty per cent (50%) of their income from employment and business activity earned in Greece during the tax year.
Specifically, for individuals-taxpayers who earn income from employment and have been subject to the special tax regime of 5C of ITC, they are required to submit to their payroll administrator the relevant official approval decision of their subjection to the special tax regime of 5C of ITC in order to withhold income tax and special solidarity contribution only for fifty percent (50%) of their income from employment earned in Greece during the tax year, while for the remaining fifty percent (50%) no withholding tax is withheld.
As regards the payroll tax which will have been withheld from the paid salary (including any paid bonus) for the taxpayers that have applied for 5C tax regime until the issuance of the decision, there is no legal provision that regulates a special/specific refund procedure, so, in this respect, the excess 50% tax will be refunded through the clearance of their income tax return which will be filed within the following tax year (which is the common way of clearance of tax differences arising from various reasons).
This treatment also seems to derive (indirectly) from the legislative framework applicable for the 5C regime, as per the following points:
- the regime provides that the taxpayers that have applied for 5C tax regime are considered as tax residents in Greece under the 5C tax regime retroactively from 1st of January of the tax year for which the 5C application has been submitted and onwards; and
- one of the Circulars regulating the regime states that in case the decision for the subjection into the 5C regime is issued after the deadline for the submission of the income tax return of the respective year (i.e. after the clearance of the tax return is made), the taxpayers can file an amending income tax return so that a new clearance of the income tax return is made that takes into account the tax exemption for the 50% of the income.
Above all, the tax seems that it will be refunded through the clearance of the annual income tax return. Any other alternatives must be officially clarified by the Tax Authority for all 5C applicants.
* 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.