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The “non-dom” tax regime: Alternative taxation of foreign-source income of individuals transferring their tax residence to Greece – Article 5A of the Greek Income Tax Code

Iason Skouzos - TaxLaw > Practice Areas  > Tax Law  > The “non-dom” tax regime: Alternative taxation of foreign-source income of individuals transferring their tax residence to Greece – Article 5A of the Greek Income Tax Code

The “non-dom” tax regime: Alternative taxation of foreign-source income of individuals transferring their tax residence to Greece – Article 5A of the Greek Income Tax Code

Conditions for inclusion in the regime

The provisions of article 5A of Law 4172/2013-Greek Income Tax Code (ITC) provide for an alternative tax regime, commonly known as the “non-dom regime”, according to which a taxpayer individual who transfers his or her tax residence to Greece can be taxed in an alternative manner for income generated abroad, in other words all income not generated in Greece, provided all the following conditions are met:

a) he or she was not tax resident in Greece during 7 out of the previous 8 years prior to transfer of his or her tax residence to Greece, which is examined based on the records held by the tax administration and
b) he or she proves that he/she or his/her relative (spouse and persons in the ascending or descending line) or via a legal person or legal entity in which he or she has the majority of shares, invests in real estate properties or undertakings or transferable securities or shares in legal persons or legal entities established in Greece. This investment may not be less than € 500,000, it must be made from 12 December 2019 onwards and it must be completed within 3 years from the date on which the application is submitted.

The eligible investments for the purposes of the regime, the required documentation, process, time of retaining the investment and all other details concerning the investment are regulated by Common Decision (KYA) No 46834/2023 of the Ministers of Finance and Development, as amended by Common Decision (KYA) No 30257 ΕΞ 23-02-2024 of the Ministers of Finance and Development.

Applications for inclusion under this alternative tax regime may be submitted either upon commencement of the investment or at the latest within 3 years after completion of the investment.

The condition regarding the investment is not required if the individual has acquired and holds a residence permit for investment activity in Greece under Article 16 of Law 4251/2014.

 

Application for inclusion under the regime
The application to transfer tax residence to benefit from the alternative tax regime must be submitted by the taxpayer to the tax administration by 31 March of each tax year.

Within that same deadline, individuals who meet the required conditions and have already transferred their tax residence to Greece within the previous tax year may also apply for the alternative tax regime.

Especially for tax year 2023, the deadline for the application was extended to 30 September 2023.

For tax year 2022 and onwards, an additional requirement has been provided, according to which the application must be accompanied by proof of transfer of the minimum amount of the investment, 500.000 euros, to an account of a financial institution established in Greece, in cases where the investment has not been completed at the time of submission of the application. Therefore, even though the investment may be completed within a deadline of 3 years from the date of the application, the minimum amount of the investment must have been transferred to a Greek bank account prior to the date of the application.

The relevant authority responsible for submitting, examining, approving or rejecting an application for inclusion in the alternative tax regime is the Tax Office of Residents Abroad and of Alternative Taxation for Greek Tax Residents. The tax administration examines the application and issues a decision approving or rejecting it by the last working day of June of each tax year.

The applicant must submit the relevant supporting documents along with the application and indicate the state in which he or she was last tax resident prior to submission of the application. Moreover, in his or her application, he/she can request that the alternative tax regime be extended to his/her relative within the same deadline. In this case, the conditions in point (b) for each of the relatives are not examined. Where minors (unmarried children of the taxpayer) live with him/her, it is not necessary to request an extension in the application, since it is presumed that they have the same tax residence as him/her. The extension of the application of the regime to such children may be done by simply requesting it at the time they turn 18. Where the marriage ends or the civil partnership agreement is terminated, the persons concerned shall cease to be subject to the relevant provisions.

The application is accepted even if not accompanied by the relevant supporting documents at the time it is submitted, apart from the proof of transfer of the minimum investment amount to a Greek bank account. The taxpayer shall be able to submit the required supporting documents within a 60-day deadline. In all events, the supporting documents may be received by the last working day of May each year. Applications submitted after 31 March and supporting documents submitted after 31 May shall be accepted and examined in order for the taxpayer to be included in the alternative tax regime for the next tax year.

Having received the application and supporting documents, the tax administration is obliged to update the relevant web application and to inform the tax authorities of the country concerned about the transfer of tax residence for the taxpayer in accordance with the provisions on international administrative cooperation in force.

The alternative tax regime shall commence from the first tax year for which the individual’s application is submitted and shall end after the completion of 15 tax years. Inclusion in the alternative tax regime may not be extended beyond 15 tax years.

Within a deadline of 6 months from the end of the 3-year deadline from the date on which the application for inclusion in the tax regime is submitted, the taxpayer shall be obliged to appear before the Tax Office of Residents Abroad and of Alternative Taxation for Greek Tax Residents, along with the relevant supporting documents demonstrating the completion of the investment and that he/she continues to be subject to the alternative tax regime.

 

Supporting documents
If the taxpayer requests a Tax Registration Number for the first time, or if he or she appears in the records of the tax administration as being tax resident abroad in 7 out of the 8 years prior to the application to transfer his or her tax residence, the supporting documents proving his tax residence abroad need not be submitted.

Where the records of the tax administration do not show the taxpayer as being tax resident abroad in 7 out of the previous 8 years prior to the application for transfer of tax residence to Greece, he or she must submit the following documentation 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 he or she declares tax residence showing that he or she is 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 DTT), instead of the certificate he or she may submit the relevant Claim for the Application of the DTT, which incorporates the tax residence certificate (dual forms) duly filled out, signed and stamped by the competent foreign tax authority.

(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 (referred to in 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 that person has a fixed and permanent establishment in the other state for that time period.

In order to prove the capacity of a ‘relative’, where not clear from the records held by the tax administration, a certificate or attestation or any document from a Greek or foreign public authority must be submitted.

In the case of an individual who has acquired and holds a residence permit for investment activities in Greece under Article 16 of Law 4251/2014, it is sufficient to submit said permit.

Lastly, given that major investments made by taxpayers show their intention to make Greece a center of their vital interests and consequently to make Greece a place of residence for taxation purposes, the postal address for the main residence of said taxpayers in Greece should be stated and no tax representative need be appointed. This practically means that the concerned individual must obtain a main residence in Greece (leased, owned etc.)

 

Tax treatment under the regime
If the application for inclusion of the taxable person in the alternative tax regime is accepted, he/she shall pay a flat tax of € 100,000 each tax year, irrespective of the level of income acquired abroad. The taxpayer can request that the application be extended to his/her relatives and in this case a flat tax of € 20,000 shall be paid each tax year for each relative and the provisions on the taxation of donations, inheritances and parental grants shall not apply. For income arising in Greece, taxation is imposed in accordance with the general provisions of the ITC (Law 4172/2013).

 

Filing of income tax return
Taxpayers subject to this alternative tax regime   are obliged to declare only Greek source income. There is no obligation to declare the foreign-source income, which is covered by the regime.

When calculating the difference between the presumed income and the taxpayer’s overall income, the tax administration is obliged to take into account the cash amounts shown in the tax return which are backed up by lawfully issued receipts. The taxpayer bears the burden of proof for those amounts which, among other things, are the import of foreign exchange which is not necessarily assigned to the Bank of Greece where acquisition of those amounts abroad can be justified. However, justification relating to acquisition of that foreign exchange is not required for persons who have been brought within the scope of the alternative tax regime of Article 5A of Law 4172/2013.

 

Payment of tax
Once the taxpayer’s application is approved, no later than the last working day of June of the relevant tax year, the Tax Office of Residents Abroad and of Alternative Taxation for Greek Tax Residents  shall, for the first year of inclusion in this tax regime, issue a tax assessment act for the total tax liability in the taxpayer’s name, indicating any relatives, and the amount of the flat tax corresponding to them, namely € 100,000 for the taxpayer and € 20,000 for each relative included in the tax regime.

For each of the subsequent years of application, provided that the taxable person and his relatives continue to be subject to the tax regime, a tax assessment act shall be issued no later than the last working day of June each tax year.

Tax shall be paid each tax year in one installment by the last working day of July and shall not be offset against other tax liabilities or any credit balances of persons who have been included in the alternative tax regime. Any tax paid abroad by the same persons for income covered by the alternative tax regime shall not be offset against any tax liability in Greece.

In the first year of inclusion under the tax regime, the individual shall be obliged to pay the lump-sum amount of tax within 30 days from approval of the application.

The general provisions of the ITC apply to late payment of that tax.

If in any tax year, and no later than 31 December of that year, the taxpayer does not pay the entire amount of tax, he or she ceases to be subject to the provisions of the alternative tax regime and from the relevant tax year onwards will be taxed on his or her global income under the general provisions of the ITC.

Upon payment of the flat tax, all tax liabilities of the individual for income arising abroad are exhausted and he/she is exempt from inheritance or gift tax for assets located abroad.

 

Withdrawal (voluntary) from the regime
During any tax year the taxpayer may apply to withdraw from the alternative tax regime.

The application to withdraw from the tax regime shall be submitted by the taxpayer by 31 March of the tax year in respect of which an application to withdraw from the tax regime is made and the tax administration shall update the relevant web application.

In the case of withdrawal, the individual shall be subject to taxation in accordance with the general provisions of the ITC for the tax year in which the application for withdrawal is submitted and thereinafter shall not be obliged to pay the flat- tax specified for that year.

After an application for withdrawal is submitted, a new application for inclusion in the alternative tax regime for foreign income can be accepted subject to the following conditions and terms:
a) If the investment has been completed, a new application for inclusion may be submitted at any time within the 15-yearperiod from the date of the initial application, without requiring a new investment, and if accepted, it shall be valid for such years as are left until 15 years from the initial inclusion are reached.

b) If the withdrawal takes place within the 3-year deadline specified for completion of the investment, andsuch investment has not yet been completed, then, provided that the taxpayer remains tax resident in Greece, he or she may submit a new application, and if accepted, the taxpayer will be brought again within the alternative tax regime for such years as are left until the 15 years are reached, and provided the investment is completed within the 3-year deadline from the initial application.

c) If the withdrawal takes place within the 3-year deadline specified for completion of the investment without it having been completed, and in the meantime the taxpayer has become a resident abroad for tax purposes, he or she may submit a new application only after the initial investment is completed, and if such application is accepted, the taxpayer will be brought back under the alternative tax regime for such years as are left until the 15 years are reached, provided that he or she also makes a new investment.

An application for withdrawal submitted by an individual shall automatically entail withdrawal of his or her relatives from the tax regime. His or her relatives may apply for withdrawal in their own name without that affecting the other persons who are subject to the regime.

 

Revocation of the regime

An individual who has been included in the alternative tax regime of Article 5A of the ITC, shall be revoked from the regime and from that tax year onwards shall be taxed on his/her worldwide income under the general Greek tax rules, under the following instances:

  • they do not pay the full amount of the required flat tax in any tax year; or
  • they have not completed the investment after the expiry of the 3-year period provided by law; or
  • after completion of the investment, they are found not to have retained the investment for a time period of more than 6 continuous months; or
  • after completion of the investment, they stop retaining the investment.

However, in case the investment is not completed within the 3 year period from the date of the application, the regime is revoked retroactively as of the first year of its implementation and the individual is taxed retroactively on his/her worldwide income under the general Greek tax rules.

 

* 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.

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