Greek tax treatment of UK pensions

According to article X par. 2 of the Double tax treaty between Greece and the UK, any pension and any annuity, derived from sources within the United Kingdom by an individual who is a resident of Greece and subject to Greek tax in respect thereof, shall be exempt from United Kingdom tax.

Based on the above, it derives that, by application of the relevant DTT provision, any pension income falling under the definition of article X and arising in the UK would be exempt from UK tax, on the condition that said income is subject to tax in Greece, being the country of residence of the beneficiary of the income and relevant proof is provided to the UK tax authorities (Tax Residence Certificate for the DTT purposes, any specific UK forms on the pension income etc.) For any UK tax/reporting obligations in the UK, tax advice must be sought by a local tax expert.

As regards the Greek taxation on the income derived from group pension schemes, the benefit paid as a lump sum or in the form of periodic payments under group pension insurance contracts is considered as pension income.

According to the provisions of the Greek Income Tax Code (article 15), payments made under group pension insurance contracts are subject to separate, uniform tax rates (i.e. are not taxed according to the standard tax scale applicable to income from employment, pensions and business income). Moreover, as of 1.1.2024 onwards, the law introduced amended tax rates for such payments under group pension insurance contracts. In particular, the following tax rates apply, according to the years of insurance in the respective pension plan:

Years of insurance (contributions)	Periodic benefit/pension (%)	Lump- sum benefit (%)
Up to 5	10	20
5-10	7,5	15
10-20	5	10
20 plus	2,5	5

The above tax rates increase by 50% in the case of early redemption by the beneficiary. Especially for individuals insured after the age of 55, the tax rates applicable to the first abovementioned category (i.e.  of an insurance period of up to 5 years) increase by 5% for each year short of the 5 years of insurance.

It is noted that, since the said benefit amount will be paid by a foreign entity, no withholding tax is applied. However, it must be declared in the annual income tax return (codes 395-396).

However, the accumulated amounts per individual under group pension insurance contracts up to 31.12.2023 are taxed according to the previous regime. For the calculation of the tax corresponding to amounts accumulated from 1.1.2024 onwards, the total duration spent under a group contract is taken into account.

More particular, according to the previous tax regime, the benefit paid under group pension insurance contracts is subject to separate taxation as follows:

• At a rate of 15% for each periodically paid benefit.

• At a rate of 10% for a lump sum payment of up to 40.000 euros and

• At a rate of 20% for the portion of a lump sum payment exceeding 40.000 euros.

The above tax rates increase by 50% in the event of early redemption by the beneficiary.

Both under the current and the previous regime, a payment is not considered an early redemption if:

(a) it is made to an employee who has acquired pension rights or has exceeded the age of 60,

(b) it is made without the employee’s consent, such as in the event of dismissal or the employer’s bankruptcy, or

(c) it is made due to the employee’s participation in a voluntary exit program.

To conclude, the Greek taxation of income from group pension insurance contracts varies depending on whether the benefits were accumulated up to 31.12.2023 or from 01.01.2024 onwards, due to recent changes in tax regulations. Therefore, it is important to distinguish between the amounts accumulated until 31.12.2023 and those accumulated thereafter, to ensure correct reporting in the income tax return.

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.