Incentive for individuals (employees & sole traders) to transfer their tax residence to Greece

New article 5C of the Income Tax Code

By virtue of Article 40(1) of Law 4758/2020, a new article 5C is added to the Income Tax Code, which provides a special method for taxing income from salaried work and business activity, acquired in Greece by natural persons who transfer their tax residence to Greece.

The new provision provides for the following:

1. Any taxpayer, being a natural person, who transfers his/her tax residence to Greece shall be subject to taxation, as specified in paragraph 2 regarding income from salaried work acquired in Greece within the meaning of Article 5(1)(a), where all the conditions below are met:

a) he/she was not a tax resident in Greece for 5 out of the 6 years prior to the transfer of his/her tax residence to Greece;

b) he/she transfers his/her tax residence from a Member State of the EU or the EEA or from a state with which an administrative cooperation agreement in the field of taxation is in effect with Greece;

c) he/she provides services in Greece in the context of an employment relationship within the meaning of Article 12(2) at either a Greek legal person or legal entity or at a permanent establishment of a foreign undertaking in Greece; and

d) he/she declares that he/she will remain in Greece for at least 2 years.

2. Where the taxpayer’s application is accepted in accordance with the procedure specified in paragraph 3, the natural person shall be exempt from income tax and from the special solidarity levy under Article 43A for 50% of his/her income from salaried work acquired in Greece during the tax year.

3. The application to transfer the tax residence and to fall within the provisions hereof shall be submitted to the tax administration by the natural person during the year in which he/she took up service in accordance with paragraph 1(c) and no later than 31 July of that year.

Within 60 days from submission of the application, the tax administration shall examine the application and issue a decision approving or rejecting it, depending on whether the lawful conditions of paragraph 1 are met or not.

The natural person must state in his/her application the state in which he/she was last resident for tax purposes up to the time the application was submitted. The tax administration shall inform the tax authorities of that state about the transfer of tax residence of the said taxpayer in accordance with the provisions on international administrative cooperation as in force.

4. The provisions hereof shall apply to income for the tax year for which the natural person’s application is submitted in accordance with paragraph 3 and shall expire after the end of a total of 7 tax years. Inclusion in the provisions hereof may not be extended beyond 7 tax years.

5. A natural person, who falls within the scope of the provisions of this Law, shall in a tax year where he/she does not meet the conditions in paragraph 1(c) and (d) cease to be subject to the provisions of this Article from the relevant tax year and shall be taxed thereafter for all income from salaried work acquired in Greece.

6. Paragraphs 1 to 6 shall apply exclusively to the filling of new job positions.

7. Paragraphs 1 to 5 shall apply by analogy to natural persons who transfer their tax residence to Greece for the purpose of carrying on individual business activity in Greece. 50% of their income from business activity acquired in Greece during the tax year shall be exempt from income tax and from the special solidarity levy under Article 43A for 7 consecutive tax years. The application to transfer the tax residence in order to fall within the provisions hereof shall be submitted to the tax administration by the natural person during the year in which he/she commenced business in Greece and no later than 31 July of that year.

8. The procedure for inclusion within the provisions of this Law, including the transfer of tax residence, the competent department regarding the submission, the examination and the approval of the application, the supporting documents accompanying the application, the supporting documents to prove that the conditions hereof are met, and all other necessary issues or modalities required to give effect to the provisions of this Article, shall be laid down by joint decision of the Minister of Finance and the Governor of the Independent Authority for Public Revenue.