Non-dom regime under article 5A of the Greek Income Tax Code: eligible investments and retention period according to the applicable Ministerial Decision No 46834/2023.
Introduction
The Joint Ministerial Decision No. 46834/2023 (Government Gazette B’ 3393/19.05.2023) of the Minister of Finance and the Minister of Development (hereinafter MD), as amended by the Joint Decision No. 30257 EΞ 23.02.2024 of the Deputy Minister of Finance and the Minister of Development, stipulates the eligible categories of investments for the non-dom regime of Article 5A of the Greek Income Tax Code (hereinafter ITC), the period of their retention in Greece, the procedure for the completion of the investment, the monitoring of the retention of the investment, the termination and the change of the investment after its completion. The MD has entered into force as of 19.5.2023, replacing the former Joint Decision No. 147269 EΞ 2020/23.12.2020 (Government Gazette B` 5789) of the Deputy Minister of Finance and the Deputy Minister of Development and Investment, which has ceased to be in force since then.
Categories of eligible investments
The MD provides that the taxpayer may, themselves or through their close relatives, within the meaning of Article 2 (f) of ITC, or through a legal entity, in which they hold the majority of shares, undertake a maximum of 3 distinct investments with their own funds of at least EUR 500,000, not excluding other financing sources for the excess amount, in one or more of the following categories:
a. Real estate investment, i.e. acquisition and/or construction of real estate in Greece.
b. Investment through participation in a legal entity incorporated in Greece (non-listed shares), namely:
b.1. capital contribution upon the establishment of the company,
b.2. acquisition of new shares by participating in a capital increase of the company,
b.3. purchase of existing shares of the company.
c. Purchase of Greek Government Bonds, with a remaining duration of at least 3 years, at the time of the acquisition, through a credit institution established in Greece which is also the custodian of these bonds.
d. Capital contribution for participation in an Alternative Investment Fund (AIFs), which is established in Greece and supervised by the Hellenic Capital Market Commission or whose Manager is registered with the Hellenic Capital Market Commission.
e. Purchase of securities traded on regulated markets, i.e. purchase of shares, bonds of companies established in Greece, units of Mutual Funds (ETFS), Greek Government bonds, which are introduced for trading or are already traded in regulated markets or multilateral trading facilities operating in Greece.
It should be noted that, investments must be made from 12 December 2019 onwards, in order to qualify as eligible for the inclusion to the non- dom regime.
It shall be pointed out that the completion of the above investment is not required, if the investment is made by an individual who has obtained and maintains a residence permit for investment activity in Greece as an investor, in accordance with the provisions of article 16 of Law No 4251/2014 (A’ 80). In this case, the application for inclusion under the non-dom regime, pursuant to the aforementioned provision, is submitted together with:
- A copy of the applicable decision granting a residence permit for investors.
- A certificate issued by the Ministry of Immigration and Asylum for the maintenance of the residence permit.
New supporting documentation for the inclusion under the non-dom regime
As of the tax year 2022 onwards, it has been provided that, at the same time with the submission of the application for the non- dom regime, the individual must have already transferred to their Greek bank account at least the minimum amount of the investment. More specifically, the individual shall submit the relevant application, along with the supporting documents required to prove their tax residence abroad, accompanied by a bank statement which proves the transfer of the minimum amount of the investment, i.e. at least 500,000 euros, to an account of a financial institution established in Greece. The application, together with the above proof of funds transfer, must be submitted by 31 March of each year at the Tax office of Tax Residents Abroad and Alternative Taxation of Domestic Tax Residents, either with physical presence or online (i.e. through their personal taxisnet account, provided that they have one).
According to the practice of the Tax Administration, in case the investment has already started, the tax authorities usually request from the applicant to submit any relevant documents proving the commencement of the investment, even though such an obligation is not explicitly provided by law.
Procedure for determining the completion of the investment.
The investment must be completed within 3 years from the date of the submission of the application for inclusion in the regime.
The investment is considered to be completed if the following conditions are met:
- the entire physical object has been implemented,
- all costs have been paid; and
- the registration of the investment has been completed, if such an obligation is required (e.g. the registration of the share capital increase in the General Register of Companies, the registration of the purchase of real estate at the relevant registries etc.).
The taxpayer is obliged to prove the completion of the investment, where applicable:
– If the investment has been completed at the time of the submission of the application, the latter shall be accompanied with a request for the verification of the completion of the investment along with the relevant supporting documentation.
– In any other case, the applicant must submit a request for the verification of the completion of the investment no later than 6 months following its completion.
The request for the verification of the completion of the investment is submitted to the Tax office of Foreign Residents and Alternative Taxation of Domestic Tax Residents, which examines the completeness of the required supporting documents and transmits the file to the Directorate of Foreign Direct Investment of the Ministry of Development and Investment. The latter is then responsible for verifying (or not) the completion of the investment within 6 months from the receipt of the request.
Noted that the taxpayer may change once the selected investment, which may be in a maximum of three (3) distinct investments, into one or more of the eligible categories provided by the MD, within 3 years from the date of submission of the application for inclusion in the non- dom regime and until the completion of the investment is verified.
Supporting documents for the request for verification of completion of the investment
The taxpayer’s request for the verification of the completion of the investment shall be accompanied by the following supporting documents:
- an Annex of the Investment Documentation, which includes a presentation of the investment as a physical object, an analysis of the invested amount and, where applicable, the supporting documents as specified by the MD per category of investment,
- a Report by a certified auditor registered in the Public Register, certifying the completeness of the Annex of the Investment Documentation and the supporting documents, as well as the fulfillment of the conditions of the law, following a relevant audit, including any special references required by the MD for each investment; and
- the supporting documents accompanying the Annex of the Investment Documentation for each category of investment, as provided for in Article 4 of the MD.
- If the investment is made by a taxpayer’s relative or through a legal entity in which the taxpayer holds the majority of shares, a relevant section shall be added in the Annex of the Investment Documentation including the personal details of the aforementioned relative or the legal entity, their relationship with the taxpayer and, where applicable, the additional supporting documents provided by the MD.
Time of retention of the investment and procedure for its monitoring
The investment in Greece shall be retained for the entire period of the taxpayer’s inclusion in the non-dom regime, which may last up to 15 tax years, starting with the tax year when the application for their inclusion is submitted. In the event where the investment is carried out by a taxpayer’s relative or by a legal entity in which the taxpayer holds the majority of shares, the relationship between the taxpayer and the investor must also be maintained for the entire period during which the taxpayer is subject to the non-dom regime.
For the monitoring of the retention of the investment in Greece, following its completion and for as many years as the inclusion in the non- dom regime lasts, the taxpayer, by the 31st May of each year and at any other time upon request, must submit to the Tax office of Residents Abroad and Alternative Taxation of Domestic Tax Residents, an application-declaration for the continuous retention of the completed investment, as it has been verified, accompanied, where applicable, with the supporting documents provided in Article 5 of the MD per category of investment.
Termination of the investment following the verification of the completion of the investment
In the event of a partial or total termination (liquidation) of the retention of the investment, the taxpayer and the investor, if they are not the same person, must inform the Tax office of Foreign Residents and Alternative Taxation of Domestic Tax Residents within 1 month from the day of the termination (liquidation), by submitting a request for the notification of the interruption in the retention of the investment.
Change of the investment following the verification of its completion
If the taxpayer wishes to change, partially or fully, the investment after the verification of its completion, the taxpayer shall submit a request for a change in the investment, accompanied by a request for the verification of the completion of the new investment. The new investment must be completed within 3 months from the partial or total termination of retention (liquidation) of the initial investment.
The change request and the request for verification of the completion of the new investment shall be submitted to the Tax office of Foreign Residents and Alternative Taxation of Domestic Tax Residents with the supporting documents specified in the MD within 3 months from the completion of the new investment.
The Tax office of Foreign Residents and Alternative Taxation of Domestic Tax Residents transmits the requests through an Information Note to the Foreign Direct Investment Directorate of the Ministry of Development and Investment to verify whether the new investment has been completed.
If the investment is implemented by a taxpayer’s relative or by a legal entity in which the taxpayer holds the majority of shares, the taxpayer and the investor must disclose any change in the relationship between them or in the taxpayer’s percentage of the capital of the legal entity within 1 month from the date of the change. The notification shall be submitted at the Tax office of Foreign Residents and Alternative Taxation of Domestic Tax Residents.
Revocation of inclusion under the regime in case of non-retention of the investment
If it is determined that the investor does not retain the investment for a period of more than six (6) consecutive months after its completion, the taxpayer’s inclusion in the provisions of non-dom regime is revoked and the taxpayer is taxed under the general Greek tax rules from that tax year and onwards.
In case the inclusion in the non-dom regime is revoked, and provided a request for the verification of the completion for the relevant investment has been submitted or its completion has been verified, the Tax office of Foreign Residents and Alternative Taxation of Domestic Tax Residents shall transmit the decision issued to the Directorate of Foreign Direct Investment of the Ministry of Development and Investment.
As a last point, it is reminded that if the investment is not completed within the initially prescribed 3-year deadline from the date of the application for the inclusion into the non-dom regime, the regime is revoked retroactively from the first year of its application.
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.