By the Official Gazette 624 / 26.02.20, the Decision of the Independent Public Revenue Authority & the Ministry of Finance No. A 1036, was published, which regulates the procedures and conditions for subjecting to the provisions of the Article 5Α, Law 4172 / 2013, par. 10, regarding alternative taxation of the income, which is acquired abroad by individuals, who transfer their tax residence to Greece.
This is an innovation of the Tax System of our country, which was introduced by the recent Law 4646 / 2019 and aims at attracting investments of tax residences of high financial capacity and boosting the public revenues, through the introduction of capitals in Greece, the creation of investment units, the creation of jobs, as well as in the real estate market.
The main provisions in summary, are the followings:
For these individuals, Greece does not set a specific time of stay in the country, namely, the requirement of residence of 183 days in the country, is not examined.
The provisions of the Article 5Α are more specific than all the others, and therefore, they take precedence over those, relating to the tax residence of the individuals. The provisions of this article, regulate only and exclusively the treatment of the tax residence of foreign residents, who wish to be included in the alternative way of taxation, which was introduced in our country and concerns only the income, acquired abroad.
Provided, that the specific individuals have income from domestic sources, they are taxed normally, in accordance with the applicable provisions for the nationals.
Any tax paid by these individuals to a foreign country, for the incomes, which will be covered by the alternative way of taxation, is not offset against any of their tax liabilities in Greece.
There is no obligation to justify the foreign currency imported from abroad.
The individual, who wishes to transfer his / her tax residence to Greece, has to submit, until 31.03. of each year, a relevant application, in order to be subject to the provisions of Article 5Α of the Law 4172 / 2013, to the Tax Office of Foreign Residents & Alternative Taxation of Domestic Tax Residents (Department C1).
In order for an individual, who wishes to transfer his / her tax residence to Greece, he / she must cumulatively meet the following two conditions:
- that he / she has not been a tax resident of Greece for 7 of the last 8 tax years, and
- to be able to prove, that he / she, or a relative of him / her (spouses or children), or through a legal entity, in which he / she owns the majority of the shares, or the corporate shares, is investing himself / herself, an investment of at least € 500.000,00 in Greece.
The investment should belong to those (eligible), which contribute to the development of our country (tourism investment, energy investment, etc.). This investment must have been completed until 31.03.2023.
It is noted, that the last condition is not required for an individual, who has already obtained and holds a residence permit for investment activity in Greece (article 16 of Law 4251 / 2014).
In the event, that the residence of the individual does not arise from the records of the Tax Administration, then he / she is obliged to submit a Certificate of tax residence for the last 8 years, from the competent authority of the State, in which he / she has, until the time of the application, his / her tax residence. If this certificate cannot be issued by the competent tax authority of his / her State, then alternatively, income tax clearances of the last 8 years, or copies of his / her relevant tax returns, can be submitted.
For proving the status of a ''relative'', the submission of a relevant certificate by a public authority of the domestic or the foreign country, is required.
In order for the above public documents to be acceptable, they must be in accordance with the international legal standards and must bear, either an apostille stamp, or a consular validation, or a validation from the Greek Consulate. Validated copies of them will also be acceptable. Subsequently, these have to be translated by a person or an authority, or a body that performs officially translations (Article 3).
The application is submitted even without adducing the required supporting documents, but these documents must be submitted, until the last working day of each year, at the latest.
However, applications and supporting documents, can be accepted, under certain conditions, beyond those dates.
Being subject to the alternative taxation, cannot exceed the period of 15 years.
The individual has the right to ask for a first - degree relative (spouse, adult children) to be included in the alternative taxation. In this case, the taxpayer, when submitting the application, must provide a written confirmation / certificate from these persons, stating, that they wish to be subject to the alternative taxation.
No submission of application for entry is required for minor children, who are deprived of income.
In the event of termination of the marriage relationship between the spouses, such persons are not subject to the relevant provisions.
► The relevant act of administrative designation, is issued by the competent tax authority, until 30th June of each year, through which a flat – rate tax, amounting to € 100.000,00, per year, is charged. For the other persons included in this regulation, the annual tax is € 20.000,00 for each of them.
By the above payments, any tax liability of the individual for the income arising abroad, is exhausted.
In addition, the individual is exempt from inheritance, or property donation tax, which is located abroad.
Provided, that the individual, who falls under the provisions of article 5Α of Law 4172 / 2013, in a tax year and at the latest, until the thirty - first (31st) of December of that year, shall not pay the whole flat – rate tax amount defined, he / she shall cease, from the tax year concerned, to be subject to the provisions of this article and henceforth, he / she shall be taxed for his / her worldwide income, based on the general provisions of the Law 4172 / 2013.
► The individual is able to revoke his / her subsumption to the alternative taxation’s provisions, until 31st March of each year.
►The individual, after being subject to the alternative taxation, submits, each year, an income tax return in Greece. In this return, he / she has to include only the incomes and not the incomes of the foreign country, since, for them, he / she has been subject to the alternative taxation; so, he / she is being exempt from the tax for these incomes, in our country.
► After 3 years from the submission of the application for entry into the provisions of article 5A of the Law 4172 / 2013, the taxpayer has to visit the Tax Office of Foreign Residents & Alternative Taxation and submit the relevant supporting documents, through which the completion of the investment is being proven, for which he / she was subject to the alternative taxation.
► The investments required for being subject to the provisions of article 5A of the Law 4172 / 2013, should have taken place, from the beginning of the provisions, i.e. from 12.12.2019 & onwards.
This Law shall enter into force on 26th February 2020.
NOTE: This article does not cover advisory, but only informational purposes, and cannot serve, as a basis for further actions, on the part of the reader. Reception of specialized advice is required. Our company does not hold any responsibility for any actions, taken by the readers, based on the present article.