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Tax Reduction in Greece for Expatriates

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Τhe Greek government has put in place a triple set of tax incentives targeted exclusively at foreign tax residents who are considering redomiciling to Greece.

The law L.4758/2020 has established tax incentives to attract foreign workers and the self- employed, but also Greeks who left the country during the financial crisis, to move back their tax residence and work professionally in Greece. 50% exemption from income tax and the special solidarity contribution has been introduced, for a period of up to 7 years, provided that a new employee is employed or starts a new business activity.

This is a measure that contributes significantly to the effort of the brain gain, the return of Greeks with a high level of knowledge, professional skills and abilities.

Specifically, the law L. 4758/2020 introduces provision with effect for fiscal years beginning from 1.1.2021 onwards for people who are employed in Greece and transfer their tax residence in Greece; choosing to be subject to a favourable tax regime concerning their employment income for services offered in Greece.

The Eligibility Criteria for the beneficiaries are the following:

  1. They have not been Greek tax residents for the last 5 of the last 6 years beforetransferring their tax residence in Greece
  2. They come from a country with which Greece has a valid agreement regarding administrative cooperation on tax issues
  3. They are providing employment services in Greece through an employment relationship as outlined by Greek law to a Greek legal entity or to a Greek branch of a overseas company.
  4. They declare that they are planning to stay in Greece for a minimum of two years.
  5. They occupy a new employment position.

In order to prove the existence of the employment relationship, one has to present supporting documents such as: a definite term or indefinite employment contract, a contract by which the natural person acquires a dependent employment relationship with another individual who has the right to indicate and control the manner, the time and the place of execution of the services, the recruitment announcement form, publication in GEMI of the act by which the person occupies a managerial position, member of the Board of Directors of a company or any other legal entity or legal entity, contract for legal services against a set fee.

In order to prove that the job position occupied is “new”, the employee needs to submit a statement of the local employer confirming that the applicant is covering a new employment position.

Timings & Duration

• The application for this regime must be filled until the end of July of that year during which one commences employment. Within 60 days as of the application date the tax authorities issue the decision, with which they accept or reject the application.

• Provided that the application for the transfer of the tax residence per the above process is accepted, the individual will be exempt from paying income tax and solidarity tax on 50% of their Greek employment income.

• For all other Greek source income and also for non-Greek source income, the individual has to report them in his annual Greek personal income tax return and will be subject to income tax (and solidarity tax, where applicable) according to the general provisions & rates applicable for all local tax residents.

• The special taxation regime can be applied for a maximum term of 7 years. If any of the respective conditions ceases to exist at any time, then the applicant will no longer benefit of the above tax regime and will be therefore taxed for the whole amount of his Greek employment salary.

• The special tax regime can also be maintained under certain conditions even if the natural person ceases to supply services in the context of an employment relationship (e.g if the employment contract expires or is terminated by termination or resignation, etc.) provided that within twelve (12) months the individual will sign a new employment contract for a “new job” according to the above or will start a sole proprietorship, informing the competent Tax Office of this change in status. Otherwise, their subordination to the provisions of the aforementioned special tax regime of article 5c of law 4172/2013 is revoked from the tax year of termination of employment or cessation of individual business activity and from this time forth they are taxed for their entire income based on the general provisions.

• The special tax regime and the special solidarity contribution for 50% of the income from business activity, will be provided in any case during the settlement of the income tax return of each tax year, which will be submitted by the individual.

Under the Employer of Record (EOR) services offered by LMW, an employee who meets the aforementioned eligibility criteria of the special tax regime can leverage the tax reduction benefits in Greece for a period of 7 years.

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