In recent years we have associated beautiful but troubled Greece with austerity measures as swingeing cuts to government expenditure were made in a drastic effort to reduce the budget deficit. This has been accompanied by tax increases and strong measures to reduce tax avoidance.
The Greek government has certainly not had its problems to seek, however nothing that has gone before could have prepared Greece, or indeed any other nation, for the trauma that was to follow as the Covid-19 crisis engulfed the world and fighting this global pandemic became paramount.
The beauty of whitewashed houses in timeless villages set against the backdrop of the shimmering azure Mediterranean is beyond doubt. Before Covid-19 dominated our lives we had however become accustomed through the media to another image of Greece in recent years as austerity led to instability and anger which frequently boiled over into protests on the streets of the larger urban areas.
Against this background, last year saw the election of a new centre-right government with an inevitable change of direction from its socialist predecessor. An indication of this is the introduction of a favourable tax regime designed to attract high net worth individuals to Greece as the country seeks to raise additional tax revenues from a sector able to contribute much economically whilst typically putting little strain on its resources.
Despite the timing, there is no doubt the Greek alternative tax scheme is attractive; hardly surprising given many commentators have likened it to the Italian flat rate tax regime that had been proving increasingly popular before that country became the European epicentre for Covid-19, and no doubt will be again once the battle against this virus has been won.
It is however worth considering the Greek offering further. Central to this is the exemption from further taxation in Greece on foreign source income for individuals transferring their tax residence as long as they have not been resident in Greece for seven out of the eight previous years before relocating.
A further requirement is that such individual, or their relatives, either directly or through a company in which they are a majority shareholder, invest in property or other assets including shares of legal entities based in Greece with a value not less than EUR 500,000. This is however not required in the case of an individual who has obtained a ‘golden visa’ or other residence permit on the basis of prior investment in Greece.
Individuals who choose to utilise the alternative taxation method in Greece are, as in Italy, obliged to pay a lump sum tax of EUR 100,000 on an annual basis. A family member may then also benefit from the regime through payment of EUR 20,000 annually. The equivalent for family members in Italy is EUR 25,000.
Any Greek source income will still need to be reported in the annual income tax return and will be taxed as appropriate locally. Foreign source income is however not subject to reporting and payment of the lump sum tax negates any further tax liability in this regard for the individual. Tax paid abroad on foreign income cannot however be offset against any Greek tax liabilities.
Once accepted for the special tax regime an individual may benefit from it for a maximum of fifteen years, again in line with the Italian equivalent. Fifteen years is however a long time in Greek politics and we will have to wait and see whether this favourable tax regime stands the test of any future change in government.
The similarities between the Greek regime and equivalent Italian scheme are apparent and can also be seen in the treatment of successions with exemption from inheritance and donations tax for foreign situs assets.
Considerations for a change in country of residence go much deeper than the tax impact and quality of life should be an important factor. The Probus group can assist in establishing residency in a number of jurisdictions; helping individuals find the right option for their circumstances. In the meantime our thoughts are with those throughout the world affected by, and in the frontline fighting, Covid-19.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Probus Group to discuss these matters in the context of your particular circumstance. Probus Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.