Alternate Taxation for Foreign Income of HNWIs: Ministerial Decision A. 1036/2020

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As of December 2019, Greece rolled out a tax reform (Law 4646/2019), aiming - among others - to attract High Net Worth Individuals (HNWIs) to relocate their tax domicile to Greece and opt for being subjected to an attractive tax regime for the income they generate outside Greece.

Subjection to Article 2 of Law 4646/2019 (as incorporated to Article 5a of Law 4172/2003 (Code of Income Tax)) will have the following effects to HNWIs:

1. They shall qualify as tax residents of Greece and will be eligible for the protection specified in 57 international tax treaties for the avoidance of double taxation that Greece has signed with foreign countries;
2. They shall be exempt from the requirement to report and be taxed locally on their foreign generated income (regardless of its origin), while only being required to pay a flat tax amount annually (tax burdens after progressive tax rates are applied may reach close to 50% in Greece);
3. They shall be subject to Greek income tax according to the local rules and progressive tax scales only on the income they generate in Greece.

On the 24th of February 2019, by virtue of Joint Decision 1036/2020 of the Minister of Finance and the Director of the Independent Authority for Public Revenues (ΑΑΔΕ) the process and preconditions for relocating a HNWI's tax domicile have been set out.

The most important clauses of Decision 1036/2020 are the following:

Article 2:
Pursuant to Article 2 of the Decision the competent authority is the Tax Office for Foreign Residents and Alternative Taxation of Domestic Tax Residents.

Article 3:
Pursuant to Article 3, the requirements for eligibility are met if all following conditions are applicable:

• The applicant has not been a tax resident in Greece for at least the last 7 out of 8 years;
• The applicant or a close relative invests in property,  securities and companies in Greece, with an amount of no less than 500,000 EUR (the investment can be through a Greek company as long as the investor applicant or his/her relative hold the majority of shares in that company). The investment should be concluded within 3 years from filing the application to the authority.

The latter obligation may be waived (thresholds still apply) for investment activity permits received pursuant to Article 16 of Law 4251/2014.
Persons deemed as relatives for the purposes of the above are grandparents, parents, children, grandchildren and spouses.

Article 4:
The HNWI intending to transfer their tax domicile to Greece and be subjected to the above tax regime for income generated abroad must apply by the 31st of March of the tax year to the authority. The Administrative Tax  Assessment will then be issued by the 30th of June by the authority and payment deadline shall be the last working day of July. The relatives can also be subjected to the same regime (adult relatives (parents, children, spouse) will have to consent whereas - in regards to children under the age of 18 - there is no tax liability or an obligation to consent. The tax authority must respond and either accept or reject the application within 60 days from filing,

Article 5:
The applicant must pay the amount of 100,000 EUR annually and 20,000 EUR annually for adult relatives who have been subjected to the same regime. Under-aged children are not subjected to any tax obligation.
With the payment of the above sum, any tax liability for income generated abroad is exhausted and the person (HNWI)  is relieved of any taxes (including inheritance tax, gift tax) for assets located outside Greece.

Article 6:
At any time within the fiscal year, the HNWI may apply for the revocation of the subjection to the alternative tax assessment of foreign income. Any revocation will have the same effect for the relatives.

Article 8:
At the lapse of 3 years ( within 6 months of the lapse of the 3 year period) the tax person needs to proceed to the authority and prove the requirement for investment of 500,000 EUR in a property has been fulfilled.
If the investment has not been completed the HNWI will cease from being subjected to the alternative tax assessment of foreign income status.

Article 9:
As acceptable are deemed the investments that were completed after the publication of Law 4646/2019 (12th of December 2019)