Currently, fiscally speaking, residence in Greece is again an interesting option for certain people, especially for retired people, pensioners and employers. In this article we tell you why.
When we talk about a Greek-speaking country with tax advantages, generally Cyprus comes to mind. From now on we can also add Greece itself.
Greece has earned a justifiably bad reputation due to its excessive bureaucracy, high levels of taxation and excessive state debt. Destitute banks and foreign policy tensions don’t exactly make the country attractive. However, many people appreciate the Greek lifestyle and the country’s diversity with its hundreds of islands.
Since Greece went back to having a conservative government in power, many things have changed for the better. But the question is always how long this will be able to last in a fundamentally socialist country. You should bear this in mind if you are considering Greece as a long-term option. On the other hand, for the perpetual traveller, a four-year term of office may be enough to temporarily settle in a country such as this. Thanks to the new laws imposing an exit tax, which is widely implemented in the EU, after 7 years of being subject to personal tax liability, there is no longer any fear of losing your own assets to the country’s destitute banks.
Is Greece a fiscal hell?
The Greek taxation system is quite attractive for locals as well. There are various taxation programs for foreigners that almost make Greece an alternative to Cyprus, as long as you have the intention to make your living in Greece. As in any European country where global income is taxed depending on where it came from, there is no minimum stay requirement per se. Even just a few days can be sufficient for taxation purposes, as long as you have a house available for an indefinite period and are a registered EU citizen. But as a general rule, a stay of 183 days is required in order to obtain a tax residence certificate. Although in the expansive and diverse Greece, this would not be an arduous task.
On the other hand, until relatively recently Greece was a very attractive country for perpetual travellers, since the tax legislation stated that unless you made your living in the country, for example with children going to school there or owning Greek property, you were only obliged to pay tax if you stayed in the country for 183 consecutive days. However, now, as is the case in most other countries, you are required to pay tax if you stayed in the country for a total of 183 days within the last 365 days, which makes the system more difficult to abuse.
It must be said beforehand that Greece does not have an attractive income tax, since it quickly increases from 9% to 44% on an income of just €40,000, without any progressive tax exemptions. There is also a progressive solidarity supplement of up to 10% to be added to this, as well as social contributions of 40% (25% from the employer and 15% from the employee) with an exceptionally high limit, starting at just €6,500 a month.
In summary, there is not much opportunity for self-employed workers in Greece. Whoever pays salaries is better off keeping them relatively low.
In a clear contrast with what has just been mentioned above, we have the taxation of dividends. The Greek state taxes dividends at just 5%, even if they come from abroad. Taxation on the distribution of dividends from private limited companies of 5% (before 2020 it was still 10%) may be appealing. Although Greece imposes a corporate tax of 24% on local businesses, it is not necessary to have a company there. It is entirely realistic to operate a company with its substance in another EU country and distribute the dividends to Greece with a tax of just 5%.
For example, in Greek-speaking Cyprus, there is a corporate tax of 12.5%. On the other hand, neighbouring Bulgaria is not so desirable. Under the double taxation agreements, Bulgaria’s withholding tax increases from 5% to 10% if dividends are distributed to Greece. Poland or Romania may also be attractive, despite their high withholding taxes. Of course, a Greek holding company could be useful to reduce these withholding taxes to zero.
Anyone migrating in 2021 will only pay half!
The country is becoming even more interesting if we bear in mind a current law that will come into force in 2021. In order to attract educated foreigners and Greek ex-pats that left the country more than 7 years ago, these persons will in principle be exempt from paying half of the respective taxes. Thus, taxation of dividends will remain at just 2.5%, a rate similar to that of Cyprus due to the compulsory contribution that must be made towards the healthcare system there. Anyone who returns to Greece in 2021 may be able to benefit from this low taxation for 7 years.
This is still rather unattractive for self-employed people. But those who take a chance on dividends from other private limited companies can make themselves quite comfortable in Greece with a very low effective tax rate.
But you must not forget the other taxes. Cyprus, for example, does not tax gains from selling shares or interest income, whereas in Greece, they are taxed at 15% (which is reduced to 7.5% with the tax exemption). Moreover, Greece has relatively high inheritance and gift taxes. VAT is also high, at 24%, and is accompanied by many other taxes, particularly on real estate.
However, these additional taxes can be waived for certain groups of people; the tax reductions announced for the “digital migrants” in 2021 are not the only reductions that have been approved by the Greek government. In 2019, following the example of Italy, a non-dom regime for both pensioners and for the wealthy was introduced. For some Tax Free Today readers, these special tax programs may even be much more attractive than the traditional system with 50% tax exemption.
Non-dom pensioners in Greece, very attractive for retired persons
The non-dom program for pensioners can be very beneficial for some pensioners. This is because of the double taxation agreements that exist between Greece and many countries, like Canada, Ireland, the UK and many others. Those agreements often exempt pensions in the country of origin from tax and credit the income entirely to Greece.
Until now, this was more of a disadvantage than an advantage given that Greece did not used to impose a tax exemption. But since July 2019, anyone who receives a foreign pension or retirement can enjoy a fixed rate of just 7% on any income obtained abroad. Therefore it is not just income from pensions that have an effective tax of just 7%, but also any capital gains from other investments abroad.
Unlike Italy’s program for pensioners, its application is not limited to a regional level, but rather it can be taken advantage of in all of Greece. The condition is to have been subject to taxation in Greece for no more than 1 year in the last 6 years. Moreover, the applicant’s previous tax residence must have signed an agreement with Greece (cooperative jurisdictions).
Non-dom for the wealthy in Greece
The non-dom program for High Net Worth Individuals requires you to have been subject to taxation in Greece for no more than 1 year in the last 8 years. But, unlike other non-dom countries, this option is only available for those who have invested at least €500,000 in the Greek economy. This includes holding shares in Greek companies and owning Greek property. For non-EU citizens, this figure can even be further reduced.
Purchasing a property of just €250,000 under the Golden Visa (permanent residence for non-EU citizens) also qualifies for the non-dom program.
The rules for this program are simple. You pay annual global taxes of €100,000. After this, income from abroad is completely tax-free. There are no inheritance or gift taxes on assets abroad. Only Greek income is taxed at the normal rates. Because the required Greek investment can also be carried out through a majority share in a Greek company, the 5% dividend tax is kept within reasonable limits. For just an extra €20,000 a year, the applicant’s relatives can also benefit without having their own Greek investments. The non-dom program in Greece can be used for 15 years.
Even if Greece cannot match the advantages of its Mediterranean neighbours, such as Cyprus and Malta, it has been a while since it stopped being a tax hell. There are some attractive tax features, particularly for foreigners and for Greeks “in exile”, that are making us pay attention to Greece once again.
In terms of Flag Theory, this in no way means leaving your assets at the mercy of the country’s destitute banks. Greece has always been an attractive leisure spot for perpetual travellers and in the meantime it has become an appealing option for anyone who wants to live in an EU country long-term without having to pay terribly high taxes.
Greece is especially suitable for the following types of people:
Businessmen/associates with a company abroad with substance: 2.5% on dividends for 7 years
Retirees/pensioners: 7% on any income from abroad for life (special feature: the German pension is only taxed in Greece)
Wealthy individuals: €100,000 of global tax, followed by tax exemption on income from abroad, with no inheritance/gift taxes, for up to 15 years
Of course, Tax Free Today can help you if you are considering Greece as one of your options. But there are also clearly some much more attractive options within the EU where it is almost possible to achieve complete tax freedom. Get in touch with us or book a consultation!