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Did You Know About Greece’s New Tax Status for HNWIs?

Did You Know About Greece’s New Tax Status for HNWIs?

At the end of 2019, the conservative Greek government set up a new law (Law 4646) that grants foreign investors with ample tax benefits for establishing their tax residency in the country.

More specifically, this regulation, which was somewhat modeled after Italy’s non-dom tax status, offers a series of tax breaks to HNWIs on their foreign-sourced income.

This new regulation follows a push by the Greek government to attract business to the country following a long period of recession and austerity measures.

Back in November 2019, Greek President Kyriakos Mitsotakis made this point during a visit to China, telling Chinese President Xi Jinping, “Today in Greece there is a government that is determined to facilitate foreign investors, attract foreign capital and create wealth and prosperity for all Greeks in a way that is sustainable and protects the environment.”

The Mitsotakis administration hopes this new law will attract, among others, the Chinese super rich and Greek shipping magnates who have parked their assets abroad as a result of Greece’s large number of taxes.

For instance, a maritime insurer in Greece, told The National Herald, “We saw shipping people based in Athens pack up and flee abroad during the Greek crisis. Now there is political stability and a tax incentive: two good reasons to return.”

As reported by Reuters, these measures also “include a cut in the corporate tax rate to 24% from 28% and lowering the tax rate on dividends to 5% from 10%.”

What Does Greece’s New Non-Dom Tax Status for HNWIs Entail?

What Does Greece’s New Non-Dom Tax Status for HNWIs Entail?

As explained by Ernst & Young’s Manos Tountas in the International Tax Review, this unique program can be broken down into three main components:

1.     HNWIs “will qualify as tax residents of Greece and will be eligible for protection under the 57 international tax treaties for the avoidance of double taxation that Greece has enacted with foreign countries;”
2.     Foreign investors will not have to “report and be taxed locally on their foreign source income (according to the locally applicable progressive tax rates highest burden could reach 54%) while being required to pay a flat tax amount yearly on their foreign source income regardless of its origin,” and; 

  1. Individuals involved “will, however, be subject to Greek income tax according to the local rules and progressive tax scales only on their Greek source income.”

Who’s Eligible to Participate in Greece’s Non-Dom?

Who’s Eligible to Participate in Greece’s Non-Dom?

This new law is not for everyone as there are specific requirements in order to qualify for it.

Tountas explains that applicants must meet two main conditions. First, interested parties must not have been “Greek tax residents for the previous seven of the last eight years before the transfer of their tax residence to Greece.” Second, HNWIs must “prove that they or a close relative of them have made an investment of at least €500,000 in real estate, businesses or legal entities in Greece, or securities or shares in legal entities based in Greece or through legal persons in which they hold the majority of the shares.” This second condition is not applicable if applicants “have already been provided with a 'golden visa’ or other residence permit obliging them to make an investment in Greece.”

Once the application is approved, writes Tountas, the interested party must then do the following: 1) “pay an amount of €100,000 per tax year for income arising abroad,” and; 2) “declare and be taxed in Greece only for Greek source income.” Furthermore, under this program, “any assets held abroad by said individual will be exempted from inheritance/donation tax.”

Additionally, as explained by Reuters, “investments of 3 million euros will reduce the flat tax to just 25,000 euros,” while a grandfathering clause will secure investors from changes brought about in the future.