Entry into force
The new regime shall applies to financial years beginning on 1 January 2021.
According to the applicable legal framework, foreign pensioners after having transferred their tax residence in Greece, are subject to a flat annual tax of 7% for their global income.
This means that as soon as the third country citizen is a pensioner, they can apply for the Greek alternative tax regime. The fact that they may have further income deriving from other sources does not affect their right to apply for the above regime as a pensioner.
Alternative tax regime for pensioners, foreign citizens, who transfer their tax residence in Greece
The new law stipulates that a pensioner is subject to an alternative tax regime for the income earned abroad, as long as they fulfill the following cumulative conditions
Conditions for inclusion in the provisions of Article 5C and supporting documents required
1. A natural person who transfers his/her tax residence to Greece is subject to taxation as defined in par. 1 of Article 5 of this Law, for the income from employment acquired in Greece within the meaning of element a) of par. 1 of Article 5 of this Law, if cumulatively:
a) was not a tax resident of Greece in the previous five (5) of the six (6) years prior to the transfer of his tax residence to Greece,
b) transfers the tax residence from a Member State of the EU or from a State with which an administrative cooperation agreement is in force in the field of taxation,
c) provides services in Greece within the framework of an employment relationship within the meaning of paragraph. 2 of Article 12 of the Tax Code, exercised either in a domestic legal person or legal entity or in a permanent establishment of a foreign enterprise in Greece; and
(d) declares that he/she will remain in Greece for at least two years.
2. The fulfilment of the condition of element a’ of par. 1 of this Article shall be established on the basis of the records kept at the Tax Administration. In particular, if the natural person applies for the first time for the assignment of a tax residence number, or if he/she appears in the records of the Tax Administration as a tax resident of a foreign country for five (5) of the six (6) previous years prior to the application for the transfer of his/her tax residence, the submission of supporting documents is not required. In case the records of AADE do not show the taxpayer’s tax residence in a foreign country for five (5) of the six (6) previous years prior to the application for transfer of tax residence in Greece, then it is required to submit, for each of the years for which no information is available:
(a) A certificate of tax residence from the competent tax authority of the state where he/she declares tax residence, showing that he/she is a tax resident of that state. If the taxpayer was a resident of a state with which there is a Double Income Tax Avoidance Convention, he may submit, instead of the certificate, the prescribed Application in which the certificate of tax residence (bilingual forms) is incorporated, completed, signed and stamped by the competent foreign tax authority; or
(b) In the case where the competent tax authority does not provide for the issuance of the above, a copy of the tax clearance of the income tax return or, in the absence of a clearance, a copy of the relevant income tax return filed in the other State as a tax resident of that State.
c) In case it is not possible to provide some of the above documents, because it is proven that the foreign tax authority does not issue them, then a certificate from any other public or municipal or other recognized authority is required, which will prove the permanent and stable establishment of this person in the other state.
3. The aforementioned foreign public documents, as defined in the provisions of Article 1 of Law No. 1497/1984 (A’ 188), shall be presented in accordance with international law (EU Regulation 2016/1191, Regulation 650/2012, apostille stamp, consular visa, visa by the Greek consulate, as defined in international treaties ratified by law by Greece, as the case may be) and clear photocopies shall be accepted from copies certified by lawyers, as defined in the provisions of the fourth subparagraph of element b) of paragraph 2 of Article 11 of Law No. 2690/1999 (A’ 45), as in force, or certified copies of the originals thereof by notaries, in accordance with the provisions in force, or by a person, authority or service which by law has this possibility. The persons, services and bodies carrying out translations in accordance with the legislation in force shall be subject to the provisions referred to the document of the Directorate of Organization of the Hellenic Administration of Foreign Affairs. From the procedure of validation in accordance with international law and translation are excluded the APPLICATIONS FOR DOUBLE TAXATION AVOIDANCE, as they apply to the states with which Greece has concluded Double Taxation Avoidance Conventions. Special provisions govern the APPLICATIONS FOR DOUBLE TAXATION AVOIDANCE with the USA, TURKEY and MOLDOVA. Also, documents and acts relating to tax residence (and therefore also tax residence certificates) are exempted from the apostille stamp, if they are issued by countries that have ratified the “Convention exempting certain acts and documents from ratification”, as well as from Cyprus.
4. In accordance with condition b) of par. 1 of this Article, it is required that the natural person transfers his/her tax residence from a member state of the EU or from a state with which an administrative cooperation agreement in the field of taxation with Greece is in force. The existence of this condition shall be examined ex officio by the competent department referred to in paragraph 1 of Article 2 of this Regulation.
5. According to condition c) of par. 1 of this article, the natural person is required to provide services in Greece in the context of an employment relationship within the meaning of par. 2 of Article 12 of the Tax Code, exercised either in a domestic legal person or legal entity or in a permanent establishment of a foreign enterprise in Greece. The concept of a permanent establishment of a foreign enterprise in Greece also includes the offices which may employ natural persons who transfer their tax residence to our country in order to be subject to the provisions of this article. In order to prove this requirement, the following documents must be submitted, such as, indicatively, where applicable, a fixed-term or open-ended employment contract, a contract by which the natural person acquires a dependent employment relationship with another person who has the right to determine and control the manner, time and place of performance of the services, the recruitment announcement form, publication in the General Register of Companies of the act by which the person is appointed as a director, member of the Board of Directors of a company or any other legal person or legal entity, or a member of the Board of Directors of a company or any other legal entity or legal entity.
6. For the fulfilment of condition d’ of par. 1 of this Article, the natural person is required to submit with his application a solemn declaration stating that he will remain in Greece for at least two years starting from 1 January of the first year of his inclusion in the provisions of Article 5C of the Tax Code.
7. For the fulfilment of the condition of filling a new job, a solemn declaration of the employer shall be submitted, certifying that the applicant covers a new job.
8. Especially for individuals who transfer their tax residence to Greece in order to carry out a sole proprietorship in Greece, in order to apply the provisions of par. 1 of article 5C, in addition to the above mentioned documents of paragraphs. 2 and 6, a declaration of the commencement of business of a sole proprietorship must be submitted to the competent TAX OFFICE, in accordance with the provisions of the decision of the Governor of the Independent Authority for Public Revenue, submitting the documents required on a case-by-case basis in accordance with the decision of the Secretary General for Public Revenue of the Ministry of Finance, as in force. The same supporting documents shall be submitted in the case of individuals who have started a sole proprietorship and are taxed as employees under the provisions of element f of paragraph 2 of Article 12 of the Tax Code.
9. A natural person who earns income from employment and from business activity arising in the domestic territory may be subject to the special taxation method of Article 5C, for all of the above income, provided that the other requirements of this Article are met for each of the above categories of income. If the relevant conditions are not met for one of the two categories of income, the reduction provided for in par. 1 of Article 5 hereof shall apply only to the category of income for which the conditions are met.
10. An individual may be subject to the provisions of Article 5C while he is subject to the provisions of Articles 5A or 5B, and vice versa, provided that at the time of subjection the requirements of each Article are met. The above shall also apply in cases where the inclusion is made at the same time.
11. A natural person who transfers his/her tax residence to Greece is a tax resident of Greece within the meaning of the Conventions for the avoidance of double taxation concluded by Greece.
Procedure for inclusion in the provisions of Article 5C
1. A natural person who transfers his/her tax residence to Greece in order to be subject to the special method of taxation of income derived from employment and business activity in Greece in accordance with the provisions of Article 5C, shall submit an application to the Foreign Taxes Department. In the case of domestic tax residents, the applicant shall apply to the Department of Domestic Taxes and in particular to Section C1′ – Application of Alternative Taxation of Domestic Tax Residents of the said Department as follows:
α) For the commencement of service or commencement of business activities that takes place on or before 2 July of the year in question, the application for inclusion in the provisions of Article 5C shall be submitted by the end of that year and shall be considered for inclusion of the taxpayer in the special method of taxation of income from employment and business activity arising in the domestic territory for that year. If the taxpayer submits an application within the year following the year in which the taxpayer takes up employment or commences business, the application shall be considered for inclusion of the taxpayer in the provisions of Article 5C for the year following the year in which the taxpayer takes up employment.
(b) In the case of a commencement of service or commencement of operations that takes place after 2 July of the year in question, the application for inclusion in the provisions of Article 5C shall be submitted by the end of the following year and shall be deemed to include the taxpayer for the year following the commencement of service. With the application for inclusion in the provisions of Article 5C, the applicant shall submit the relevant supporting documents, as the case may be, in accordance with the provisions set out in paras. 2 to 8 of Article 3 of this Regulation. The natural person shall state in his application the State in which he had his last tax residence up to the time of submission of his application, as well as his address of residence in Greece.
2. The application and supporting documents are submitted either by digital scanning and sending them through the “My Applications” platform on the myAADE digital portal (https://www1.aade.gr/gsisapps5/myaade/#!/arxiki), or in a physical envelope by post, registered mail or courier service to the competent department of par. 1 of Article 2 of this Regulation. Applications may also be handed in at the registration desk of the abovementioned service. The date of submission of the application shall be deemed to be the date on which the application is sent to the ‘My Applications’ platform on the myAADE digital portal, or the date as evidenced by the postmark or courier service stamp, respectively. The proof of postal or courier service receipt or the automated message sent in response to the taxpayer’s electronic message shall constitute proof of submission of the application and shall serve as proof of receipt by the recipient.
3. The TAX OFFICE of Foreign Residents and Alternative Taxation of Domestic Tax Residents, after receiving the above application and the supporting documents accompanying it, must enter the data in the relevant electronic application, which will be monitored throughout the period during which the taxpayer is subject to the regime of article 5C of the Tax Code.
4. The application must be accompanied, otherwise it will not be examined by the Tax Administration, by a solemn declaration of residence in Greece for two years from the year of inclusion in the provisions of article 5C and a) in the case of a natural person who provides services in Greece in the context of an employment relationship within the meaning of par. 2 of Article 12, i) a solemn declaration by the employer that the applicant covers a new job as well as ii) the documents referred to in par. 5 of Article 3 of this Regulation; and/or (b) in the case of a natural person carrying out a business activity, by the declaration of the commencement of business of a sole proprietorship. Where the application is not accompanied by the supporting documents referred to in par. 2 of Article 3 which prove that the natural person transferring his/her tax residence to Greece has not been a tax resident of Greece for the previous five (5) out of the six (6) years prior to the transfer of his/her tax residence, the applicant shall be immediately informed of the submission of additional supporting documents within a period of thirty (30) days from the date of such information. The Head of the TAX OFFICE Foreign Taxes Department shall issue a decision approving or rejecting the application, depending on whether or not the conditions of Article 3 of this Regulation are met, within sixty (60) days of the submission of the application. Upon approval of the application, the natural person shall be considered a tax resident of Greece, in accordance with the provisions of Article 4, from the tax year of his/her affiliation, as defined in particular in Paragraph. 1 of this article.
The Head of the aforementioned TAX OFFICE, in his explicit approval decision for the taxpayer’s inclusion in the provisions of Article 5C, informs him that after the expiry of seven (7) years, his inclusion in Article 5C will automatically cease and he will be taxed in accordance with the general provisions for the taxation of income from employment and self-employment acquired in Greece. The approval decision can be posted via the “Digital Notification” application in the taxpayer’s mailbox in the myTAXISnet Personalized Information of the AADE, digitally signed. In case of rejection of an application for inclusion in the provisions of article 5C of the Tax Code due to failure to submit the required supporting documents, if these are submitted no later than 31 March of the year following the submission of the application, the Tax Administration shall revoke its rejection decision, review the application and issue a new decision within sixty (60) days from the submission of the supporting documents, for inclusion of the applicant in the year of the original application. Specifically for applications submitted in the year 2021 and denied for failure to provide the required supporting documentation, the Tax Administration shall rescind the denial decisions and reconsider the applications if the required supporting documentation has been provided on or before April 29, 2022.
4A. a) A natural person who has applied for inclusion in the provisions of article 5C of the Tax Code for one of the categories of income subject to the special taxation regime (income from employment/income from business activity) may, with a subsequent request, apply for an extension of his/her inclusion in the special taxation regime for the income of the other category, provided that the subsequent request is submitted for inclusion in the same year as the initial request and within the deadlines of par. 1. A request for extension may be submitted either a decision on inclusion in the provisions of Article 5C has been issued on the initial application or is under consideration.
(b) If a natural person has been subject to the special taxation regime of Article 5C for income earned from salaried employment in the context of an employment relationship within the meaning of paragraph 2 of Article 12, he may submit a new request for extension of his inclusion also for the income earned from a second employment relationship. In this case, provided that the condition of the new employment is met, the new application is accepted, the approval decision is completed with regard to the details of the new employer and the natural person is subject to the special method of taxation for as many years as are left until the completion of the period of time referred to in par. 4 of Article 4 of this Regulation.
(c) If an individual has been subject to the special tax treatment under Article 5C for income earned from a business activity, no new application is required in case of extension of the business activity to new codes (KAD).
5. A natural person who has been included in the provisions of Article 5C, if in any tax year he does not meet the requirements of paragraphs c) and d) of para. 1 of Article 3 of this Article, shall cease to be subject to the provisions of Article 5C from the relevant tax year onwards and shall be taxed on all his income from employment or business activity earned in Greece in accordance with the general provisions. If during the period specified in par. 3 of this article and for a period not exceeding twelve (12) months, the natural person ceases to provide services in Greece within the framework of an employment relationship, within the meaning of par. 2 of Article 12 or ceases to carry out a sole proprietorship in Greece, he shall continue to be subject to the provisions of Article 5C, provided that within the aforementioned period of twelve (12) months he shall enter into a new employment contract (for which the conditions of ELEMENT c’ of paragraph 2 of Article 12 shall be met again or start a new business of a sole proprietorship and inform the competent tax authority accordingly. If a natural person ceases to provide services in Greece in the context of an employment relationship, within the meaning of par. 2 of Article 12, or ceases to carry on a sole proprietorship in Greece for a period exceeding twelve months, the individual shall cease to be subject to the provisions of Article 5C from the tax year of cessation of the employment relationship or cessation of the sole proprietorship. For that tax year and thereafter, he shall be taxed on all his income under the general provisions and the provisions of par. 6 of Article 5 hereof. If the said natural person has submitted an income tax return for the tax year of termination of the employment relationship or cessation of self-employment, he/she shall be obliged to submit an amended income tax return in order to determine the tax on the basis of the above, otherwise the Tax Administration may issue an administrative tax determination act in accordance with the provisions of par. 2 of Article 32 of Law 32 of the Law. 4174/2013.
6. In any case where the job of the natural person subject to the provisions of par. 1 of Article 5C, the taxpayer shall inform the competent department of paragraph 1 of article 2 of this article of the change of employer and submits the solemn declaration on behalf of the new employer on filling a new job, in order to continue to be subject to the special taxation method of article 5C for as many years as there are left until the completion of the period of time of paragraph 4 of this Article. A taxpayer who has been subject to Article 5C as an employee and who subsequently loses this status but within a period of twelve (12) months starts a sole proprietorship, shall inform the competent department of paragraph 5C of the taxpayer’s status as an employee and subsequently loses this status but within a period of twelve (12) months starts a sole proprietorship, in order to continue to be subject to the special taxation method of Article 5C, for as many years as there are remaining until the completion of the period of time of paragraph. 4 of this Article. Similarly, a taxpayer who was subject to these provisions due to the commencement of a sole proprietorship, but who subsequently ceases this activity and takes up paid employment, shall inform the competent department referred to in par. 1 of Article 2 of this Regulation of this change and shall continue to be subject to the provisions of Article 5C if the conditions of paragraph c’ of paragraph 1 of this Article are fulfilled.
7. Re-submission of the natural person to the provisions of article 5C, if there has been a removal of this, is possible, provided that the new application for inclusion is submitted at any time within the period of paragraph 7. 4 of Article 5C. In the case where the taxpayer has remained a tax resident of Greece, the conditions of paragraphs 1(a) and 1(b) of Article 5 shall not be re-examined. In the case that the taxpayer has become a tax resident of a foreign country in the meantime, the taxpayer may apply but all the requirements of par. 1 of Article 5C. In each of the above cases, if the application is accepted, the inclusion will be valid for as many years as there are left until the completion of the above period, i.e. until the completion of seven years from the initial inclusion in the provisions of Article 5C.
8. The subjection of a taxpayer to the provisions of Article 5C shall not automatically result in a change in the tax residence of other persons related to him, other than the subject of the provisions.
Revocation
The taxpayer retains the right to revoke their application at any fiscal year during the 15 years of the enforcement period. In case of revocation, the pensioner is subject to the regular provisions starting from the fiscal year when the application for revocation was submitted.
Content of the tax declaration according to the alternative regime
According to Art. 67 of the L. 4172/2013, all taxpayers above must declare all of their incomes, whether they are exempted or not, electronically. Under special circumstances, taxpayers are allowed to submit the declaration in paper form to the Tax Administration. Specifically for the pensioners subject to the alternative tax regime, they are obliged to declare all income arising in Greece and all income arising abroad that is subject to the alternative tax system.
Amoiridis Law Services®, having successfully represented numerous international clients, coming from more than 60 countries, can assist you during the entire transfer of your tax residence and the application process in order to benefit from the latest flat tax regime.
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