Income tax rates decrease to 7% for foreign pensioners in Greece

Tax income rate of 7% for 15 years for foreign pensioners who transfer their tax residence in Greece

From the end of September 2020, pensioners residing in one of the countries with which Greece has signed a double taxation exemption agreement or an agreement for administrative cooperation (including the U.K., Canada and the United States of America) can transfer their tax residence to Greece and request to be subject to the provisions of Laws 4172/31.07.2020, 4714/2020 and 4172/2013 on the alternative taxation of the pension income of foreign origin.

The retirement income is taxed with 7% for 15 years, regardless of the annual pension amount. However, this advantageous tax income rate does not apply to income of the pensioners from other sources in Greece or abroad (such as income from real estate, financial products, reverse mortgages etc.) for which the normal tax rates apply by income tax bracket.

To be entitled to the single tax rate of 7% on their retirement income, the foreign retirees must be former employees or freelance of the private sector. If you were a civil servant and you are receiving a state pension, you do not have the criteria for applying on this advantageous taxation regime.

The only exceptions concern 1) foreign retirees, former state officials wishing to transfer to Greece, if they also have the Greek citizenship or 2) Greek citizens, former state officials, residing in one of the foreign countries that have signed a double taxation exemption agreement or an agreement for administrative cooperation with Greece.

In addition, applications for the preferential tax rate of 7% for 15 years are not accepted by the Greek tax authorities if they relate to pensions paid for example by private insurance companies. Indeed, private insurance policies are considered as financial products and the pensions they pay do not derive from earned income. However, there is one exception, namely group insurance policies, such as those stipulated by large groups of companies for their employees. In this case, the pension paid by the insurance company is considered equivalent to the pensions paid by the social security.

Special criteria should be met for benefiting from this favorable tax regime:

One of those criteria is that the retiree has not been Greek tax resident for any of the last five (5) years out of six (6) years before of the relocation. The foreign pensioner may apply to the alternative regime until 31 of March of relevant tax year.

A recurring problem, which I already encountered in 2020 with the first cases of applications by retirees for the transfer of their tax residence in Greece, is that foreign individuals had previously already obtained a Greek tax identity number (in order to be able, for example, to buy or rent real estate in Greece or to proceed for an inheritance in Greece), while remaining tax residents abroad. In most cases, the individuals had not applied for a specific Greek tax ID number for residents abroad. The consequence of such an error is not only the fact of being subject, for the Greek tax authorities, to double taxation, but also the absence of the conditions required for benefiting from the favorable tax regime, given that the retiree is already considered a Greek tax resident by the Greek tax authorities. However, it is possible in most cases to remedy the problem, by retroactively transferring the tax residence abroad for the last five years. Only then the procedure of (re)transfer of tax residence from abroad to Greece can be initiated and the pensioner can apply for benefiting from the privileged tax rate of 7% for 15 years on his retirement income.

Another of the required criteria that should be met for benefiting from this favorable tax regime is to be the holder of a lease, to have a contract for the free use of real estate or to be the owner of an apartment or a house in Greece, because it is necessary to demonstrate to the competent Greek authorities that you really want to move and reside in Greece when submitting the application for the transfer of the tax residence. In fact, a retiree who transfers his tax residence to Greece should be able to prove, during a tax audit in his home country, that he spends at least six months and one day in Greece each year.

Effective residence in Greece means domicile, a fixed and registered address in Greece and not the transfer of domicile in Greece to a mobile vehicle, such as a boat, even if it is permanently moored in a port or marina. More particularly, the retiree who wishes to live permanently on a boat must in any case stipulate a rental contract for an apartment or a house in order to fulfill the requirements of the application for a tax transfer with a privileged tax rate of 7% during 15 years on his retirement income.

Our law firm provides assistance to retirees who wish to transfer their tax residence to Greece, in order to benefit from the privileged 7% tax rate on their retirement income.

We take care of all aspects of the procedure. As an indication, the services we offer are:

• Assistance in finding and selecting real estate to rent or buy anywhere in Greece.
• Legal advice on the rental and purchase of real estate. Assistance in the negotiation phase for the purchase or rental of the property.
• Drafting of the lease contract.
• Legal advice and assistance in the control of title deeds. This is a necessary and indispensable aspect given the peculiarity of the Greek real estate market, where the cadastral offices (Ktimatologio in Greek) are still in the process of constitution and the effective ownership as well as the characteristics of the real estate must be verified in the archives of the land registry offices (Ypothikofilakeio in Greek) located in the region where the real estate is located.
• Coordination and assistance in the process of purchasing real estate in Greece with engineers, accountants and trusted notaries.
• The obtention of a Greek tax identity number for resident abroad, needed for the purchase of the property. Tax representation in Greece.
• The opening of a bank account.
• Tax declarations for the purchase of the property and all administrative procedures as well as those for the subsequent correct management of the property.
• The preparation of the documents required for the application for the transfer of tax residence with privileged tax rate of 7% for 15 years on the retirement income and the filling of the application at the competent tax office in Athens.
• Legalized translation of all documents from English, French, Italian, German, Portuguese, Spanish (or other languages) to Greek.
• Assistance in the procedure following the acceptance of your tax transfer application to Greece by the Greek tax authorities. Assistance in general for all practical and legal aspects that the transfer to Greece may involve.

The application of the new law on preferential tax rates for foreign pensions is recent in Greece and the competent tax administration office has very recently been created for this purpose. It has only a few competent officials.

Our law firm is in permanent contact with this competent tax office located in Athens, from its creation in September 2020, in order to be able to discuss in real time all possible problems relating to the specific cases of our clients.

We can also carry out a preliminary check on the tax situation of our clients. As a result, we are sure of the speed and efficiency of our services. All applications of our customers have always been accepted very quickly.

For applying on this privileged regime of taxation of your retirement income and for the transfer of your tax residence in Greece, contact our law firm.