Greece’s Enticing 7% Tax Rate for Retirees
A recently introduced draft tax law in Greece states that foreign retirees who shift their tax residency to Greece will pay a flat tax rate of 7% for ten years. They expect the parliament to table the law this year. Foreign retirees will be subject to this taxation practice for all of their foreign incomes including pensions, investments, and business activities.
The chief economic adviser of prime minister Kyriakos Mitsotakis, Alex Patelis states that “the 7% flat rate will apply to whatever income a person might have, be that rents or dividends as well as pensions”. Athina Kalyva, who is the head of tax policy at the Finance Ministry of Greece, also states that “we hope that pensioners benefiting from this attractive rate will spend most of their time in Greece, that would mean investing a bit – renting or buying a home”. It is very clear from these speeches that Greece tries to attract foreigners to invigorate the economy. The ultimate aim is to bring money into the country. Meanwhile, the country seems to prevent rivalry between Greek residents and foreign tax residents. For this reason, the law is valid only for retirees. Patelis summarizes this situation as “pensioners, by definition, don’t work, so there’s no competition with the domestic labor force. On the contrary, they will be here spending money”.
In fact, Greece is not the first country to introduce such a program. Portugal offers a program called NHR (Non-Habitual Residency) as well. This regime is also for foreigners, but not specifically to retirees. You can find more information about this program in the next sections.
Who Can Benefit From The New Regulation?
This program is mainly aimed at EU retirees, especially those from the UK. The country has set some restrictions on the application process. The applicants must be from a country Greece has a Double Taxation Agreement (DTA) with. DTA is a tax treaty signed between two countries to prevent taxation on the same income in both countries.
How To Be Eligible For This Regulation
● Retirees should not have been tax residents of Greece for the previous five years of the last 6 years before their transfer of tax residence to Greece
● The applicants must prove their pension status, and
● They must agree that they will stay in Greece for more than six months a year
Can non-EU citizens benefit from the new tax law?
As stated above they normally won’t admit non-EU citizens. However, there is an opportunity for non-EU citizens as well. They can make use of their Greece Golden Visa to benefit from its tax opportunities when they retire in Greece. The reason is that the Golden Visa will open the way for them to move their tax residency to Greece. After they invest in the country and get their temporary residency permit via Golden Visa, they can stay in the country. When they meet the minimum stay requirement for tax residency, they can move their tax residency to Greece. In this way, they can enjoy the recent tax treatment for ten years after they retire.
In this sense, it is similar to the NHR (Non-Habitual Residency) program in Portugal. NHR is also available only for EU/EEA/Swiss citizens. However, as a non-EU citizen, after you obtain your Portugal Golden Visa, you can become a tax resident in Portugal. You can do this by staying there for 183 days each year. After this, you can benefit from the NHR. NHR is also valid for ten years. However, it is not restricted to pensioners as the one in Greece is. Under the NHR regime, most of your foreign source income is exempt from taxation. You also enjoy generous tax exemptions if your job is one of the “high-added-value” professions.
As a result, investors in Greece may think of the Greece Golden Visa as a future investment. In this way, they can benefit from the double taxation treaty before retiring. Furthermore, they will have a right to include their family to the Golden Visa, and visa-free travel to Schengen countries. In the meantime, they can keep their investment. In fact, The Greece Golden Visa has the lowest investment threshold in Europe already.
After retiring, investors will pay only 7% tax rate for their foreign income regardless of its amount. In this way, they will pay much lower taxes throughout these years. In addition to that, their property investment in Greece will already be ready to use when they retire.