The new Greek Non-Dom tax regime

The Greek State after having introduced for the first time in Greece by Law 4646/2019 a favorable Non-Dom tax regime based on which individuals may benefit from the Non-Dom taxation as from tax year 2020 onwards by submitting their application until 31st March 2020, now the Ministry of Finance released a new Tax Bill for public consultation which completes the existing Non-Dom tax regime.

In particular, under the new provisions, pensions of foreign source could be subject to alternative Non-Dom taxation and could be taxable in Greece. Last years, similar tax regimes have been introduced to other countries of the EU, such as Italy, Portugal, Malta and Cyprus.

More specifically, according to par. 1 of the proposed Tax Bill, the taxpayer who is beneficiary of a foreign source pension and transfer his tax residency in Greece, could be subject to the alternative Non-Dom regime, under the following two (2) requirements:

  1. The individual was not a Greek tax resident during the last five (5) from six (6) years before the transfer of his tax residency in Greece.
  2. The individual transfers his tax residency from a country with which Greece has signed a tax administrative cooperation agreement.

Furthermore, based on the provision of par. 2, if the entry under the Non-Dom regime for the foreign income get in force, the individual should pay yearly a tax at a rate of 7% for the total amount of his/her foreign source pension with exhaustion of his/her income tax liability and the said income is exempt from any social solidarity contribution of article 43A of ITC. Last but not least, any tax paid abroad by the individual for the foreign source pension is not allowed as a credit against the Greek tax payable in respect of that income. However, that regulation seems to be contrary to the various tax rules for the avoidance of double taxation adopted by the EU and Double Tax Conventions (DTC).

In any case, according to the explanatory report of the said Tax Bill, the application of the international DTC are not effected from the provisions of the said Tax Bill. This means that withholding taxes continues to be paid to the Source Country for pensions paid to the individuals due their previous service in the public sector continue irrespective of the tax residency transfer. On the contrary, the so-called private pensions will be only subject to the taxation mentioned here above, under the condition that the Country of residency has the exclusive right for taxation based on the provision of DTC.

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