Decision on the Separate Tax Return for Married Couples Living in Different Countries Established for the First Time

August 5, 2016

The decision on the Separate Tax Return for Married Couples Living in Different Countries Established for the First Time in Greece by the Council of State, is reshaping long-standing tax filing obligations for cross-border spouses.

Based on the Decision of the Council of State

The institution of marital cohabitation has historically existed in Greece—defined as the default common cohabitation of spouses following their marriage. As a result, all married couples (whether by religious or civil marriage) are required to submit a joint tax return.

In practice, this means:

• The wife appears jointly with her husband on the tax return.

• Their Tax Registration Numbers (TRNs) are combined under one tax office, typically the husband’s, even if they reside in different districts.

  
  

Until recently, the only exemption from this joint return requirement was a civil partnership (par. 4, art. 67, L. 4172/2013), in which taxpayers could opt to file separately. However, civil partnerships are relatively uncommon in Greece.

This joint-return policy has created serious complications, particularly when one spouse moves abroad and seeks to change tax residence, while the other remains in Greece.

With Decision No. 1445/2016, the Council of State brought a turning point—establishing legal grounds for a separate tax return when one spouse has a different tax residence.

Legal Foundation

Article 4 of Law 4172/2013 defines tax residency:

“An individual is a tax resident of Greece if they:(a) have their permanent or principal or habitual residence in Greece, or the center of their vital interests (i.e., personal, economic, or social ties),or(b) are a consular, diplomatic, or similar public official with Greek nationality working abroad.”

The concept of “vital interests” implies family interests. So, if one spouse remains in Greece, tax authorities typically assume that the family’s center of vital interests is still in Greece—preventing the migrating spouse from changing tax residence unless divorced.

Many people were forced to separate or divorce just to resolve their tax registration and residency conflicts.

The Council of State’s Intervention

In a pilot trial, an individual who had exhausted all administrative remedies filed an appeal before the Council of State. He provided all required documentation under L. 4172/2013 and Circulars 1058/2015 and 1177/2014 to prove he resided and worked in Germany, while his wife remained in Greece as a civil servant.

The Council of State overruled the tax authority’s decision, holding that:

“Any restrictions caused by the technical limitations of the electronic tax return system (TAXISNET) are irrelevant. The system must adapt to tax law, not the other way around.”

Additionally, the Court cited the OECD Convention (Art. 4):

In cases of dual residency, a person is considered a resident of the country where they have a permanent home.If they have homes in both countries, the deciding factor is the center of vital interests—personal and economic ties.

The Court clarified:

• “Vital interests” include: housing, physical presence, family members’ residence, employment, assets, public affiliations, and social/political/cultural activities.

• All relevant factors must be weighed together—not only the spouse’s presence in Greece.

  
  

Conclusions and Implications

The Council of State affirms:

• If one spouse resides abroad and satisfies the criteria for foreign tax residence, the other spouse’s Greek residence cannot block their request to change tax residence.

• The tax administration system (TAXISNET) must support separate tax returns when tax residency differs.

• Each case must be evaluated individually, in accordance with international law and Double Taxation Treaties (DTTs).

• Circulars alone cannot override legal precedent, and any rejection must be thoroughly reasoned.

• This decision opens the door for re-evaluation of prior rejections—with the right to request refunds for undue Greek tax on global income that should have been taxed abroad.

  
  

Clarification

Many have misinterpreted this decision to mean that all foreign-earned income is now tax-exempt in Greece. This is incorrect.

The ruling only applies where:

• One spouse genuinely resides and works abroad, and

• Can prove foreign tax residency.

  
  

Someone who merely rents a house abroad but lives and works in Greece cannot claim tax exemption abroad.

Final Remark

This landmark decision significantly impacts married couples split across borders due to economic circumstances. However, it does not yet bind tax authorities unless implemented through official circulars or updated TAXISNET capabilities.

Next Steps Needed:

• The Ministry of Finance must issue updated instructions and circulars.

• TAXISNET must allow separate tax return submissions for married couples with distinct tax residences.