Greece Paves the Way for International Family Offices – Key Reforms Introduced by the New Draft Bill on Article 71H of the Income Tax Code

The operation of special purpose entities for the management of family wealth (Family Offices) has become a fundamental tool for individuals seeking centralized, efficient, and institutionally transparent asset management.

Greece introduced a special tax regime for Family Offices through paragraph 1 of Article 25 of Law 4778/2021 (Government Gazette A’ 26/19-02-2021), effective from the 2021 tax year onward. The new draft bill by the Ministry of Finance proposes significant amendments to Article 71H of the Income Tax Code (Law 4172/2013), aiming to enhance and expand the operational framework of Family Offices in Greece.

The Five Key Points of the Proposed Amendments

1. Establishment by Foreign Tax Residents Now Permitted

The new provision allows for the establishment of Family Offices via corporate entities not only by individuals with Greek tax residency but also by foreign tax residents. Crucially, this does not trigger a presumed shift of tax residency or effective management to Greece.

Example:Mr. A, a tax resident of Switzerland with significant interests across Europe and the Middle East, chooses to establish a Family Office in Athens to centralize his investment management. The new regulation ensures that this corporate setup will not alter his tax residency, thereby minimizing related tax risks.

2. Reduction of Minimum Annual Operating Expenses

The minimum required annual operating expenses are reduced from €1,000,000 to €500,000, making Family Offices more accessible and feasible for medium-sized estates.

Example:A family with a mid-sized investment portfolio (e.g., 3 properties in Europe, 2 corporate holdings, and 1 charitable foundation) previously unable to justify annual costs exceeding €1,000,000 can now operate a Family Office with documented expenses of €500,000.

3. Revenue Calculation Method – "Cost Plus 7%"

The new regime retains the fundamental “cost plus markup” method, whereby the gross revenue of a Family Office is determined by its documented operating expenses plus a 7% profit margin.

A significant change from the previous regulation is the explicit provision that if the company’s actual invoiced revenues (as recorded in its books) exceed the calculated “cost plus 7%” threshold, the higher figure will be used for tax purposes.

In effect, the “cost plus” method now serves as a minimum taxable income threshold rather than a fixed upper limit.

This allows for greater flexibility in tax treatment while ensuring proper documentation and compliance, particularly in related-party transactions, which may also require transfer pricing documentation under Articles 50–51 of the Income Tax Code.

Example:Family Office "X Ltd" incurs total operating expenses of €500,000 (salaries, rent, accounting services, external consultants).

• Under the “cost plus 7%” method:Minimum gross income = €500,000 + 7% = €535,000Taxable income = €35,000 (profit margin), taxed at 22%.

• If the company invoices a related holding entity for €600,000, then the higher figure (€600,000) is considered for taxation.

Evaluation:The “cost plus 7%” method means gross income is calculated as total operating costs plus a 7% margin.Taxable profit = 7% of expenses (€35,000).However, if book-reported revenue is higher (€600,000), then the taxable income becomes €100,000 (€600,000 - €500,000).Additionally, as billing is to a related party, transfer pricing documentation may be required.

4. Mandatory Employment of 5 Staff Members in Greece

The original requirement under Article 71H (since 2021) is retained: the special purpose company (Family Office) must employ at least five staff in Greece within 12 months of its establishment. This ensures Family Offices maintain real economic substance in Greece, contributing to local employment and the economy rather than functioning merely as tax optimization vehicles.

5. Provision of Services to Trusts and Foreign Entities Without Tax Residency Shift

It is now explicitly stated that providing services to foreign entities, trusts, or holding companies does not result in a shift of their tax residency to Greece.

Example: Greek Family Office “A” provides reporting and management services to a foreign trust owned by its founder. Under the new provision, the trust retains its foreign tax residency, with no risk of being considered a Greek tax resident.

The proposed amendments, currently under public consultation, align Greek legislation with international standards, offering:

• Enhanced tax certainty and predictability

• Reduced entry barriers for Family Offices

• Reinforcement of Greece's position as a destination for investors with international tax residency

• A robust institutional foundation for long-term, effective wealth management structures

The final version of the law will be determined following the conclusion of the public consultation and its subsequent passage by Parliament.