The plan for wooing wealthy foreigners

The plan for wooing wealthy foreigners

The new tax law is aimed at attracting fresh revenues into the country’s state coffers – mainly from foreigners as well as Greeks who are taxed abroad – by relocating their tax domicile to Greece, as it tries to woo “high-net-worth individuals” to the Greek tax register.

The non-dom model provides for revenues obtained abroad to be taxed at a flat amount, while any income generated within Greece will be taxed in the same fashion and rates as those used for regular Greek taxpayers.

Having these foreigners stay in Greece for at least 183 days a year, as the law requires, will also entail expenditure on accommodation and everyday costs that will be added to the Greek economy. Combined with the Double Tax Avoidance Agreements, most eligible foreigners will be able to considerably lighten their tax burden if they relocate to Greece, with the exception of Americans, who by law have to be taxed in the US as long as they have an American passport.

However, there are many aspects that remain unclear in the Greek non-dom framework, while the discretion that the targeted wealthy people are used to may be violated by the requirement to declare the tax registration number they have in their country of origin.

A significant section of the market estimates that Greece’s target ought to attract a large number of wealthy foreigners, which will enhance domestic economic activity via the added expenditure; nevertheless, the amount of 500,000 euros’ worth of investment in Greece required of foreigners and the annual flat tax of 100,000 euros demanded (plus 20,000 euros per family member) may keep many of them away.

The framework is inspired by that of Italy, introduced in 2017, PwC tax director Stavroula Marousaki explains to Kathimerini. The aim is to attract individuals who have spent at least seven of the last eight years as tax residents abroad.

PwC argues that “it is particularly important and in the right direction that incomes within Greece are taxed at the ordinary rates that apply to everyone. Still, the favorable status has a time limit of 15 years, without the option of an extension.”

Another significant provision is the exemption from any tax on inheritance or donations of assets abroad, especially given that according to inheritance taxation there is also a similar exemption granted to Greeks provided they have been based abroad for at least 10 consecutive years, adds PwC.

Criticism focuses on the restrictive character of the legislation, seen as so strict that it prevents a large section of the European or other population – such as pensioners who would have been interested in coming to Greece – from paying a lower tax for their international incomes and conducting their spending in Greece while staying in this country, to the benefit of the local economy.

“At the end of the day, the question is what we really want: Is it many people spending much, or a few people spending a little more?” says an economist involved in this domain.

This criticism, as well as concerns that the non-dom framework may not attract people who are not in the multimillionaire category, comes as a large number of other countries, mainly in Southern Europe, have been using a similar model for years, so that tens of thousands of interested taxpayers have already chosen one of them as their tax residence.

Still, it is true, as PwC’s Marousaki explains, that the introduction of the non-dom status also creates the necessary conditions for the return to Greece of Greeks who decided to move abroad at least seven years ago.

Italy, Portugal, Cyprus, Ireland and Malta, as well as the United Kingdom have non-dom frameworks too. It is clear that Greece has to compete with other, more attractive models that have been established for some time. This country may have comparative advantages, such as its climate and natural beauty, but it also has counterincentives, such as the language, in comparison with Spanish or Portuguese. Moreover, the need for the state and public services to be improved may well keep some foreigners away.

Some people are concerned that Greece may be seen as a tax haven, attracting funds of unknown origin, of which Cyprus and Malta have been accused. According to Nikos Siakantaris, managing partner at Andersen Tax, “in any case, these people will be considered tax residents of our country and therefore have to declare their revenues, which the Greek tax authorities will have to probe concerning their source, regardless of the standard tax of 100,000 euros imposed on them.”

Legal and other sources familiar with how wealthy foreigners operate say that the government plan does not meet all of their requirements. They consider it necessary to have a much shorter minimum-stay requirement, perhaps 60 days per year. As the plan is currently phrased, it requires staying in Greece for at least 183 days per year, which is seen as far too long for a class of people who tend to travel a lot. The foreigners should also be specifically relieved of the obligation to declare their revenues in other countries, given that the perception of the Greek authorities’ confidentiality is not the best possible.

Siakantaris also comments that in other countries, such as Cyprus and Portugal, there is no demand for paying a tax on revenues from abroad, “so the 100,000 euros is an amount considered to be too high, effectively being a counterincentive for those interested in shifting their tax residence.”

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