Security Alert
By virtue of a new, recently ratified Law, the Greek Parliament introduced significant legislative developments pertaining to the lump-sum tax regime for high-net-worth individuals wishing to relocate to Greece along with their families (art. 5A of the Income Tax Code), as well as to the Greek Family Office regime (art. 71H of the Income Tax Code).
Enhancing the Greek lump-sum tax regime
Greece has been offering, since 2019, a lump-sum tax regime, for individuals moving their tax residence into the country. Individuals qualifying under the regime (along with their close relatives) are subject to an annual lump sum tax of EUR 100,000, which exhausts their tax liability for any foreign-sourced income (their close relatives are subject to an additional lump sum tax of EUR 20,000 per person). To date, the lump-sum tax regime has undergone many legislative and technical developments for the purpose of becoming even more appealing and attractive to high-net-worth individuals wishing to relocate along with their families to Greece.
The legislative developments introduced under the new Law, can be summarized as follows:
Option for family members to be added to the regime with subsequent application
Under the former rules, any additional family members wishing to benefit from the lump-sum tax regime should be included in the original application submitted by the principal applicant. The new Law changed this by allowing eligible family members -such as children- to be added later through a supplementary application, provided it is submitted within the 15-year duration of the principal applicant’s regime. This important change, applying retroactively to all principal applicants already qualifying under the lump-sum tax regime since its commencement in late 2019, introduces greater flexibility to accommodate evolving family circumstances following relocation into Greece.
Expansion of the gift and inheritance tax exemptions to cover all foreign assets transferred or received by lump-sum regime participants
Under the former rules, the Greek gift and inheritance tax exemption applied only to foreign assets received by the lump-sum tax regime participants and only extended to gifts or inheritances transferred to family members also covered by the lump-sum tax regime. The new Law broadens this scope significantly, by exempting from Greek gift and inheritance taxation all foreign-situs assets that the participant to the regime either receives or transfers -regardless of whether the recipients are also subject to the lump-sum tax regime. This important clarification broadens the exemption’s territorial scope, providing greater flexibility and meaningful tax advantages for clients with international estates and complex cross-border planning requirements, even more so since it explicitly applies retroactively to cover any inheritance as from 1.1.2020.
Newly evolved framework for Greek Family Offices
Greece initially introduced a family office regime in 2021. The regime stipulates the incorporation under Greek law of special purpose legal entities (“family offices”), the statutory objective of which will be exclusively the management and administration of the assets and investments of individuals and their family members (i.e., spouses and partners under a cohabitation civil agreement, not-married children and parents). Those special purpose legal entities should comply with certain legal requirements with regard to personnel and required annual expenditure, while their gross profits shall be computed on the basis of a 7% profit margin imposed on their annual expenses.
The legislative developments introduced under the new Law, making the regime friendlier, can be summarized as follows:
Expansion of qualifying services to offer advisory services to trustees
Beyond mere management and administration of the family wealth, Greek Family Offices will onwards be authorized to provide advisory services to trustees of trusts settled by, or for the benefit of, covered individuals (and their families), whose wealth is managed under this regime. This expansion recognizes the global nature of modern family wealth structures.
Reduction of annual expenditure requirement
One of the most notable changes is the drop in the minimum annual expenditure from EUR 1 million to EUR 500,000 (the proposed under the first version of the Draft Bill minimum annual threshold of EUR 250,000 had not been maintained in the final version of the law). High operating costs had previously raised concerns about the regime’s accessibility. Lowering the threshold encourages a broader range of families to consider setting up a Greek Family Office.
Shielding from place of effective management rules
A key development is the explicit confirmation that Greek Family Offices providing services to foreign legal entities owned by covered individuals or their family members will fall outside the scope of the Greek place of effective management (PoEM) anti-abuse rules. This addresses longstanding concerns of inadvertently triggering Greek tax residence for foreign asset-holding entities.
The aforementioned developments aim at building on Greece’s existing family office framework by increasing legal clarity, flexibility, and overall attractiveness for Greek high-net-worth individuals. It is envisaged that, with the PoEM issue addressed and a workable annual expenditure threshold, added to the preserved special VAT exemptions for services rendered to individuals (and the entities owned by them), those revisions significantly enhance Greece’s competitiveness in the international single family office market.