INSIGHT: The New Greek Tax Bill – Pragmatic Pro-Growth Reform?


The title of the bill sounds quite promising: a “Tax reform with a growth dimension for Greece of tomorrow.” In fact, the new legislative initiative of the Greek government aims at further improving the country’s economic climate by providing working individuals and, above all, businesses, with what they have consistently been asking for—lower taxes. If this would be sufficient to boost growth in a gradually recovering Greek economy, this is the time to find out.

Bundle of Tax Reliefs for Businesses and Individuals

The key points of the draft bill are:

  • The reduction of the corporate tax rate from 28% to 24% for profits of tax year 2019, aimed mainly at supporting small and medium-sized enterprises.
  • The introduction of a low tax rate of 9% for individuals, including freelancers, farmers, employees and pensioners (down from the applicable 22%). This reduction is expected to benefit not only those with incomes below 10,000 euros ($11,070), but all taxpayers, as their income will now be taxed on a more equitable basis. In addition, tax rates for higher incomes will also be reduced by 1%.

The new tax rates for income in tax year 2020 will be:

Income (euros)

0–10,000: 9%

10,001–20.000: 22%

20,001–30,000: 28%

30,001–40,000: 36%

40,001 and above: 44%

  • The tax rate on dividends will also be reduced from 10% to 5%, and a conditional exemption from capital gains tax for legal persons who are Greek tax residents is introduced.
  • A low tax rate of 10% for agricultural cooperatives is introduced.
  • The income tax advance payment is reduced to 95% (down from 100%) of the payable tax for legal entities (for tax year 2018).
  • Tax reliefs are introduced to support vulnerable taxpayers and enhance social protection, by providing (for income and transactions after January, 1, 2020):
    • an increase of the family’s tax credit by 1,000 euros for each child, regardless of their number;
    • an exemption from the solidarity contribution for all individuals with a disability rate of over 80%, irrespective of the type of disability;
    • a reduction of value-added tax (VAT) on child-related products, from the applicable 24% to the reduced rate of 13%;
    • a reduction of VAT on motorcycle helmets and child car seats from the applicable 24% to the reduced rate of 13%;
    • corporate bonds listed on a regulated market also gain an exemption from income tax and solidarity contribution.

Incentives to Attract Investment

In order to attract foreign investment, the relevant tax legislation is being clarified and simplified, while introducing an alternative method of taxing nonresidents’ income by paying an annual flat tax of more than 500,000 euros ($554,000).

An individual taxpayer who transfers their tax residence to Greece may be subject to the alternative taxation method for income derived abroad, provided that the following criteria are cumulatively met:

(a) the taxpayer has not been a tax resident of Greece for the previous seven/eight years prior to the transfer of their tax residence to Greece; and

(b) the taxpayer proves that they are is investing for themselves or their relative, or through their legal entity or legal entity in which or in which they hold, respectively, the majority of the shares or shares in real estate or business or securities or shares in legal entities based in Greece. The amount of this investment must be equal to or exceeding 500,000 euros. The relevant investment must be completed within three years of the date of the relevant application.

Condition (b) shall not be met in the case of individuals that have acquired and hold a residence permit for investment activity in Greece, as these will be subject to tax on their taxable income derived in the country.

If the taxable person is subject to alternative taxation for income derived abroad, an individual will pay a flat-rate tax, irrespective of the amount of income earned abroad, of 100,000 euros for each tax year. This taxpayer may apply for an extension of this provision to any of their relatives by paying a tax of 20,000 euros per tax year for each of them. This tax shall be payable in one installment and is not offset by other tax liabilities or any credit balances.

The application for transfer of tax residency subject to the alternative method of taxation of income derived abroad shall be submitted by the taxpayer to the tax administration by March 31 of each tax year. The application of this provision shall begin from the first tax year for which the taxpayer is required to apply and shall expire after 15 tax years.

Boost for Certain Sectors

In addition, measures are being legislated to boost the economy in important sectors contributing to the country’s GDP which have been severely affected by the recent economic crisis. In particular:

• VAT on buildings licensed from January 1, 2006 onwards, as well as capital gains tax on real property, is suspended;

• costs incurred from January 1, 2020 to December, 31, 2022 for services related to the energy, functional and aesthetic upgrading of buildings which have not already been, or will not be, included in a building upgrading program, shall be reduced equally over the four-year period by 40%.

Sustainable Development

Concrete tax provisions are introduced to promote sustainable development, such as:

  • the introduction of a package to promote the use of public transport and zero or low-emission vehicles, following best practice in the EU;
  • the strengthening of corporate social responsibility and employee benefits by providing a deduction from gross business income for expenses related to corporate social responsibility actions, and incentives for companies to choose to purchase or lease eco-friendly cars for their employees.

Reduction of Evasion

Lastly, a significant intervention in the direction of transparency and reduction of tax evasion is legislated by:

  • lowering the limit for transactions in cash from 500 to 300 euros. Purchases over 300 euros must be made exclusively online;
  • a new standard debt settlement mechanism ranging from 24 to 48 installments. Under the proposed arrangement, regular debts (income tax or ENFIA—the unified real property tax—VAT, etc) are regulated, regardless of income criteria, in up to 24 installments (12 currently), while extraordinary debts (such as inheritance tax) can be adjusted in up to 48 monthly installments, according to specific income criteria. The minimum installment will be 30 euros per month. Taxpayers who choose to adjust to more than 12 installments will incur a 1.5% interest rate increase. Debtors consistent with the regulation are exempt from paying an amount equal to 25% of the interest: however, this exemption may not exceed the amount of the last installment;
  • an obligation of a required amount of a taxpayer’s annual expenditure to be performed by electronic means of payment (credit or debit cards, e-banking etc.), which is set at 30% of their real income from employment, pensions and business activity and up to the amount of 20,000 euros. The calculation of actual income shall not include the amount of the solidarity contribution. Any difference between the required expenditure limit and the declared amount will be subject to a 22% tax rate. Exemptions are also provided for senior taxpayers who face objective difficulties in using electronic payment instruments;
  • a revised regime for benefits in kind. Undertakings to employees or partners or shareholders or their relatives are included in the taxable income at their market value, provided that the total value of these benefits exceeds 300 euros per tax year, and only for the amount of the excess. The value of the concession of a vehicle to an employee, partner or shareholder by an individual or legal person or legal entity, for any period within the tax year, will be calculated and taxed as additional annual income as a percentage of the vehicle’s retail price (before tax).

Our Thoughts

Although not legislated in a particularly systematic way, the new provisions are a bundle of pragmatic but significant tax reliefs and facilitations for businesses and individuals. Nevertheless, a coordinated approach between the new Investment Law and the new draft bill is necessary to attract foreign investment into the country.

The positive political message of the draft bill must surely be accompanied by effective reform of the public administration, including the independent tax authority, in order to produce concrete results.

Planning Points

The draft bill has already gone through the parliamentary procedure and will enter into force in the coming days. Although the bill provisions related to individual taxpayers will apply for income to be derived after January 1, 2020, the majority of the business-related provisions will apply for income derived in the current tax year. This is clearly a choice in favor of investment and enterprises, aimed at improving the economic climate. However, the legal provisions need to be accompanied by effective implementation in order to produce positive results as soon as possible.

Nikolaos Theodorou is an Athens-based Attorney-at-Law, and co-author of Bloomberg BNA Portfolio for Greece.

The author may be contacted at:

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Bloomberg link : INSIGHT: The New Greek Tax Bill—Pragmatic Pro-Growth Reform? (



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