Greek 7% Income Tax for Pensioners - All You Need to Know
Dec 16, 2024
How it works and why it is a game changer, including practical examples for UK retirees
Retiring abroad has never been more appealing, especially with Greece’s 7% flat tax rate on worldwide income, valid for an incredible 15 years! Whether you’re seeking financial savings or a better lifestyle, this program could be your next step.
What Is the 7% Tax Scheme?
Greece offers a 7% flat tax rate on all worldwide income to eligible pensioners. This tax incentive is valid for 15 years, making it one of the most attractive programs for retirees looking to maximise their savings while enjoying the Mediterranean lifestyle.
Who Is Eligible?
To qualify, you must:
Receive a pension from government, insurance bodies, or occupational schemes.
Have not been a tax resident in Greece for at least 5 years.
Transfer your tax residence from a country that has an administrative cooperation agreement in taxation with Greece (most countries qualify, including the UK).
How Does It Work?
Tax is paid annually in a lump sum based on your tax return.
Payment is due by July each year.
How to Apply
Applying for the Greek 7% tax incentive is a detailed process:
The application requires non-standard forms that vary by individual circumstances.
It’s highly recommended to work with an experienced accountant or tax advisor to ensure everything is submitted correctly.
Applications must be submitted by March 31 of the tax year in question, or they roll over to the next year. For example, if the application is submitted by March 31, 2025, and subsequently approved, the special tax regime will apply to the 2025 tax year. However, if the application is submitted just one day later, on April 1, 2025, the regime would only take effect starting from the 2026 tax year, whereas for 2025, you would be subject to normal taxation, which is much higher than 7%.
The application process is reviewed within 60 days. If additional documents are required, you’ll be notified during the 60-day review period.
👉 Don’t wait—applications close March 31st for the same tax year!
Q&A: Common Questions
1. Are Taxes Paid Only in Greece?
This depends on your country of origin and whether it has a dual tax agreement with Greece.
The UK has a double taxation treaty with Greece, meaning taxes are paid only in Greece under this scheme, provided you do not spend enough days in the UK to automatically qualify as a tax resident.
2. Are All Pensions Eligible?
Not all pensions can be transferred for tax purposes. Government pensions (e.g., civil servants) are often excluded and remain taxed locally. However it is important to check for each country, as there might be exceptions. For example, while NHS pension is usually always taxed in the UK, for Greece it is possible to benefit from the dual taxation rules. Reach out to discuss your specific circumstances.
3. Are All Types of Income Included?
• Included: Beyond pensions, investment income is usually covered under the 7% scheme.
• Excluded: Rental income is typically taxed in the country where the property is located.
📌 Recommendation: Consult with a tax advisor to ensure your unique income streams are accounted for correctly.
4. What Should I Consider Before Changing Tax Residency?
It’s critical to plan ahead to maximise your benefits. Some assets which are tax-free in your original residency country (like an ISA in the UK) may become taxable under Greek rules. In some circumstances, it may be best to some make financial moves (e.g., selling assets) before applying for the program. Same as above, it is key to get support and plan ahead.
5. Can You Provide an Example?
Sure! Here’s a quick example:
• If you earn a yearly gross pension of €50,000 and currently pay taxes of €12,000, your effective tax rate is 24%.
• In Greece, under the 7% tax regime, you would pay €3,500 annually.
• This results in a yearly tax saving of €8,500, which adds up to €42,500 over 5 years and €127,500 over 15 years (the maximum duration of this incentive).
This calculation only includes savings on pension income tax, but the benefits could increase if you earn additional income, such as from investments. And it doesn’t even factor in the savings from Greece’s lower cost of living. Imagine all the extra experiences and comforts you could afford with those savings! 🌞
For tailored examples and to learn more, reach out for a complimentary first consultation.