Greece offers a 7% income tax rate to foreign pensioners

Most countries give tax incentives to young people – entrepreneurs with ideas, students looking to learn, unemployed scientists. Greece, though, has decided on a different approach, by making a play for Europe’s retirees.

Under the new bill, the foreign retirees who transfer their tax residence to Greece will pay a flat tax of seven (7%) percent on their global income. The measure obviously scopes to attract wealthy northern Europeans that search for a cheap retirement in warmer climes.

The retiree should fulfill two criteria in order to be included in this tax incentive. Firstly, he/she mustn’t be a Greek tax resident in the previous five (5) of the six (6) years prior to the transfer of his/her tax residence. Secondly he/she must transfer his/her tax residence from a state that has signed an administrative agreement on tax matters with Greece.

The incentive would be applicable for fifteen (15) years and any foreign tax paid for that income on the other state can be offset against 7% of Greek tax.

Greece is not the first EU state to devise such a scheme. Due to financial crisis, Portugal also set about luring foreign retirees with an offer of a decade of tax-free pensions. But it infuriated other EU states, who complained that the country was running a discriminatory tax regime. After incensed locals also lashed out, Lisbon announced that it will this year introduce a 10% tax on foreign-source pension income for “non-habitual residents”.

The difference though is that Greece will not only apply the flat rate to pensions, but to every source of revenue too.