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Giorgos Christopoulos: From Brain Drain to Brain Gain – a small tribute to expatriates abroad

Anna Dollari
9 Feb, 2023
expatriates abroad

expatriates abroad

expatriates abroad

The diary of a tax professional

The reason for our today's article is a recent response of mine to ERTNews and ERT1, and specifically to the four-hour daily news magazine "Syndeses", presented by the respected journalists Christina Vidou and Kostas Papachlimintzos.

There I was hosted and we spoke to expatriates who are abroad, who asked for critical issues regarding their taxes.
So together with the video that follows, we send our interest and thoughts to thousands of our mostly young fellow citizens, who as you know made the decision mainly due to the economic crisis to immigrate to another state abroad and look for work.
With ten useful questions - answers we tell them that at the taxheaven node we have done similar tributes many times and we answer every issue that they want to be informed more about and solve every question they have.

⦁ In recent years (almost a decade) a large number of our Greek citizens made the decision mainly due to the economic crisis to immigrate to another state abroad and look for work, where they live permanently there.
⦁ The term "brain drain" and the reality it describes, the flight of hundreds of thousands of young Greek scientists abroad during the years of the crisis, became part of the everyday vocabulary of the past decade and as a phenomenon is still troubling.
⦁ So the threat of brain drain continues to cast its shadow heavily over the Greek reality, a reality that it seems has not yet managed to leave behind some of the "sickness" of the recent past of the crisis and the memoranda.
⦁ It is estimated that approximately half a million, highly educated Greeks, aged 25-44, immigrated between 2008-2017 (data from the Bank of Greece). Of these, half were between the ages of 25-39, more than 90% were graduates and one in three was a woman." 
(see our related article: Tribute to the diaspora and Greeks everywhere – Why does the "Odyssey" of the suffering of the Greeks who live abroad not end? June 21, 2017, June 24, 2017, July 9, 2017 here on the hub.
So today we are making a small tribute to expatriates abroad with ten questions and answers:
Let's first consider the cases where we have an establishment abroad pending the non-change of tax residence.
⦁ Change of tax residence: a taxpayer who has already settled abroad, for what reasons should he change his tax residence? What are the advantages, or obligation at the same time, to transfer his VAT number to the D.O.Y. residents abroad;
The concept of tax residence for natural and legal persons is defined in the Income Tax Code (article 4) and is particularly important, since it determines under what conditions a person must be taxed on his worldwide income and submit a tax return in our country
In recent years, the tax administration has made a number of decisions regulating issues of taxation of foreign residents and the procedure for changing tax residence. (see regarding pol. 1201/2017 and how we arrived at it).
Of course, the framework has become stricter compared to the past, following the standards and guidelines of the OECD, but thanks to the crucial decisions of the CoE, important problems have been solved (such as with decisions 1445/2016 and 1215/2017, on the "unblocking" the legal difficulties and the "refusal" of the Tax Administration for separate declarations when the husband works abroad and the wife is a tax resident of Greece).

Suppose, then, that a person (a Greek man) decides to immigrate to another state in which he will be active and settled.
From the moment of relocation onwards the questions arise:
a. of which state is the natural person a tax resident?
b. how will it be taxed?

1on Regarding tax residence and worldwide income:
⦁ Following the standards of the OECD and the European Union, in the Greek tax law with the new Tax Law (Law 4172/213), in article 3, the term "tax residence" is introduced, in order to define the persons subject to the tax,
⦁ This is how the general rule applies in our tax law according to the OECD standards: "The tax residence determines the place where the taxpayers' income is taxed".
⦁ Tax resident abroad: he is taxed only on his taxable income, which arises in Greece and is acquired within a certain tax year (Article 3 of the Tax Code) and subject of course to the provisions of the relevant Double Taxation Agreement (DTA), if it exists. (note the SADF also sets the series of criteria that should be taken into account when two contracting states claim the same natural person as their tax resident, in order to resolve the dispute).
⦁ On the other hand, the taxpayer who has his tax residence in Greece is obliged to submit a tax return and declare all his income, whether it comes from Greece or from abroad, i.e. he is subject to tax on his worldwide income obtained within a certain tax year .
⦁ Consequently, Greeks who left abroad, if they do not transfer their tax residence, remain tax residents of Greece, they are obliged to declare and be taxed in Greece for all the income they acquire worldwide.

2on Regarding the obligation to submit an income tax return:
The resident of Greece who transfers his tax residence abroad, when he does not acquire real income in Greece, e.g. interest, rent, dividends, etc., does not have an obligation to submit a tax return in Greece.

3on Regarding the evidence:
Tax residents abroad do not have presumptions of subsistence under Article 31 of the Tax Code (that is, for example, they can have a holiday home or a car, or a boat in Greece, without being caught by a presumption of subsistence).
Also, the presumptions of acquisition of assets in Greece of article 32 of the Tax Code do not apply for tax residents abroad as long as they do not acquire income in Greece (interest, dividends, rents, etc.).

4on The tax resident abroad can remit sums of money through a bank in Greece, without having to justify these funds on the one hand and without being controlled for these movements (by the tax authorities) on the other hand.

5on The foreign tax resident, having income from sources in Greece (e.g. interest, dividends, capital gains, etc.), can apply the double taxation avoidance agreements (DTAs), which provide for the avoidance of double taxation.

6on The tax resident abroad who decides to return to Greece, can transfer funds within two years, without having to justify these funds and of course without being subject to taxation. (article 34, par. 2 of the Civil Code)

7on The tax resident abroad who decides to return to Greece, even if he does not transfer his funds to Greece and they remain abroad, will be able to justify them at any time in the future. On the contrary, someone who has not done the process of changing the tax residence will not be able to justify them. Let's not forget transnational agreements for mandatory, automatic exchange of information.

⦁ Until when can I apply for the change of my tax residence?

The application is submitted to the tax office to which it belongs and submits its tax return, no later than the last working day of the first ten days of March of the tax year following the year of departure for abroad, application (form M0) with attached forms M1 and M7 completed, as well as the necessary responsible declarations.
At the same time, and if they have them, they also submit the relevant supporting documents proving the tax residence.
Otherwise, the taxpayer should provide them no later than the last working day of the first ten days of September of the tax year following the tax year of departure.
Example: If someone left for abroad in 2022.
Let's say he settled in Germany on 30.06.2022 and therefore completed 183 days from the first day of his presence in Germany, he must submit his application for transfer of his tax residence by Friday 10 March 2023 which is his last working day first decade of March of the following year. Attention: On the contrary, if the applications are submitted or the supporting documents are submitted after December 31 of the year following the year of departure, they will be examined according to the procedure of circular pol. 1177/14.7.2014 but with the supporting documents provided for in Decision pol. 1201 /2017.

⦁ What are the supporting documents for the change of tax residence?

The change of the tax residence of a natural person tax resident of Greece, due to his moving abroad, presupposes the observance of a specific procedure and the submission of specified supporting documents to the competent DOU of the taxpayer, which will decide on the matter. In the event that the relevant request is rejected, the taxpayer may apply for annulment before the Council of State.
The required supporting documents are alternatively the following:
(a) Certificate of tax residence from the competent tax authority of the state where he declares tax residence, or instead a tax residence certificate (bilingual forms), if the taxpayer is established in a state with which there is a FTA. (usually in practice, if we do not have a certificate of tax residence but a certificate of tax residence, an employment contract or employer's certificate is additionally requested) or
(Β) a copy of the settlement of the income tax return or, in the absence of a settlement, a copy of the relevant income tax return, which he submitted to the other state as a tax resident of that state, in the event that the issuance of the above by the competent tax authority is not foreseen.
In the event that the taxpayer does not work abroad, either as an employee or as a self-employed person, etc. therefore there is an impossibility of presenting the previous ones, a certificate from any other public or municipal or other recognized authority must be presented from which the permanent and stable establishment of the of that person in the other state.
For the authenticity of foreign public documents, which have been drawn up on the territory of the foreign state, a Hague stamp (apostille) is required as well as an official translation into the Greek language either by an approved translation center (or the Translation Service of the Ministry of Foreign Affairs), or by lawyer.
(Other details for additional to the above supporting documents that he must provide on a case-by-case basis, see related in pol. 1201/2017).

⦁ What are the criteria for someone to be considered a foreign tax resident?

Acquiring a residence requires an actual establishment in a certain place (corpus) and the will of the person (animus) to make said place the center of his existence, his biotic relations, his material interests, the material of his life and his professional establishment
First counts in the country to be established the period of time that must exceed (183) days, cumulatively, during any twelve month period.
At the same time as we mentioned above, to acquire his permanent or main residence or his habitual residence or the center of his vital interests, i.e. his personal and financial ties in the Country where he will settle.

⦁ Do I have consequences if I do not declare my change of tax residence to the tax office, while I have settled and work abroad?

We said earlier that each taxpayer can have only one tax residence.
Many of those fellow citizens who have moved abroad confuse the concept of tax residence with habitual residence and permanent residence and this is obviously wrong.
The tax administration cannot know (ex officio) if someone has gone abroad, and he himself has not declared it and has not taken care of the change of his tax residence to the competent local tax office that submitted his declarations. Therefore, the Greek authorities will ignore that he is already a permanent resident abroad. In the register, the tax administration will still see him as a tax resident of Greece in accordance with the provisions of article 3 of the Tax Code - Law 4172/2013.
For this reason, he will not have any tax advantage and will continue to be taxed like the tax resident of Greece for worldwide income. But in practice it may also face a number of other possible consequences.
As an example, we mention that in order to transfer money from abroad to Greece, he must be able to justify it. And this cannot be done if he remained a tax resident of Greece and did not declare the worldwide income in Greece. And there, of course, the consequences can be very serious.

⦁ Will I have double taxation both abroad and in Greece, after I normally transfer my tax residence abroad?

No. There is no double taxation.
In any case with the countries with which Greece has concluded an agreement to avoid double taxation of income, it is foreseen for each source of income where it will be taxed.
Most DTAs follow the OECD model. Nevertheless, when completing the foreign resident's declaration in order to decide in which category to include an income from the home country, in order for it to receive the corresponding tax treatment, according to the corresponding provision of the Double Taxation Avoidance Convention (DTA), a necessary condition is to refer in each case to the corresponding article of the respective Agreement and to carefully examine the conditions referred to therein.
The same applies vice versa when we have a tax resident of Greece who obtains income from a source abroad.

As an example, we mention that SADFEs have three cases of income taxation, for each source of income separately:
1. Taxation only in the state of tax residence.
2. Taxation only in the state of origin of the income.
3. Taxation in both states with foreign tax credit.
But also with the countries with which there is no agreement to avoid double taxation, the Ministry of Finance provided a solution with Law 4172, which in article 9 provides for the crediting of the tax paid abroad (related law 1067/2015)

In this regard, we would like to remind you that the income obtained by natural persons who are tax residents in states with which Greece has concluded a double taxation avoidance agreement (DTA) and which results from certain incomes (goodwill from the transfer of securities issued by domestic business, dividends, interest, royalties) provided that they submit to the Tax Administration supporting documents proving their tax residence. (See also in my book "DATE ​​WITH THE IRS" I - Natural persons. Edition 2021 and 2022).

⦁ I have left Greece for many years and have not declared the change of my tax residence. What should I do;

If it is proven that the taxpayer is a resident abroad and provided that he is not considered a resident of Greece according to the provisions of our internal legislation, it is possible to change his tax residence from the current date, without the obligation to submit to the D.O.Y. . where the taxpayer appears as a resident of Greece, income tax returns with the income of foreign origin for the years he proved that he was a resident abroad.
Specifically, with the decisions of AADE, for previous years, the procedure of pol. 1177/14.7.2014 circular is followed, but with the supporting documents provided for in pol. 1201/2017 Decision of the Governor of AADE.

⦁ When does the tax resident abroad have to submit a tax return in Greece?

As we said before, foreign residents are only required to file an income tax return if they have real income in Greece. ATTENTION Even a minute of interest gives rise to this obligation!

⦁ I have a holiday home and a car in Greece, will I pay tax in Greece?

As we said above about proof of living, they do not apply to a natural person who has his tax residence abroad. For the property you will of course pay EN.F.I.A

⦁ Tax benefits and incentives for the repatriation of our alienated expatriates – From Brain Drain to Brain Gain: This is how the phenomenon can be reversed:

Greece has passed laws introducing new articles into the tax law (See related Tax Law - Law 4172/2013, articles 5A, 5B, 5C)
With these articles, the aim is to attract special categories of taxpayers to Greece, in order to transfer their tax residence to Greece and the repatriation of Greek tax residents abroad.
Related decisions and circulars on the alternative taxation of article 5A of the C.F.E.: E.2079/2020, A.1130/2020, KYA 147269 EX 2020, A.1036/2020
Relevant decisions and circulars on the alternative taxation of article 5B of the C.F.E.: A.1217/2020
Relevant decisions and circulars on the alternative taxation of article 5C of the C.F.E.: A 1087/2021 (Government Gazette BI 691/26.4.2021), E 2015/21.1.2021, E 2224/01.12.2021
Examples include:
Conditions for subscribing to the alternative taxation of article 5A of the C.F.E.

Inclusion if the conditions are met cumulatively:
⦁ was not a tax resident of Greece for (7) of the previous (8) years before the transfer of his tax residence to Greece, and
⦁ proves that he invests himself or his relative, or through a legal person or legal entity in which or in which, respectively, he has the majority of shares or shares, in real estate or businesses or securities or shares or shares in N.P. or N.O. based in Greece.
The amount of this investment cannot be less than 500.000 euros
The investment must be completed within three (3) years from the date of submission of the application.

Alternative taxation of article 5B of the C.F.E.
If the pensioner comes and settles in Greece, after having completed as a foreign resident (5) out of (6) years before the transfer of his tax residence to Greece, he pays tax every tax year independently at a rate of (7%) for the total of his income earned abroad.
Evidence Coverage:
For the taxpayer subject to the provisions of article 5B (pensioners), there is no express provision in case d of paragraph 2 of article 34 of the Tax Code regarding non-justification of the acquisition of imported foreign currency, as is the case for those subject to the provisions of 5A (subcase dd ').
However, the provision of sub-case cc' may apply, according to which, justification of the acquisition of imported foreign currency is not required, for persons who had resided abroad for at least five (5) continuous years and the claimed amount of foreign currency comes from deposits in his name or in the name of the other spouse in a bank account opened in an EU country or in a branch of a Greek bank abroad during the time they lived abroad or from their deposits - within one (0) year of moving them in Greece without this currency having been re-exported abroad.
Alternative taxation of article 5C of the C.F.E.
If he comes to work in Greece in a new position of salaried work, or for the purpose of exercising an individual business activity, he will be exempt from income tax for (50%) of his income from salaried work in Greece, for seven (7) consecutive fiscal years years and of course it will not have a presumption based on the residence or the passenger car for private use.
It is sufficient that he has completed as a foreign resident (5) out of (6) years before the transfer of his tax residence to Greece.
Non-application of presumptions for natural persons subject to the provisions of article 5C:
For the natural persons subject to the provisions of article 5C, no annual objective (living) expense arising from residences and cars for private use is applied. With circular E. 2029/2022 and decision A. 1087/2021 it was clarified that for these persons, "the annual objective expenditure, which arises based on residence (main and secondary) and/or passenger cars for private use (regardless of number vehicles)'.


*Georgos Christopoulos is a tax technician - economist, with writing and teaching experience, scientific partner of Taxheaven, member of the "mental Group G. Christopoulos and Associates", former TEI professor.
For communication: g.christopoulos@mental.gr
 See it in the following video: from the show "Connections" of ERT 1  https://youtu.be/VB8Snnq4ahk?t=14 

photo dimitrisvetsikas1969 / https://pixabay.com/ 


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Anna Dollari

Anna Dollari


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