Tax incentives to reverse brain drain
The Greek brain drain, that is the mass emigration of highly trained professionals, was intense and kept deteriorating year after year during the country’s economic crisis. Hundreds of thousands of young people left the country and their families in search of a well-paid job with development prospects and a working environment commensurate with their qualifications.
The phenomenon substantially weakened Greece’s economy and labor market, a fact that has been troubling successive governments.
The current government is trying to reverse the brain drain and turn it into brain gain by implementing regulations establishing a new way of taxing income from employee and business activity arising in Greece, for individuals who transfer their tax residence to Greece, with effect from January 1 of 2021.
Essentially, it is establishing tax incentives for people to return and transfer their tax residence to Greece, granting them a seven-year exemption from income tax and from the so-called special solidarity contribution for 50% of their declared income from salaried work and/or business activity arising in the country.
Of course, individual taxpayers must fulfill a number of conditions to take advantage of this regime and the accompanying tax incentive. These conditions must be met cumulatively.
Firstly, the individual concerned should not have been resident in Greece for tax purposes for five of the six years prior to the transfer of their tax residence to Greece. For example, someone wanting to transfer their tax residence to Greece today must have been resident for tax abroad since at least 2017 and up to the present day. Secondly, the transfer of tax residence must be from an EU or European Economic Area country or from a state with which an administrative cooperation agreement in the field of taxation with Greece is currently in force. Thirdly, the individual must declare that they will remain in Greece for at least two years and should be employed (salaried or otherwise) to provide their services in Greece, either to a local legal person or legal entity or to a foreign company that has a permanently established presence in this country.
Despite appearing daunting, the process for transferring one’s tax residence to Greece from another country as outlined above is straightforward and no longer features the bureaucratic complications Greece used to be associated with.
Elli Kominea is an economist and a tax accountant.
