Greece is trying to entice European high-net-worth individuals and pensioners with its low tax rate. The country is straightforward about its goal of encouraging pensioners to relocate to Greece.
About the Initiative
The idea is currently still just an initiative, but if passed, it would give foreign retirees a flat income tax rate that is only 7 percent if they change their tax residence to be in Greece. This incentive would last for a decade.
The Greek finance ministry’s head of tax policy, Athina Kalyva, is entirely upfront about the goal of this initiative and the desire to have pensioners move to Greece. Kalyva explained that the country is beautiful with a good climate, making logical sense for them.
The idea behind the initiative is that the pensioners will come due to the rate, then hopefully spend most of their time within the country. The ultimate goal of this initiative is to expand the tax base of the country. Those in favor hope that the pensioners would choose to buy or rent a home in Greece.
The flat rate of 7 percent offered in the initiative is not limited to just the pension income. It also applies to other income of the pensioners, such as dividends or rental income.
Part of the plan also hopes to appeal to the Greek diaspora around the world, which includes 5 million people with sizable ties to Greece. Given that the country has lost an estimated 500,000 citizens during its debt crisis, there are plenty of people to bring back.
There will also be some conditions on the initiative, and officials indicated that those from “dodgy countries” will not benefit from it. The initiative will be restricted to those from countries with double taxation treaties with Athens. Additionally, they must choose to live in the country for more than half the year.
The Ultimate Goal
While one of the goals is to bring more pensioners to Greece, the ultimate purpose is to revitalize the economy and upgrade Greece’s growth models. As mentioned, those behind the initiative hope that retirees will strengthen the economy in other ways.
Greek officials want to work to rebuild the country’s reputation as well as take advantage of what the country has achieved. They expect labor and capital to move to areas of the country that did better once the pandemic is under control. Hopefully, this initiative can assist with the recovery.
Similar Policies in Other Countries
During the financial crisis, Lisbon came up with a similar offer, offering those who relocated their funds a decade of pensions without taxes. This led to wealthy Europeans from other countries to consider it, with many moving to Portugal.
That policy, however, did not come without its problems. Other European Union members argued that Portugal was using a tax regime that was discriminatory. Locals were also upset by the policy. That led to the country making changes and announcing a 10-percent tax on pension income from foreign sources, applied to non-habitual residents.
What Officials Expect
Despite Portugal’s problems, officials behind the Greek initiative do not expect locals to protest the scheme. They point to the fact that the country is already austerity-struck and highly-taxed. Additionally, there would be no competition for jobs from the change, since pensioners do not work anymore. Instead, the newcomers would be boosting the economy.
Platon Tinios, a University of Piraeus economics professor and Greek pension reform expert, told the Guardian that there are some solid points in the idea. For it to work well, pensioners would need easy access to airports to visit relatives, golf courses, and decent health care.
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