The Greece 7% tax for pensioners, also called the article 5B regime, is a great regime if you plan to retire in Europe.
It basically allows you to pay a fixed tax rate of 7% on your foreign income.
Greece’s 7% Tax Regime for Pensioners at a Glance
- 7% tax on qualifying foreign income like pensions, dividends and capital gains
- Valid for 15 tax years
- Must receive foreign pension income to qualify
- You can’t have been a Greek tax resident for five out of the last six tax years
- Actual benefit will depend on your type of income and the provisions of double tax treaties
What Is Greece’s 7% Tax Regime for Pensioners?
The 7% tax regime for pensioners in Greece allows you to pay a fixed tax rate on foreign income, including qualifying foreign pensions.
Thus, it excludes you from the higher Greek taxes for income that comes from abroad. Greek source income is still subject to the normal Greek tax rates.
In order to qualify for the regime, you need to meet certain conditions.
Who Qualifies for Greece’s 7% Pensioner Tax Regime?
If you want to qualify for the 7% pensioner tax regime you need to meet certain criteria.
Receive Foreign-Source Pension Income
The first condition is that you should receive foreign-source pension income.
What qualifies as pension income is fairly broad:
- Government pension
- Employer pension
- Payouts from professional pension funds
- Private pension products
- Life annuities
Yet, especially for the last two cases you need to make sure it actually qualifies. Depending on how the contracts are drafted, this could also be seen as investment income.
If you plan to qualify based on these type of payouts, I recommend getting an upfront assessment to make sure you do qualify.
Therefore, other recurring incoming (e.g. investment income from brokerage account) doesn’t qualify. Nevertheless, you could convert the invested capital to a qualifying annuity.
Become a Greek Tax Resident
This requirement is quite obvious but you need to become a Greek tax resident so you’re subject to the personal income tax rules in Greece.
In order to qualify as a Greek tax resident you need to:
- Live in Greece for at least 183 days during a 12 month period; or
- Have your centre of vital interests in Greece.
You can learn more about Greek tax residency in this article.
If another country also considers you a tax resident the provisions of the double tax treaty will determine in which country you’ll actually have to pay your taxes.
Satisfy the 5-out-of-6-Year Rule
In order to qualify for the benefits of the pensioner regime you can’t have been a Greek tax resident for five out of the last six tax years.
The reason behind this is that the regime tries to attract new taxpayers to the country rather than giving benefits to people who already live there.
Move From an Eligible Country
You need to move to Greece from a country with which Greece has an agreement on administrative cooperation for tax matters.
This are countries with which Greece has a double tax treaty but it’s broader than that. An agreement to exchange tax information, for example, is sufficient. There are also other type of agreements that qualify as well.
What Income Is Taxed at 7% in Greece?
The 7% tax has a broader application than just foreign pensions.
Once you qualify, the following income is subject to the fixed rate of 7%:
- Foreign pensions
- Foreign dividends
- Foreign interests
- Foreign capital gains
- Rental income from abroad
However, for any foreign income you always need to take into account the taxation of that income in the country of origin. We’ll discuss this in more detail when looking at the application of double tax treaties.
Any income from Greek source is subject to the normal tax rules.
How Are Foreign Pensions Taxed in Greece?
The tax implications can differ depending on the type of pension you receive. We’ll discuss the different types of pensions out there and the tax consequences linked to them.
Private Pensions
Private pensions are pensions paid to you directly by a former employer, a private pension fund or similar institutions.
By default foreign pensions are taxed at the progressive tax rates. These rates go up to 44%.
However, under the 7% tax regime, you only pay a fixed percentage of 7% in tax on foreign pensions.
Nevertheless, if your pension comes from abroad, you also need to take into account the taxes in the country of origin.
Luckily, most double tax treaties will grant the right of taxation to your country of tax residency with exclusion of the other country. This means that only Greece can tax the pension income and the country of origin should not levy any tax.
Yet, the payee of the pension might have to withhold taxes on the pension which you need to claim back through filing a tax return in the respective country.
State Pensions
A state pension is a pension you receive from the authorities after retiring. It’s a social benefit for which you paid social contributions during the years.
How much pension you’ll receive will depend on the rules of the country that grants the pension and for how many years you contributed. If you paid contributions in different countries throughout your career, it’s possible you receive pension payouts from different countries. The rules about when they are granted and the size of the payouts are country-specific.
State pensions fall under the standard rules. Accordingly, you pay progressive income tax rates unless you benefit from the 7% regime.
Nevertheless, also in this case you want to pay attention to the tax rules in the country of origin and the provisions of the double tax treaty. Normally, the outcome will be the same as for private pensions and you’ll only actually pay tax in Greece.
Government Pensions
If we speak about government pensions we refer to a pension you receive because you used to work as a public servant for the government instead of for a private employer.
Just like with a state pension, you’ll build up pension rights that are paid out by the government of a particular country.
In Greece, the same tax rules will apply to this type of income as it doesn’t distinguish between the fact if you receive a pension because you worked for a government or for a private employer.
However, for the application of the double tax treaty it does matter what the origin is of the pension. DTT’s will grant the taxation right of such a public pension to the government that pays out the pension. That’s a major difference with a state pension that you receive after working for a private employer.
Consequently, this pension will be subject to the tax rules of the country that pays the pension. Greece will have to exempt the income from tax.
Accordingly, you won’t really benefit from the 7% flat tax in this case as it doesn’t apply to this type of pension.
Lump-Sum Payments
Lump-sum pensions are pensions that are paid out all at once instead of on a recurring basis. This type of pension occurs most with private pension funds or insurance that you or your employer build up.
Accordingly, you might receive a big payout all at once instead of speak out over many years. In this case, the tax treatment is even more important as it is a one time taxable event and you don’t get to change the tax consequences afterwards.
Lump-sum pension payments can qualify for the 7% tax regime for pensioners. Yet, we do always recommend to have a specialist make an upfront assessment to ensure the payout falls within the scope of the rules. In that way you can avoid nasty surprises.
The double tax treaty does normally grant the taxation rights to your country of residency.
Nevertheless, you might have to provide some specific documents and proof to the institution making the payment to avoid withholding tax in the source country.
Do Double Tax Treaties Override Greece’s 7% Pension Tax?
Double tax treaties do override Greece’s 7% pension tax.
Double tax treaties are agreements between two countries that set out the rules about which country can tax which type of income.
These agreements are international law and supersede local law. Therefore, you need to take DTT’s into account for your tax assessment.
A perfect example is the case of a government pension received by a former public servant. The double tax treaty will grant the taxation rights for this type of income to the country that is paying out the pension.
Consequently, you’ll be subject to the tax rates of that particular country and Greece will have to exempt the income from tax.
Also for other types of income can a DTT have an impact. Another good example is the case of dividends. Dividend income is eligible for the 7% rate. Nevertheless, the DTT allows the country where the company is located to apply a withholding tax.
Accordingly, you might pay more tax than just the 7% that Greece levies. Greece will give you a tax credit for the tax paid abroad but with a maximum of the tax payable in Greece.
So, let’s say the country of origin applies a withholding tax of 10%. In this case, you won’t have to pay any additional tax in Greece because the tax withheld abroad is higher than the tax due.
How Much Tax Would a Pensioner Pay in Greece?
The amount of tax you would pay as a pensioner in Greece will depend on the type of income you receive.
Under the 7% tax regime you will basically pay 7% on most of your foreign income.
Let’s say you receive a foreign pension of €50.000 and dividends of €10.000 per year. In that case, your total taxable income is €60.000 and you’ll pay €4.200 (7% x €60.000) in tax.
However, it’s always important to check what type of income you’ll receive to check if this regime actually makes sense.
Another example clarifies this. Let’s say you only receive dividends for an amount of €50.000 per year. Under the pensioner regime you’ll pay €3.500 in tax (7% x €50.000).
However, the general tax rate for dividends in Greece is only 5% so under the general rates the tax payable would only be €2.500 (5% x €50.000).
Nevertheless, as already mentioned before, you also need to take into account the effects of double tax treaties and potential foreign taxes in the country where the income originates.
How Long Does Greece’s 7% Tax Regime Last?
If you qualify for the 7% tax regime in Greece you can benefit from it for 15 tax years.
After this period, you fall back on the normal income tax rules. This means that your pension income will be subject to the progressive income tax rates up to 44%.
Therefore, it’s recommended to review your tax position after the regime ended.
How to Apply for Greece’s 7% Pensioner Tax Regime?
If you want to apply for Greece’s 7% pensioner tax regime you need to take few steps which will discuss below.
Step 1 – Establish Eligibility
If you plan to benefit from the 7% pensioners tax regime in Greece you first want to ensure you’ll qualify.
You need to meet the following conditions:
- Receive a qualifying foreign pension
- Become a Greek tax resident
- Haven’t been a Greek tax resident in five of the last six tax years
- Move to Greece from an eligible country
Step 2 — Plan The Move
After making sure you’ll meet the criteria to qualify for the pensioner regime, you can start planning your move.
We won’t go into the practical details of getting a place to stay etc.
However, what is important is that you’ll benefit from the regime for 15 years. After that, you fall back into the general tax rules.
Accordingly, you might want to plan around this duration. If we’re close to the end of the year and you want to move, you might want to wait till the beginning of the next year to take full advantage of the regime for the full 15 years in total.
Step 3 — Establish Greek Tax Residence
As part of the process you’ll have to establish Greek tax residency.
You can do this by:
- spending 183 days over a twelve month period in Greece; or
- having your centre of vital interests in Greece (e.g. house, bank accounts, social circle)
Step 4 — Obtain the Necessary Greek Tax Identification / Registration
If you’re going to establish your tax residency in Greece you’ll also have to register yourself as a Greek tax resident and get a tax number.
You can make the application with the Greek authorities online or in person at a local tax office.
Step 5 — Submit Application
As this regime grants you particular benefits you need to file a specific application to qualify for it. You have to make the application with the Greek tax authorities (AADE).
When filing the application you will have to show that you meet the requirements. Thus, you need to include proof of your foreign pension and that you’re moving from an eligible country.
In the past there was a deadline that stated you had to apply before 31 March of the year but this deadline was removed. This makes sense as it made things hard for people who moved to Greece in the middle of the year.
Step 6 — File the Annual Tax Return and Pay Taxes
Obviously, the last step is to actually file your annual personal income tax return.
The deadline for filing your tax return is 15 July of the following year.
More importantly, you need to pay your tax by the last day of December of the tax year.
That means you need to track your income throughout the year and actually pay the tax before filing your tax return.
Missing the payment deadline can cause you to lose the tax benefit.
How to Become Tax Resident in Greece as a Pensioner
Becoming a tax resident in Greece as a pensioner is no different than for any other person.
You can either spend 183 days in the country over a twelve month period or establish your centre of vital interests in the country.
If you want to apply for the pensioner tax regime you’ll also have to file a specific application in addition to just meeting the requirements for tax residency.
What Other Taxes Do Pensioners Pay in Greece?
The 7% pensioner tax regime only applies to personal income tax on qualifying foreign income.
Therefore, if you have any Greek source income (e.g. rental from a local property) you’ll pay the normal income taxes on this income.
Moreover, when you buy a property you’ll still pay transfer tax and an annual property tax.
And, once you start buying goods and services you’ll obviously still pay VAT.
So, although the pensioner regime is interesting, it doesn’t mean you can avoid taxes altogether as it has a specific scope.
Is Greece a Good Place to Retire for Tax Purposes?
Greece is a great place to retire for tax purposes.
However, how beneficial exactly will depend on the different kind of income streams you’ll receive. If you receive a normal foreign pension, it’s a great deal. Yet, if you receive a pension after being a public servant you’ll depend on the tax rules of the source country of the pension.
Nevertheless, if you want to consider other places you can have a look at the full list of best countries to retire for tax purposes.
FAQ About Greece’s 7% Pension Tax
Let’s have a look at some frequently asked questions about Greece’s 7% pension tax.
Does Greece Really Have a 7% Tax Rate for Foreign Pensioners?
Yes, Greece does really have a 7% tax rate for foreign pensioners.
However, you want to ensure your income falls within the scope of the regime so it isn’t taxed at higher rates.
Moreover, you might need to take into account foreign taxes as well.
Who Qualifies for the Greek 7% Pensioner Tax Regime?
You qualify for the Greek 7% pensioner tax regime if you meet four requirements:
- Receive a foreign pension
- Move your tax residency to Greece
- Haven’t been a Greek tax resident for five out of the last six years
- Move to Greece from an eligible country
Is the 7% Rate Only for Pension Income?
The 7% rate is not only for pension income but basically for all foreign source income.
This includes amonst others:
- Foreign pensions
- Dividens from abroad
- Interest from abroad
- Foreign capital gains
- Rental income from abroad
How Long Can I Benefit from Greece’s 7% Regime?
You can benefit from Greece’s 7% tax regime for 15 tax years.
After those 15 years you fall back into the normal rules and you’ll have to pay progressive income tax rates on your worldwide income.
Do I Need to Become a Greek Tax Resident?
Yes, you need to become a Greek tax resident to benefit from the 7% pensioner tax in Greece.
You can become a Greek tax resident by:
- spending 183 days over twelve months in Greece; or
- establishing the centre of your vital interests in the country.
Can I Qualify if I was Previously Resident in Greece?
You can qualify is you were previously a resident in Greece but only if you were not a tax resident for five out of the last six tax years.
So, what is important is tax residency, not just residency.
Moreover, you can have already been a tax resident for one year in the past six years and still qualify.
Are Dividends Taxed at 7%?
Yes, foreign dividends are also taxed at the fixed tax rate of 7%.
Do note that this is actually not a benefit as the normal tax rate for dividends in Greece is only 5%.
Furthermore, you need to take into account withholding tax on the dividend in the country of origin of the dividend.
Are Rental Properties Taxed at 7%?
Foreign rental properties are taxed at 7% as it falls within the scope of the regime. However, Greek rental income is subject to progressive tax rates as it’s excluded from the regime.
Still, for foreign rental income you also need to take into account the income tax in the country where the property is located.
Greece will give you a tax credit for the taxes paid abroad. Practically, this means you won’ have to pay any additional tax in Greece if you already paid more than 7% in tax abroad.
Does Greece’s 7% Regime Override Tax Treaties?
No, Greece’s 7% regime does not override tax treaties.
Therefore, the 7% tax rate will only apply to income that is actually taxable in Greece. If you receive income that is taxable in the source country (e.g. rental income) you still have to account for the taxes in that country.
How Do I Apply for the Pensioner Regime?
To apply for the pensioner regime you need to file a special application with the Greek tax authorities (AADE).
Without this application, you won’t be able to benefit from this tax regime. As part of the application you will need to demonstrate that you meet all the conditions (e.g. receive foreign pension).
If you doubt that you’ll qualify for the regime, I recommend checking this upfront with an advisor.
Do I Need to Live in Greece for 183 Days?
You do not need to live in Greece for 183 days to benefit from the pensioner tax regime.
However, you do have to qualify as a Greek tax resident.
Nevertheless, you can also become a tax resident by making sure your centre of vital interests (e.g. house, social connections, etc.) are in Greece rather than in another country.
What Happens After the Regime Ends?
After the regime ends you will fall back in the scope of the general tax rules.
Practically, this means you’ll start paying progressive taxes on most of your income after benefiting of the regime for 15 years.
Accordingly, you need to reassess your tax situation if you don’t want to be hit with a major increase in your tax bill.
Is Greece Better Than Italy for Retirees?
Whether Greece is better than Italy for retirees depends on your personal preferences.
However, from a tax perspective they both offer an interesting tax regime whereby most of your foreign income is taxed at a fixed 7% rate.
Yet, you can benefit from the Greek program for 15 years while the Italian regime only grants you benefits for 10 years. Furthermore, you only qualify in Italy if you move to smaller towns in a specific region.
Do EU Citizens Have an Advantage?
EU citizen have an advantage because of two reasons.
The main reason is that because of the free right of settlement. That means that just because you hold a European passport you can decide to move to Greece with little conditions attached to it. You won’t have to apply for a specific visa to be allowed to live there.
Second, within the EU countries cooperate on fiscal matters. This means that when you move to Greece directly from another EU country you’ll meet the condition for moving their from an eligible country.
Do I Need to Be Permanently Retired?
You don’t need to be permanently retired to fall within the scope of the Greek pensioner tax.
You can still remain professionally active as long as you already receive a foreign pension.
However, you need to assess the tax consequences of this upfront. If you remain professionally active and you work from Greece, this income should be subject to the general Greek tax rules.