Attracting foreign investment and highly skilled professionals in the financial sector is becoming a top priority for the government, with the goal of establishing the country as a regional hub for investment fund management.
With an emphasis on attracting activities such as hedge funds, private equity, and alternative investment funds (AIFs), as well as on creating a broader ecosystem of financial and professional services, it has introduced a bill in Parliament focusing on the tax and regulatory treatment of international alternative investment fund managers and specialized professionals in the financial sector.
As indicated in the country’s “call for investment,” investment firms based abroad continue to be taxed at their place of incorporation, even if their executives or support structures operate in Greece. The presence of such activities does not automatically imply a transfer of tax residence or the establishment of a permanent establishment in the country.
New Framework
The provision incorporated into the omnibus bill of the Ministry of National Economy and Finance (YPETHOO) further stipulates that economic activity conducted in Greece will be fully taxed in accordance with the current national tax framework. Companies established in Greece are subject to the standard corporate tax rate, while employees are taxed on their total income and pay the required social security contributions.
The VAT regime and other tax obligations also apply as usual.
A special provision is introduced for executives who transfer their tax residence to Greece, under Article 5C of the Income Tax Code (ITC).
This regime provides for favorable tax treatment for up to seven years, while for specific forms of variable performance-based compensation, a reduced tax rate is provided under certain conditions.
Regional Hub
With the new regulation, the government aims to strengthen Athens’ position as a regional hub for alternative investment management by attracting specialized professionals and fund managers from the Middle East, Asia, London, and other international financial centers, as well as high-value-added activities in the investment services sector.
According to the ministry, the sector’s growth is not limited to the asset management firms themselves, but extends to a broader ecosystem of services that includes legal, auditing, tax, banking, custodial, advisory, and technology services, while also creating new highly specialized jobs.
More specifically:
- Foreign investment firms (based in the European Union and third countries under specific conditions) continue to be taxed where they are based.
- The new framework ensures that, if some executives relocate to Athens or if an office is established here to provide services to the fund manager, it is not automatically considered that the tax residence of the Manager, the investment entity, or the unit holders is “transferred” to Greece, nor does it create a permanent establishment for these entities in Greece.
- The foreign group is taxed abroad in any case, while any income generated in Greece (service offices, salaries) is fully taxed here. This avoids double taxation and provides the legal certainty that foreign managers need to choose Athens.
- Full taxation of all economic activity in Greece is provided for:
- Service offices established in Greece to provide services to affiliated companies/managers are fully taxed at the standard corporate tax rate.
- All employees are fully taxed on their salaries and pay the required contributions, while receiving the benefits and rights provided by Greek labor and social security laws.
- Corporate income tax and VAT are paid as required.
- Those who now transfer their tax residence to Greece, falling under the regime for incoming workers as defined in Article 5C of the Income Tax Code, with a time limit of 7 years and provided they are employed by a Greek entity with operating expenses of at least 3 million euros per year, will be subject to a 5% tax rate exclusively on the performance-based bonuses of management executives.
Previous Reforms
It is worth noting that this new legislative measure to attract foreign capital to the country builds on a series of reforms implemented in recent years.
With the aim of shifting investment interest from real estate toward the productive sector, industry, technology, and the “green” economy, the following was established:
- A new framework for Foreign Direct Investment, which introduced a special incentive scheme for investment projects up to 50 million euros. Funding comes exclusively from foreign capital and focuses strictly on manufacturing, industry, research and development, and artificial intelligence.
Furthermore:
- To address the excessive concentration of foreign capital in the residential real estate market, the “Golden Visa” program has been tightened and reformed. The minimum investment thresholds for real estate have been raised (up to 800,000 in high-demand areas), while incentives have been introduced to link residence permits to investments in startups (through Elevate Greece), in venture capital or Greek government securities.
- In line with European guidelines, the country passed a law to screen foreign direct investments for reasons of security and public order. The ultimate goal of the regulation is to create a secure and predictable environment for serious international investors. Specifically, control mechanisms were established in critical sectors such as infrastructure, energy, defense, and high technology.
- The current development law introduced “closed” thematic aid schemes, offering a stable tax environment and subsidies. A prime example is the “Major Investments” scheme, which offers significant tax exemptions and leasing subsidies for large-scale projects. It also provides for expedited application procedures through the Development Laws Information System.
- Tax incentives have also been established for the transfer of tax residency, to attract foreign tax residents (a flat-rate tax of 100,000 euros on worldwide income, provided that at least 500,000 euros are invested in Greece).