Does Greece Tax Foreign Income? 7% Pension Tax Incentive Explained

For retirees or individuals receiving a pension from employment or military service, Greece offers an attractive tax incentive: a 7% flat tax on foreign-sourced income.

This special taxation regime, outlined in Article 5B, allows foreign pensioners to significantly reduce their tax burden while enjoying life in Greece.

How does it work, and does Greece tax foreign income under this scheme? Let’s break it down.

Who Qualifies for Greece’s 7% Pension Tax?

To benefit from the 7% flat tax on foreign pensions and other overseas income, applicants must meet the following conditions:

• Non-Tax Resident Status: The applicant must not have been a Greek tax resident for at least five out of the previous six years before relocating to Greece.
• Residency Transfer from an Eligible Country: The individual must move their tax residency from a country that has a tax cooperation agreement with Greece. For example, both American and British citizens can transfer their tax residency, given the Double Taxation Agreements that exist in both countries.
• Application Deadline: Individuals who transferred their tax residency to Greece in the previous tax year can still apply within the designated period.

Tax Obligations & Benefits

Once approved, eligible pensioners will be taxed at a flat rate of 7% on all foreign-sourced income, regardless of the amount. The benefits of this scheme include:

• The special tax rate applies for 15 years from the year following the application.
• It covers all types of foreign-sourced income, not just pensions.
• Payments are due annually in a single installment.
• Participants can withdraw from the regime at any time by submitting a request.

Please note: failure to pay the full tax amount will result in removal from the program, and the individual will be subject to Greece’s general tax rules.

Frequently Asked Questions

Does Greece Tax Foreign Income?

Yes, Greece generally taxes foreign income, but under the 7% flat tax scheme, eligible retirees enjoy a significantly reduced rate. Greece has international tax treaties—known as Double Taxation Agreements (DTAs)—with many countries to prevent individuals from being taxed on the same income in both Greece and their country of origin.

How the 7% Tax Aligns with International Tax Treaties

Greece's Double Taxation Agreements ensure that retirees benefiting from the 7% tax rate will not be taxed again on the same income in their home country, provided that a DTA exists between Greece and that country.

Do US citizens living in Greece still have to file US tax returns?

The Greece-USA tax treaty covers income from employment, business, dividends, interest, and royalties. It helps avoid double taxation on personal and corporate income. The Foreign Tax Credit (FTC) system allows US citizens and residents to offset Greek taxes against their US tax liability. US citizens and Green Card holders must still file US tax returns regardless of residency. If you're residing in Greece but have income from the UK or USA, you may need to file tax returns in both countries but can claim tax relief based on the agreements.

Is Greece a Tax-Friendly Retirement Destination?

For retirees seeking an affordable yet high-quality life, Greece presents a compelling option. Not only does it offer a low 7% tax rate on foreign-sourced income, but it also provides a low cost of living, beautiful Mediterranean climate, and a strong expat community. Furthermore, foreign retirees who have shares in foreign companies can also benefit from a 0% tax on capital gains and a 5% tax on dividends by transferring their tax residency.

Final Thoughts

If you’re considering moving to Greece from the USA or another country with a tax agreement, this scheme could make retiring in Greece more financially appealing. With the right planning, you can enjoy low taxation, Mediterranean living, and financial peace of mind.

Consulting a Greek tax professional is highly recommended to ensure you meet all criteria and deadlines. For more information on the Greek tax incentives, and to see if you're eligible,  reach out to us by booking a free 15-minute discovery call.

Why Choose My Greek Expat Journey?

At My Greek Expat Journey, we assist expats from around the world in obtaining their residency permits and with handling paperwork. With a trusted network of top-rated accountants and lawyers, we ensure a smooth process free from scams. Our transparent communication, up-front fees, and quick responses make relocating to Greece stress-free.