Greece’s Tax Cut in Response to COVID-19
By: Miguel Ortega from Wardenclyffe, Inc.
After almost a year into the COVID-19 pandemic, almost every government has elaborated plans to counteract the economic crisis brought by the long-lasting pandemic. One of the most recent actions to make up for the crisis occurred in Greece, when Alex Patelis, economic advisor to the Greek Prime Minister Kyriakos Mitsotakis, announced a new tax incentive with the intention to attract those working from home. Additionally, this measure aims to compensate for the brain drain that Greece has suffered in past crises. The new law was passed by Greece’s Parliament in December and it is effective since the 1st of January 2021.
This law offers a 50% income tax cut that benefits Greeks who are living or working in a foreign country if Greece has not been their tax residence for seven of the past eight years, and if they return to their home country, also to employed or self-employed foreigners that move to Greece and make it their new tax base during 2021. The tax plan will be effective for a maximum of seven years. “We are targeting companies that want to open offices in Greece due to Brexit, Greeks abroad who want to return to Greece, digital migrants or tech companies; anybody or any company that wants to open an office in Greece,” Alex Patelis said.
During 2020 the income tax rate in Greece was a progressive rate ranging from 9% to 44%. The lowest rate applies on income not exceeding €10,000; a 22% rate applies on income higher than €10,000 but not exceeding €20,000; a 28% rate applies on income higher than €20,000 but not exceeding €30,000; a 36% rate applies on income higher than €30,000 but not exceeding €40,000; and the highest rate applies on income exceeding €40,000. Consequently, depending on the individual’s income is the tax rate that will apply to 50% of its income; there will not be restrictions on the level of income or type of work.
European Commission forecast shows that the GDP in Greece is set to drop by 9%, with an unemployment rate of 18%. Although the Greek government is one of the last European governments to take such measures, it is aiming to compete with northern European countries to promote employment, attract foreign companies, and recover from the brain drain that the country suffered through tax incentives.
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