Changes to the concept of permanent establishment under Article 6 of the Income Tax Code (ITC), and amendments to the alternative tax regimes for High-Net-Worth Individuals (HNWIs) and foreign pensioners.
An article by Ioannis Giannopoulos, Head of Tax Advisory Services, Crowe Greece
The recent Law 5313/2026 introduces, among other things, amendments to the Income Tax Code (ITC). This update concerns certain key tax provisions of critical interest, which are adopted with an emphasis on the following:
- Further enhancing the attractiveness of the special tax regimes for individuals—High-Net-Worth Individuals (HNWIs) and foreign pensioners (Articles 5A and 5B of the ITC).
- Providing certainty regarding non-exposure to a Permanent Establishment (PE) for regulated activities.
- Extending the preferential regime for the taxation of carried interest or performance fees to Alternative Investment Funds (AIFs).
Amendments to the HNWI and Foreign Pensioners Regimes HNWI και αλλοδαπών συνταξιούχων
The March 31st application deadline is abolished. The new application deadline is expected to be determined by a Decision to be issued by the Governor of the Independent Authority for Public Revenue (IAPR/AADE).
The lump-sum tax on foreign-source income (i.e., the flat tax of €100,000 for HNWIs or the 7% tax on foreign-source income for foreign pensioners) is payable by the last working day of December, instead of July as previously applied. Furthermore, for the HNWI regime, the obligation to pay the flat-sum tax for the first year within 30 days of the application's approval is abolished.
The deadline for the tax administration to review applications is also abolished [previously, this was "by the last working day of June" for the HNWI regime, and "within sixty (60) days" for the foreign pensioners regime].
Permanent Establishment (PE) – Exclusion of Facilities Used for Regulatory Compliance and Supervision
Changes are introduced to the definition of a Permanent Establishment (PE) under Article 6 of the ITC.
Specifically, the use of facilities in Greece solely for the purposes of regulatory compliance and supervision by competent authorities is explicitly included among the activities that no longer constitute a PE.
- Consequently, such facilities will not establish a PE in Greece, provided that their use is strictly limited to regulatory compliance and supervisory purposes, and
- Does not form part of the core business activities of the enterprise.
This amendment enhances legal certainty for regulated entities, confirming that establishing a presence in Greece for compliance purposes will not, by itself, trigger PE exposure. These provisions will apply from January 1, 2026.
Carried Interest or Performance Fees -Taxation regime for performance fees received by employees of legal entities established in Greece that provide services to alternative investment fund managers established in a European Union Member State or to equivalent investment fund managers established in third countries that meet specific supervisory requirements.
Income derived from carried interest paid, by virtue of a contractual right, to employees of legal entities established in Greece that provide services to affiliated Alternative Investment Fund Managers (AIFMs), is taxed as a capital gain at a flat rate of 15%. This applies to EU AIFMs or equivalent investment managers established in third countries, provided that (a) their statutory seat is not located in a non-cooperative jurisdiction within the meaning of Article 65 of the ITC, and (b) they are subject to supervision by a competent authority accredited by the International Organization of Securities Commissions (IOSCO).
Performance fees constitute a reward (in addition to the salary taxed under the general provisions of Law 4172/2013) of an uncertain and variable nature, dependent on achieving high performance in the investment portfolio, paid only if it exceeds a predetermined threshold ("hurdle rate"), and subject to the discretion of the employer or manager. Treating it as a capital gain aligns with its true nature. The reference to payment "by virtue of a contractual right" covers employees under dependent employment relationships. This regulation expands the scope beyond the members of the Manager's team in Venture Capital Funds (A.K.E.S.) to also include employees of legal entities established in Greece with whom a performance fee is agreed upon and paid.
Furthermore, a highly favorable flat tax rate of 5% is provided if the following conditions are met cumulatively:
- The individual is employed by a legal entity established in Greece and transfers their tax residence to Greece under the special tax regime of Article 5C of Law 4172/2013, and
- The legal entity incurs annual operating expenses of ≥ €3 million in Greece per tax year.
This respective favorable tax treatment applies for up to 7 years (matching the duration of the 5C regime of the ITC).
If the carried interest relates to a time period prior to the individual transferring their tax residence to Greece and prior to the commencement of the employment relationship with the legal entity established in Greece, the portion of income corresponding to that period is not subject to tax in Greece.These provisions apply from January 1, 2026.
AIFs – Tax Treatment, Place of Effective Management, and Permanent Establishment Implications
The tax framework for AIFs and their managers is clarified and updated, while also being extended to investment funds of third countries in alignment with EU and international practices. This aims to boost legal certainty and enhance Greece's attractiveness as an investment destination. A comprehensive framework is introduced regarding the tax treatment of AIFs, equivalent non-EU investment vehicles, and related services, alongside clarifications on the implications for the place of effective management and PE.
The provisions apply to EU AIFs and equivalent investment undertakings established in third countries, provided that:
- Their statutory seat is not located in a non-cooperative jurisdiction within the meaning of Article 65 of the ITC, and
- They are subject to supervision by a competent authority accredited by IOSCO.
It is clarified that:
- The management, the delegation of management or part thereof, and the portfolio management of such AIFs, when exercised in Greece, do not constitute a place of effective management in Greece.
- The same applies to foreign legal persons and entities in which these undertakings hold a direct or indirect participation of at least 95%, provided they operate exclusively for asset-holding or investment purposes.
- The relevant provisions of the ITC regarding the place of effective management do not apply solely by virtue of these activities.
In addition:
- The provision of the aforementioned services by legal entities established in Greece does not, by itself, constitute a PE in Greece for the respective AIFs, their managers, or affiliated entities.
- Portfolio management and investment advisory services provided in the ordinary course of business by Greek entities to eligible EU and non-EU AIF managers do not create a PE in Greece for those managers.
This framework confirms that foreign AIFs and affiliated entities remain taxable in their jurisdiction of establishment, while Greek entities providing the services are fully subject to taxation in Greece.
The provisions aim to enhance legal certainty and strengthen Greece's position as an investment management hub and related services.
Entry into force:
- Certain provisions for AIFs established in third countries apply to tax years beginning on or after January 1, 2025.
- The provisions regarding the place of effective management and PE apply to tax years beginning on or after January 1, 2026.