The decisions of the Council of State (CoS 1445/2016, 1215/2017), which considered that it is possible for spouses to have a different tax domicile and therefore to submit separate tax returns, led the Tax Administration to review its position so far, according to which it was not possible to transfer the tax domicile of a single spouse abroad.
This change is reflected in the most recent decisions of the Dispute Settlement Division (DSD) and is mainly crystallized explicitly in the relevant decision of the Independent Authority for Public Revenue (IAPR) POL 1201/2017.
The DSD decision to transfer a spouse's tax residence abroad
Following these decisions, the Dispute Settlement Division has received an intra-corporate appeal from a taxpayer to transfer his tax residence abroad and at the same time submitting a separate statement from his spouse. The decision of the DSD referred to its reasoning and the decision of the Council of State C 1445/2016, which interpreted the concept and criteria of tax residence (article 4 par. 1 of law 4172/2013).
Specifically, the DSD reiterated that liable to income tax in Greece for his worldwide income is, inter alia, a natural person who has his residence in Greece, that is he has permanent and main real establishment, which he has made, according to his will, the center of his generally living relations and vital interests, which is an element determining the concept of residence.
As such, and not as an independent criterion for determining tax residence, a person's center of living relations and vital interests exists where that person develops his personal, economic and social ties.
In order to determine whether a natural person has a (or has, rather, shited his long-term) residence, account must be taken of all relevant factors such as, in particular, the presence of the house, the physical presence of the individual, the members of his family (only the spouse and his / her children are included), the place of employment, the place of the property, the place of the administrative links with the public authorities and bodies (insurance, professional, social), the place of development political, cultural or other activities.
Therefore, in order to establish the aforementioned tax liability of a natural person, the tax authority must make a special reasoned judgment as to whether that person is domiciled in Greece, in principle, the burden of proof of the facts which, in the light of the circumstances, adequately substantiate its existence.
Furthermore, in view of the fact that, based on the general social and moral perceptions of the time and according to the socio-economic data of the spouses, their separate residence is conceivable, a married natural person is not obliged to submit an income tax return in Greece, for the reason that he/she does not have his/her tax residence in the country, and there is not in any event a question of submitting a joint income tax statement, Article 67 (4) of Law 4172/2013, with his or her spouse solely because the spouse meets the criteria set out in Article 4 (1) of that Law in order to qualify as a tax resident in Greece.
IAPR: POL 1201/2017
The IAPR then issued the decision 1201/2017 (Government Gazette B 4441 / 15-12-2017), which redefined the procedure and the supporting documents that the taxpayer who wishes to transfer to the tax authorities his tax residence in a foreign country, also specifying the case of the separate tax domicile of the spouses.
In order for a tax resident in Greece to transfer his tax residence abroad, he should submit to the competent authorities the relevant application, as well as supporting documents, which will result in its relocation.
The taxpayer's application (Forms M0, M1 and M7) and the written statement for the appointment of his tax representative in Greece must be made by the last working day of the first ten days of March of the year following the year of relocation, and other supporting documents may be submitted by the last working day of the first 10 days of September of the year of the submission of the application.
The supporting documents required include:
(a) A certificate of tax residence from the competent tax authority of the State where the taxpayer states that he is a tax resident of that State. If the taxpayer is established in a State with a Double Taxation Convention (hereinafter referred to as the DTC), he may provide - instead of the attestation - the relevant application for applying the DTC where the tax residence certificate (bilingual forms) is incorporated or
(b) If the competent tax authority does not provide for the above, a copy of the settlement of the income tax return or, in the absence of a settlement, a copy of the relevant income tax return submitted to the other State as a resident taxpayer.
(c) If it is not possible to produce some of the above documents (under a)or b) because the foreign tax authority is not able to issue them, a certificate from any other public or municipal or other recognized authority, which will prove the permanent and stable establishment of that person in the other State.
In addition, the taxpayer must also provide, as appropriate, the following:
Documentation proving the date of departure and placement in the country of residence to establish that he has completed at least 183 days in that country during a tax year, that is to say, in the year preceding that in which the change is requested. These documents may be, alternatively and indicatively, documents relating to taking up paid employment, taking up a professional activity in that country and making it subject to the insurance legislation of that country, registration in a country register, rental, registration or attendance at schools children in that country.
Instead of the above supporting documents, the taxpayer may submit tax residence certificates from the country in which he declares a resident of the two previous years from the year in which the change request is made.
Change of the spouse's tax residence
In particular, if one of the spouses asks for a change in his/her tax residence and the other remains a tax resident of Greece, in addition to the above documents, additional and cumulative documents must be provided, together with the following documents, which show that the claimant the change is indeed outside of Greece and has organized his or her life abroad in a permanent or lasting way:
- 3 points of proof for his employment abroad, proving the permanent or long-term nature of employment,
- 3 points of proof on the existence of a bank account abroad,
- 3 points of proof on the existence of owned or leased housing and accounts of services of general interest abroad and
- 3 points of proof on the acquisition of a tax, insurance or equivalent register abroad (e.g. social security).
These foreign public documents (other than DTC application forms) are legally translated and legalized (apostille stamp, visa by the Greek consulate, etc., as the case may be).
The competent tax authority checks the completeness and adequacy of the file submitted by the taxpayer in accordance with the above and is required to give its opinion within two (2) months from the date of submission of the supporting documents.
If the application for change of tax residence is accepted, the taxpayer is "transferred" to the Tax Office of the Foreign Residents with a date of change indicated by the taxpayer in Form M1. If the taxpayer is liable to submit an income tax return, he/she may submit it as a tax resident abroad at the latest by the end of the tax year following the year of departure.
If, on the contrary, his application is rejected (explicitly or tacitly after a period of two months), he has the right to file an Intraday Appeal and further to appeal to the Administrative Courts.
Submission of Income Tax Statements
If the taxpayer submits the forms and produces within the prescribed period and in any case not later than the year the provided supporting documents but is not considered complete and sufficient, the taxpayer is informed by the Tax Administration that his request for transfer of his tax residence is rejected and the application with the attached forms and supporting documents, shall be placed in his/her file.
In this case, the taxpayer is required to submit a statement of income tax as a tax resident of Greece (declaring his worldwide income) at the latest by the end of the next tax year than the one for the transfer request, without imposing a fine of late statement.
If the taxpayer submits the forms and does not provide the required documents, he/she is informed that his/her request for transfer of his tax residence is rejected and the application with the attached forms and supporting documents is placed in hi/her file.
In this case, the taxpayer is required to submit an income tax return as a tax resident in Greece, which is considered to be overdue since the filing date of the income tax returns and results in the imposition of a fine.
Finally, if the taxpayer submits the forms and produces the due documents in due time, he is required to submit a statement of income tax as a tax resident of Greece or, if he/she is liable, as a tax resident of abroad, considered to be overdue by the final date of filing statements of income tax and results in the imposition of a fine.
As mentioned above, the Tax Authority is required to rule on the completeness and adequacy of the file within two (2) months from the date of submission of the supporting documents.
Applications and supporting documents submitted by 31 December of the year following the tax year of departure are normally received without sanctions and are considered, but still the the tax authority has room to make a decision within 2 months.
On the contrary, if the applications are submitted or the supporting documents are submitted after 31 December of the year following the year of departure, these will be examined in accordance with the procedure of POL.1177 / 14.7.2014 of the circular but with the supporting documents provided for in this Decision.
The taxpayer must keep all the documents required to prove his tax/her domicile abroad in the case of tax audit.
POLICY 1201/2017 applies to applications for changes in tax residence submitted in 2017 onwards and involving a change in the tax residence of a natural person for the years 2016 and following, respectively.
Taxpayers whose applications submitted in 2017 have been refused may re-submit such an application, which shall be dealt with in accordance with the specific provisions herein, provided that they comply with the conditions set forth herein.
The General Secretariat of Public Revenue Decision 1058 / 18.3.2015 is repealed from the entry into force of the above, i.e. from 15/12/2017.
Posted on the monthly magazine "The Accountant", March 2018 edition