Greece: New law introduces amendments to taxation of insurance funds and pension plans

New Law 5078/2023 (FEK A' 211/20.12.2023) introduces amendments to the taxation of professional insurance funds (TEA) and group insurance pension plans and equalizes their tax treatment.

The following tax regulations now apply equally to TEAs and group insurance pension plans:

• Insurance premiums/contributions of employer/employees are not considered taxable employment income up to an amount which does not exceed 20% of the employee’s gross employment income (which includes any productivity bonus). However, this threshold does not apply to already existing defined benefits plans.
• Benefits paid by TEAs or group insurance pension plans as a lump sum or as periodic payments (i.e., pension) are taxed at progressive rates (depending on the years of participation in the insurance plan). More specifically, the rates for lump-sum payments are: 5%, 10%, 15% and 20% for years of participation over 20, from 10 to 20, from 5 to 10, and up to 5 respectively. For periodic payments. such rates are reduced by 50% and thus the above rates become 2.5%, 5%, 7.5% and 10%, respectively.
• The rates are increased by 50% in case of early redemption.
• For those insured after the age of 55, the above-mentioned rates that apply in case of participation in the plan for up to 5 years (i.e., 20% for lump-sum payments and 10% for periodic payments) are increased by 5% for each year below the 5-year insurance threshold.
• The new rules apply to contributions paid and income earned from 1 January 2024, but already accumulated amounts until 31 December 2023 are taxed according to the previously existing regime.

Read a January 2024 report prepared by the KPMG member firm in Greece