Global Tax Alert (News from Transfer Pricing) | 13 September 2013
Recent transfer pricing regulatory developments in Greece
Several major transfer pricing legislative changes have taken place recently in Greece. This Alert summarizes the most recent developments.
On 29 August 2013, the Greek Parliament approved a bill that extends the deadline for disclosing to the tax authorities the intercompany transactions put in place and also excludes from the documentation requirement transactions with affiliates below a certain threshold.
Moreover, the new Tax Procedures Code promulgated July 2013 and effective 1 January 2014, includes the possibility of an advance pricing agreement (APA) for agreeing with the tax authorities in advance the transfer pricing methodology to be used in setting the prices for cross-border intercompany transactions along with the critical assumptions, under which such methodology will remain valid.
The Tax Procedures Code also introduces a general anti-avoidance rule that makes the recognition for tax purposes of contractual arrangements dependent, among other factors, on whether such arrangements make sense from a commercial point of view and whether they conform to the actual conduct of the parties and effective allocation of risks.
Extension of the deadline for submission of the transfer pricing summary information table and threshold for the documentation of intra–group transactions
Pursuant to the recently introduced legislative amendments to the transfer pricing documentation legislation in force, the documentation must be prepared by the end of the fourth month, following the financial year end, as opposed to the 50 day deadline from the financial year end previously in force.
Within the same 4 month deadline, taxpayers must submit electronically with the General Secretariat of Informative Systems (GSIS) of the Ministry of Finance a Summary Information Table (SIT) regarding their intercompany transactions, information about the Group they belong to, the functional and risk profile of their business, as well as a short description of the transfer pricing method applied in each case. The obligation to submit the SIT applies for financial years ending from 31 December 2012 onward.
Moreover, if the deadline to prepare the transfer pricing documentation file and submit the SIT ends before or on 19 September 2013, such deadline is extended to 20 September 2013. Hence, for financial years ending 31 December 2012 through 19 May 2013, the deadline to submit the SIT is reset to 20 September 2013.
Penalties regarding late filing or non-filing of SIT remain the same, i.e., up to €10,000 in the former and up to €100,000 in the latter case.
The legislative amendment also excludes from the documentation requirement and the SIT submission obligation intercompany transactions that do not exceed €20,000 with the same group affiliate during the financial year. If there are several transactions of the same nature with the same group affiliate, these are aggregated in order to determine whether said threshold is exceeded. Moreover, companies, whose intercompany transactions do not exceed cumulatively €200,000 (or €100,000 for those with combined turnover of all group affiliates of up to €5,000,000), remain exempt from the obligation to prepare transfer pricing documentation and submit SIT. Pursuant to the applicable provisions up to the point when the Tax Procedures Code will enter into force (1 January 2014), the €100,000 or €200,000 limit for the exemption from any documentation obligation is considered on the basis of whether the turnover of all related parties exceeds €5,000,000. According to the provisions of the newly introduced Code, only the turnover of the local entity will be considered.
The Tax Procedures Code provides from 1 January 2014 the possibility of an APA. An APA will cover any relevant criteria used for the determination of the intra-group pricing. These criteria mainly include the transfer pricing method, the comparable data to be used and any relevant adjustments to be made as well as the critical assumptions under which the transfer pricing methodology approved will remain valid.
An APA term cannot exceed four years and retroactive effect will not be possible.
The Tax Procedures Code does not exclude the determination of the pricing or margin from the APA procedure unlike what was previously stated, in L.4110/2013, by which the APA procedure was initially introduced.
The APA may be revised, revoked or cancelled in case the taxpayer does not comply with the terms thereof or the critical assumptions change or are proved incorrect or in case of a different outcome arising in the context of the mutual agreement procedure pursuant to the relevant bilateral tax treaty or in the context of the convention of the member states of the European Union on the correction of profits of associated enterprises.
Finally, a decision by the Secretary General of Public Revenue will provide clarifications and guidance for the application of the APA procedure.
Tax Anti-Avoidance Rule
The Tax Procedures Code introduces a general anti-avoidance rule for the first time in the Greek tax law. Said rule, whose application scope seems rather broad, seeks to capture cases where taxpayers make use of artificial structures without any underlying commercial substance and that have been implemented for tax avoidance purposes and lead to the generation of tax advantages.
In cases where the rule is deemed to apply, the authorities may impose taxes while disregarding the artificially created structure.
Indicative criteria in order for an arrangement to be considered as artificial are included in the new provision, such as arrangements that are not in line with ordinary business practices and tax benefits that are not proportionate to the risks assumed.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Business Advisory Solutions S.A., Athens
- • Stefanos Mitsios
+30 210 2886 363
- • Alexandros Karakitis
+30 210 2886 415
- • Christos Kourouniotis
+30 210 2886 378
EYG no. CM3801