Greece’s Tax Authority issues guidance on COVID-19 and Transfer Pricing

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EY Global

Executive summary

The Greek Independent Authority for Public Revenue (IAPR), following the relevant Organisation for Economic Co-operation and Development (OECD) Guidance,has proceeded with the issuance of Circular E. 2054/10.03.2021 to provide guidance on the transfer pricing implications of the COVID-19 pandemic (the Guidance).

The Guidance addresses the four key issues analyzed in the OECD Guidelines, including:

  • Comparability analysis

  • Losses and the allocation of COVID-19 specific costs

  • Government assistance programs

  • Advance Pricing Agreements (APAs)

The Guidance issued by the IAPR essentially constitutes a concise summary of the OECD Guidance and is a positive step towards strengthening local transfer pricing rules by demonstrating that the local tax authorities comprehend the unprecedented effects of the pandemic on the economic environment.

This Alert summarizes the provisions on the four key issues.

Detailed discussion

Comparability analysis

Guidance is provided for performing a comparability analysis, i.e., how the taxpayer should determine the existence or non-availability of comparable data and/or determine the potentially comparable transactions/activities.

  • For the purpose of the comparability analysis of the controlled transactions for fiscal year (FY) 2020, information on the impact of the pandemic on the controlled transactions can be drawn indicatively from: (i) changes in the sales volumes; (ii) comparison of the budgeted/forecasted and actual data on sales; (iii) costs and profit margins; (iv) information on the incremental or exceptional costs borne by the parties to the controlled transaction or by the Multinational Enterprise (MNE) group as a whole; and (v) comparison of industry data relating to the effects on sales, costs and profitability.

  • Given the unique and unprecedented nature of the COVID-19 pandemic and its effect on economic conditions, a comparability analysis that is based on information from a prior financial crisis (e.g., 2008-2009) is not recommended.

  • The application of more than one transfer pricing method may prove useful without, however, being required.

  • While the principles outlined in the OECD Guidelines regarding the use of multiple year data and averages remains applicable, it may be appropriate to refer to separate testing periods for the transactions that took place during the pandemic as long as this is justified for comparability purposes.

  • When a taxpayer rolls forward an existing set of comparables to cover FY2020, the appropriateness/comparability of such existing comparables should be reviewed in the course of the benchmarking update process.

  • Loss-making comparables that satisfy the comparability criteria may be appropriate to be included in the set of comparables.

It is noted that any comparability adjustments should be quantified and adequately justified in terms of their appropriateness and necessity.

Losses and the allocation of COVID-19 specific costs

Limited-risk entities

It is provided that limited risk entities generating losses may be in line with the arm’s-length principle, to the extent that this accurately reflects the functional analysis, and more specifically the allocation of risks between the parties to an arrangement. Consideration should be given to whether a company is taking consistent positions on the allocation of functions and risks pre- and post-pandemic.

Contractual arrangements

To the extent that it is demonstrated that this reflects third-party behavior under comparable circumstances, related parties could seek to renegotiate their intercompany agreements and/or their conduct in their commercial relationships, or invoke force majeure clauses in order to suspend/defer or be released from the obligations arising by the latter. It is explicitly stated that the existence of a COVID-19 force majeure clause is not sufficient and the basis for renegotiation should be adequately justified.

Exceptional costs

A similar approach should be followed when determining how exceptional costs, arising from the COVID-19 pandemic, should be allocated between related parties; they should be borne by the party assuming the respective risks and functions. Moreover, guidance is provided on which costs may be considered as exceptional and not as recurring operating expenses, on potential adjustments for accounting purposes to address exceptional costs as well as on the issue of cost recharges without the application of a mark-up in the context of the comparability analysis.

The relevant interpretation on the treatment of exceptional costs and accounting adjustments constitutes a positive development as these items are sometimes questioned during tax audits.

Government assistance programs

Government assistance programs are considered to be part of the market conditions and an indication of the economic conditions in which businesses operate. Therefore, they should be part of the transfer pricing documentation and should be analyzed both in the context of the functional and of the comparability analyses for the identification of comparable companies (e.g., for purposes of determining the geographical criterion, for performing comparability adjustments, for addressing any differences in the accounting treatment of government assistant by the tested party, as well as the comparable companies).


Acknowledging the potential impact of the COVID-19 pandemic in the context of APAs, the guidance encourages taxpayers and tax authorities to adopt a constructive and collaborative approach to resolve relevant issues as summarized below.

In relation to existing APAs

Unless a condition leading to the cancellation or revision of the APA has occurred, existing APAs and their terms should be respected, maintained and upheld by the parties. Revision or cancellation may be an appropriate response where there has been a material change in the conditions noted in a critical assumption in the APA. In such cases, the APA may be revised for the period and the covered transactions that are materially affected by the COVID-19 pandemic.

Where a company considers that material changes in economic conditions lead to the breach of one or more of the critical assumptions, it should notify the tax authority in a timely and justified manner (the guidance issued provides for indicative documentation in this respect).

In relation to APAs under negotiation

Companies may request the revision of filed APA applications as long as this is justified. Furthermore, consideration could be given to filing a separate APA application covering the COVID period, or including a clause permitting the revision of the agreement of an annual basis.


The consequences of the COVID-19 pandemic on the transfer pricing obligations of businesses for FY2020 as well as for subsequent fiscal years, constitutes a complex exercise and the guidance of IAPR provides useful guidelines for the analysis of some of the main effects of the COVID-19 pandemic on intra-group transactions. Companies, thus, should in a timely manner consider one or more of the following actions:

  • Review their transfer pricing policies.

  • Confirm through the transfer pricing in place that the economic effects of the pandemic are properly allocated among the group entities and that the current transfer pricing documentation approach remains appropriate.

  • Confirm that the profitability of the tested party is appropriately calculated.

  • Evaluate the necessary actions vis a vis existing or ongoing APAs.

All of the above should be considered in the light of the obligation of MNEs to present consistent transfer pricing positions pre- and post-pandemic.

For information with respect to this Alert, please contact the following:

Ernst & Young Business Advisory Solutions S.A., Athens

  • Stephanos Mitsios, Head of Tax 
  • Spyros Kaminaris 
  • Christos Kourouniotis 
  • Christos Bourkoulas 

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.