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Greece introduces APA system and modernises transfer pricing legislation

Greece has abolished the legislative transfer pricing framework developed by the Ministry of Development. The move aims to rationalise and modernise the rules by broadening the definition of related entities and introducing an advance pricing agreement.


Law 4110/2013, recently passed by the Greek Parliament, specifically focuses on:

Compliance with arm’s-length principle

· The definition of the term “related entities” is broadened. The criterion of the “substantial administrative or financial dependence or control” which was also used under the pre-existing regime for determining whether two entities were related, is no longer limited to cases where there is a participation to the share capital or the administration of one entity to another; the new provision implies that such a relationship could also exist even with no participation to the share capital or the administration of one entity.

· The obligation to comply with the arm’s-length principle is no longer limited to transactions concerning the sale of goods or the provision of services, but is extended to all types of intragroup transactions, such as loans, transfers of shares and real estate, etcetera.

· The following transactions now specifically fall within the scope of the transfer pricing rules:

· Loans granted to related entities;

· Transfer of real estate between related entities;

· Transfer of shares, parts and business sectors between related entities; and

· Transactions with related entities based in “non-cooperative” jurisdictions or in “favourable tax regimes”

Provisions regarding the computation of a deemed minimum value or capital gain no longer apply to intercompany transactions.

· No separate penalty is provided in case a transfer pricing adjustment is assessed by the tax audit. In such a case, the price difference is added to the taxable profits of the audited company, triggering the application of the standard corporate tax rate along with penalties for inaccurate filing of CIT return

Documentation requirements

· L.3728/2008 of the Ministry of Development is abolished, with the obligation to document the pricing of intragroup transactions deriving only from the Income Tax Code. The list of intra-group transactions, required by the Ministry of Development, is replaced by a summary information table, which must be submitted electronically to the tax authorities no later than 50 days after the end of each financial year. For financial year 2012, the summary information table must be submitted by 10 May 2013.

· Companies operating in Greece must prepare a transfer pricing documentation file for transactions with domestic and foreign affiliated entities. The file must be prepared before publication of the tax compliance report (tax certificate) and, in any case, no later than 50 days after the end of a financial year. For fiscal year ended December 31 2012, the deadline for compilation of the documentation file and submission of the summary information table is May 10 2013. The documentation file must be made available to the tax authorities within 30 days following a request.

· Transactions with related entities that do not exceed €100,000 in total are exempt from the documentation requirement, provided the operating revenue of all related parties does not exceed €5 million. The threshold is €200,000 for groups whose annual turnover exceeds €5 million.

· A ministerial decision will be issued to provide details on the content of the transfer pricing documentation file and the summary information table, etcetera.

· Late filing of the documentation file or the summary information table will give rise to a one-time penalty calculated at 0.1% of the company’s revenue. However, the penalty cannot be less than €1,000 or more than €10,000. If the taxpayer fails to submit either document, the one-time penalty will be calculated at 1% of the company’s revenue, but not less than €10,000 or more than €100,000.

· These provisions are effective retroactively for transactions that take place in accounting periods that commence as from January 1 2012. Transfer pricing documentation of transactions that took place in financial years 2010 and 2011 will be governed by the provisions of L. 3728/2008.

Advance pricing agreements (APAs)

The new law introduces an APA programme as from January 1 2014, which will enable taxpayers to obtain advance approval of their transfer pricing practices. An APA will be available for all of the criteria used to determine transfer prices (for example, transfer pricing methodology, comparable data, adjustments and key assumptions), but will not cover a nominal price or margin.

The term of an APA will not be able to exceed two years, although it will be possible to renew the APA twice, provided there are no significant changes in the facts on which the initial approval was based. Where an APA is granted, a tax audit is limited to verifying that the terms of the APA have been respected and that the key assumptions used in the APA are still in effect.

Eftichia Piligou,

Tax principal, transfer pricing,

Deloitte Business Solutions Hadjipavlou, Sofianos & Cambanis

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