Greek laws on automatic exchange of tax information and CbCR
Vasiliki Athanasaki and Eftichia Piligou of Deloitte explain the new laws around country-by-country (CbC) reports and automatic exchange of tax information in Greece, and give practical examples.
Greece has transposed into its domestic legislation the EU Directive 2015/2376 of December 8 2015, amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation, adding advance cross-border rulings and advance pricing arrangements (APAs) within the scope of automatic exchange of information.
In addition, Greece transposed into its domestic legislation the Council Directive (EU) 2016/881 of May 25 2016, amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation and more specifically, in the field of transfer pricing, as regards the exchange of CbC reports.
Both recently issued Laws 4474/2017 and 4484/2017, which incorporated the above-mentioned EU Directives in the Greek tax legislation, have modified the already existing Law 4170/2013 for the adoption of the Council Directive 2011/16/EU of February 15 2011 on administrative cooperation in the field of taxation and repealed Directive 77/799/EEC.
Automatic exchange of advance tax rulings and APAs
Law 4474/2017, which was published in the Official Gazette on June 7 2017 and is generally effective from January 1 2017 onwards, covers the automatic exchange of advance tax rulings and APAs, in the field of transfer pricing as well as the relevant procedure.
According to the provisions of article 22 of L. 4174/2013 (Greek Code of Tax Procedures or GCTP), as well as the respective Circular POL. 1284/2013, APAs are defined as agreements among one or more taxpayers and one or more tax authorities, concerning an appropriate set of criteria used for the determination of transfer prices during a certain time period. It ensures that the Greek definition of APAs is fully in line with the respective concept, as stipulated in the OECD Transfer Pricing Guidelines and the EU Joint Transfer Pricing Forum. The conclusion of an APA as well as the procedure to be followed for its negotiation is applicable from January 1 2014, onwards.
Automatic exchange of CbC reports
Law 4484/2017, which was published in the Official Gazette on August 1 2017 and is effective from June 5 2017 onwards, covers, among others, the automatic exchange of CbC reports. The Law specifically defines the scope and conditions of mandatory automatic exchange of information on the CbC report, the respective procedure as well as the penalties imposed in case of non-compliance. Such penalties are equal to €20,000 ($23,000) in case of non-submission of the CbC report and €10,000 in case of overdue submission or submission of inaccurate CbC report. It should be mentioned that the General Secretariat of Public Revenues (currently Director of the Independent Public Revenues Authority or IPRA) on January 27 2016 signed on the Multilateral Competent Authority Agreement on the Exchange of Country by Country Reports, however, up until now, no respective legislation had been enacted in the Greek tax law.
Legislation on CbC reports
Law 4484/2017 also introduces the respective legislation on CbC reports in the Greek tax framework, through relevant appendices included. Such legislation on CbC reports generally follows the template legislation proposed by the OECD, following the BEPS project. Μore specifically, the new law adds Article 9AA to L.4170/2013, which provides the scope and requirements for the compilation and filing of the country-by-country report in Greece by multinational enterprises. The most significant provisions of the new law are outlined below.
The obligation for annual filing of the CbC report arises for multinational enterprise groups for fiscal years beginning from January 1 2016 onwards, provided the group’s total consolidated revenues exceeded €750 million in the fiscal year preceding the reporting fiscal year. The CbC report must be submitted within 12 months from the last day of the reporting fiscal year. The entity required to file the CbC report is the ultimate parent entity of an MNE group that has tax residence in Greece (or any other surrogate entity in Greece).
Greece, as a competent authority receiving CbC reports, undertakes the obligation to share those reports via the mechanism of automatic exchange of information within 15 months from the last day of the reporting fiscal year, with any jurisdiction in which one or more constituent entities of each group are incorporated (according to the information provided in the CbC report). Especially for the first year of application - the fiscal year beginning January 1 2016 - the exchange of information will be completed within 18 months from the last day of the reporting year.
The CbC report must include the following information, which will be provided and exchanged using standard tables:
Aggregated data relating to revenue, profit (loss) before income tax, income tax paid, income tax due, share capital, accumulated profits, number of employees, and tangible assets other than cash or cash equivalents for each jurisdiction the group operates in.
Identification documents for the jurisdiction where each constituent entity has its tax residence, and in case the latter differs from the jurisdiction of tax residence, the jurisdiction under which this constituent entity is organised and the nature of its primary business or businesses.
The source of information for the CbC report, which may be financial statements, statutory financial statements, and internal management accounts, should be used in a consistent way, the same data sources year on year. There is no requirement that differences in accounting standards from jurisdiction to jurisdiction must be adjusted. It is also not necessary to reconcile differences in revenue, profits, and taxes between the CbC report and the consolidated financial statements. The penalty for failure to submit the CbC report is €20,000, while in cases of late submission or inaccurate disclosure the penalty is €10,000. Any constituent entity that is a tax resident of Greece and does not submit the CbC report is obligated to notify the Greek tax authorities of the identity and tax residence of the reporting entity no later than the last day of the reporting fiscal year. For the first year of application, the deadline is extended to the last day of submission of the CbC report.
The information contained in the CbC report will be shared between jurisdictions through the mechanism of automatic exchange of information, and it will be used by the authorities to evaluate possible areas of concern in relation to the pricing of intragroup transactions and other risks associated with erosion of the tax base and profit shifting. The law explicitly provides that price adjustments of intragroup transactions will not be based on information provided by the CbC report.
However, the Greek law states that the information in the CbC report may be used as the basis for further scrutiny regarding the group’s pricing arrangements or other tax issues in the context of a tax audit; hence, appropriate adjustments of a constituent entity’s taxable income may occur. This statement is not included in BEPS Action 13 or in the OECD transfer pricing guidelines.
To summarise the deadlines that must be taken into account for the first year of application of the CbC reporting requirement, a relevant example is presented below.
An MNE group with a parent entity in Greece and two subsidiaries, one of which is a Greek tax resident, has a fiscal year starting on January 1 2016 and ending on December 31 2016. The Greek parent entity must submit the CbC report for the year 2016 by December 31 2017 with information on the group’s income, tax, and business activities per jurisdiction. The same deadline applies for the notification that the Greek subsidiary must make to the Greek tax authorities regarding the reporting entity of the CbC report for fiscal year 2016 and for fiscal year 2017.
The information included in the aforementioned CbC report must be communicated by the Greek tax authorities to the EU member states by August 31 2018. The Independent Authority of Public Revenues is expected to provide details regarding the submission process soon.