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Greece: Transfer pricing controversy – trends and practical recommendations

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Christos Kourouniotis of EY discusses the latest trends in the Greek transfer pricing world and outlines his solutions on how to steer clear from potential controversy.

In recent years, transfer pricing (TP) controversy has increasingly constituted a major part of global tax controversy matters. Among the reasons for this development are:

  • Political pressure to deal with perceived tax avoidance by multinational groups;

  • The increased access to information that enables the audit of the full value chain; and

  • The pressure to increase tax revenues by often exploiting intra-group transactions' audits.

On this basis, TP controversy issues are likely to continue to increase rather than reduce.

The Greek tax controversy landscape is no different. In the past two years, Greek tax auditors have demonstrated an increased level of sophistication with regard to TP audits and there is a greater level of scrutiny on the functional profile, TP methods used by the taxpayer, as well as with the economic analysis performed.

Causes of increased controversy

Common issues of controversy which arise during Greek TP audits include:

  • The final set of comparable companies upon performing a benchmarking study, in the context of transaction net margin method (TNMM), are often challenged and redefined. This is probably the most common reason for controversy between Greek tax authorities and taxpayers, stemming from the broad interpretation that could be applied in regard to the definition of comparable entities in a universe of far than perfect comparable data.

  • Inter-company financing transactions are another field of interest. In particular, loan transactions are sometimes tested by tax auditors based on data from the Bank of Greece's published statistical bulletins, even if the Greek taxpayer is the lender. This often takes place instead of using comparable data from proven loan and bond databases.

  • Inconsistency between the strict approach adopted when assessing the comparability criteria used by the taxpayer, and the broad definition of comparability when applied by tax authorities, is another common area of controversy.

  • Disputes arise where tax auditors insist on the use of the interquartile range, in comparison to the use of the full range (even if there is sufficiently reliable internal comparable data and the full range would be appropriate to be used).

  • The requirement for the taxpayer to provide supporting documentation that may create an excessive burden to the taxpayer.

In this context, taxpayers would need to adapt accordingly and be as proactive as possible.

Facilitating a smoother process

Practical recommendations to facilitate a smoother tax audit experience in Greece include:

  • The preparation of 'audit ready' TP documentation and not merely 'check-the-box' documentation. This requires a minimum localisation of any globally prepared documentation and a focus on global consistency in order to avoid misinterpretations. In addition, it involves adopting a practical approach or plan for gathering and maintaining needed supporting documentation.

  • Exploring digital tools and automation solutions that will enable taxpayers to (a) manage the tax audit more efficiently and (b) gather any supporting documentation expected in the tax audit.

  • Performing a risk assessment to identify potential exposure that exists where tax authorities apply a different approach to that applied by the taxpayer and evaluating the current position in light of current developments.

  • Evaluating the merits of an advanced pricing agreement (APA) in order to avoid any controversy and gain certainty and predictability for TP affairs.

In some cases, the choice of comparability criteria, documentation approach or database selection, may require the taxpayer to make a subjective decision on which is the most appropriate criteria, approach or database. In such cases, in conjunction to presenting all arguments supporting the choice of the taxpayer, it is equally important to be in a position to demonstrate consistency year-on-year.

For example, selecting specific screening steps during a search strategy for benchmarking profitability, or choosing bond data in order to document loan transactions instead of corporate loan data, is required to demonstrate that it constitutes a consistent application of what the taxpayer considers as appropriate. This in turn will increase the possibility for Greek tax auditors to accept the position of the taxpayer, especially in cases that there is more than one approach that can be applied.


In summary, there are three important aspects to consider in regard to TP audits in Greece:

1) Acknowledge patterns in regard to the approach of the Greek tax authorities during TP audits and determine which transactions are considered to be of a 'higher risk'.

2) Evaluate the TP documentation in place and whether the documentation of 'higher risk' transactions will need to be supplemented.

3) Ensure that consistency can be demonstrated for all choices made by the taxpayer when documenting their transactions.

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