It is interesting to note that, contrary to other jurisdictions, Greece did not have so far any legal tradition in respect of substance over form or similar principles or doctrines emanating either from case law or from legal practice in general. Perhaps the only relevant concept in Greek legal theory was that of sham or fictitious transactions found predominantly in Greek civil law. Traditionally the Greek tax administration used to apply in the course of both domestic and treaty law the opposite general principle of form over substance which was based on the widely accepted notion that the tax rules must be interpreted narrowly by the tax administration.
From a practical perspective, the introduction of an explicit GAAR in domestic tax law may have significant impact in contemplated transactions and/or tax planning structures. For example, even though Greece has not introduced so far anti-treaty shopping rules either domestically or in the double tax treaties (DTTs) concluded with other states, it could be argued that, based on the domestic GAAR, treaty benefits may be limited and/or denied even to treaty residents under certain circumstances and especially where it may be evidenced that the interposition of an entity in a treaty country was effected solely to obtain treaty benefits.
Similarly, from an indirect tax perspective, instances of stamp duty mitigation in loan transactions on the basis of the territoriality principle may now be challenged on the grounds that the conclusion and/or execution of a loan overseas may still be subject to Greek stamp duty charges if it may be extracted that the overseas conclusion and execution was not substantiated by any business reasons but was encouraged merely to enjoy the stamp duty exemption.
Another practical example where the introduction of a GAAR may have serious consequences is the equity injection in a Greek corporation through share premium (instead of nominal share capital) with a view to qualifying for capital duty exemption. It may now be argued that such a technique, which is popular in Greek tax practice, may be challenged in the course of a future tax audit if a mere comparison is attempted between the same transaction with and without the tax avoidance element (that is share capital increase through share premium and through nominal share capital respectively).
No ministerial decisions, circulars and/or other official guidelines have been issued thus far to complement the aforementioned GAAR's interpretation and, consequently, there is great uncertainty at the moment regarding the exact scope and object of that rule. It is expected that the Greek tax administration will supplement this GAAR with additional safe-harbour tests so that it will be able for the taxpayers to overtly distinguish between what is allowed and what is prohibited under Greek tax law, especially before they proceed to inbound and outbound tax planning structures.
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