Two separate sets of law and authority regulate transfer pricing documentation requirements in Greece.
The Ministry of Development has introduced transfer pricing documentation rules by Law 3728/18-12-2008 and Ministerial Decision Α2- 8092/31-12-2008, applicable from fiscal years 2008. Within the aforementioned legislative framework, the Ministry of Development is the auditing authority of the transfer pricing rules; in case of identification of transfer pricing infringements, the case is referred to the supervising taxing authorities (the tax office of the taxpayer) for the application of the relevant provisions of the tax legislation and the imposition of the relevant tax sanctions.
In addition, transfer pricing documentation rules were introduced by Ministry of Finance (L.3775/2009, applicable to accounting periods for which the obligation of filing the income tax return starts from January 1 2011). No ministerial decision under these rules has been issued yet.
OECD guidelines
The aforementioned legislative framework confirms the applicability of the OECD transfer pricing guidelines.
The Ministry of Development and the Ministry of Finance, the two Greek supervising authorities of intra-group transactions, recognise the OECD guidelines and consider Greek transfer pricing laws and decisions to be consistent with the OECD guidelines.
All three of the traditional transactional methods (CUP, resale price and cost plus) can be applied, while the use of profit-based methods is possible where substantiated. In particular, other (non-traditional) transfer pricing methods such as the transactional net margin method (TNMM) and the transactional profit split method can be used only in cases where the use of the above traditional transfer pricing methods are considered ineffective, provided that a detailed justification is included in the documentation files.
Penalties
· Ministry of Development
In accordance with the Ministry of Development transfer pricing documentation rules, a penalty equal to 10% of the value of the transactions for which no file has been submitted to the auditing authorities, or for which the lists of intra-group transactions have not been submitted, is imposed. Also, a penalty of €10,000 ($12,000) plus €1,000 per day of delay (up to a maximum total penalty of €100,000) is imposed in case of late filing of the intra-group listing. If, from the audit report, an infringement of the arm’s-length principle is assessed, a fine of €5,000, apart from the penal sanctions, provided by Article 30 of Legislative Decree 136/1946, as in force, is triggered.
· Ministry of Finance
L. 3775/2009 amended and introduced articles 39 and 39A, respectively, in the Greek Income Tax Code.
Specifically, by virtue of the provisions of article 39 GITC, where an agreement for the provision of services or the supply of goods is concluded between local enterprises or between local and foreign enterprises of the same group and the contractual price differs unjustifiably from that which would have been agreed upon between independent enterprises for a similar transaction in similar market conditions, then any amount over-invoiced or under-invoiced according to the above is deemed to be an accrued profit for the respective enterprise and will be included in its actual profits and be taxed accordingly by application of any relevant penalties (additional taxes).
In detail, in such a case, it will be deemed upon a potential tax audit that the company has filed an inaccurate income tax return triggering the imposition of additional taxes and surcharges at a rate of 2% per month of delay on the tax difference incurred, capped at 120%. Additionally, to the extent the above provision applies, an individual penalty of 20% of the profit adjustment (i.e. deemed profit) is imposed to the taxpayer company, irrespective of any additional tax assessment or other penalties provided for by the law.
According to article 39A of Greek Income Tax Code, a penalty equal to 20% of the value of the transactions applies where no file is submitted to the tax authorities or where the submitted data is insufficient.
Documentation requirements
To show compliance with the arm’s-length principle, the taxpayer should make the documentation files available within 30 days of a request from the supervising authorities of either the Ministry of Development or the Ministry of Finance.
With respect to groups of companies with a Greek parent company, the master documentation file should include the following information:
Group-related information:
The organisational, legal and operational structure of the group, including any permanent establishments and interests in partnerships, as well as general background information of the group’s industry and the financial data relating to it;
General description of the group activity, the business strategy, including changes of the business strategy as compared to the previous financial year;
General description and implementation of the intra-group transfer pricing policy, if applicable; and
General presentation of transactions concluded between the Greek parent company and its affiliated companies (Greek or foreign), as well as of the transactions among the affiliated companies, if one of these is Greek, namely:
· Nature of transactions (for example, sale of goods, provision of services, financial transactions);
· Invoice flows; and
· Amounts of transaction flows.
The description of the affiliated companies or of their permanent establishments that enter into the above transactions shall include:
The scope of their activities, the years of operations, the annual turnover, the number of employed personnel, etcetera; and
General description of functions and risks undertaken by the affiliated companies, including the changes incurred to this end as compared to the previous year.
In addition, a general description of the tangible assets used by the group for the purposes of carrying out the above functions:
The ownership of intangibles (for example, patents, trademarks, brand names, know-how) and royalties paid or received; and
List of any APAs concluded by the group companies with foreign tax authorities.
Company-related information
A detailed presentation of the transactions with associated companies for which the documentation obligation exists;
Nature of transactions (sale of goods, provision of services and financial transactions);
· Invoice flows;
· Amounts of transaction flows.
Comparative analysis:
· Characteristics of goods and services
· Functional analysis (for example, functions, risks, used fixed assets);
· Contractual terms;
· Economic circumstances; and
· Specific business strategies.
Description of the transfer pricing method implemented, as specified in the OECD guidelines, including a discussion on the selection criteria;
Relevant information on internal and/or external comparables, if available; and
Description of other data or circumstances deemed relevant.
With respect to groups of companies with a foreign parent company as well as foreign companies operating with any type and legal form in Greece, the Greek documentation file should include the same information listed above for Greek parent companies, with the following exceptions.
Group-related information for companies with a foreign parent should include:
A general presentation of transactions concluded between the parent company and its affiliated companies (Greek or foreign), namely:
· Nature of transactions (for example, sale of goods, provision of services, financial transactions);
· Invoice flows; and
· Amounts of transaction flows.
Company-related information for companies with a foreign parent should include:
Description of the affiliated companies or of their permanent establishments that enter into those transactions or agreements:
· Description of the transfer pricing method implemented, as specified in the OECD Guidelines, including a discussion on the selection criteria;
· Relevant information on internal and/or external comparables, if available; and
· Description of other data or circumstances deemed relevant.
Relevant deadlines
Taxpayers should submit annually to the Ministry of Development, within four months and 15 days of their fiscal year end, a list with the details of their intra-group transactions, especially the number and the value thereof.
The above-mentioned documentation files should be provided to the supervising authorities of the Ministry of Development within 30 days of the notification of a request.
In the context of a tax audit performed by Ministry of Finance, the documentation files, in accordance with the law of the Ministry of Finance, should be available to the tax authorities within 30 days.
Statute of limitations on transfer pricing assessments
Taxpayers must keep documentation files for a period equal to the prescribed period of Greece’s right to impose tax (statute of limitations), as specified by the provisions of tax legislation.
As a general rule, Greece’s right to impose tax is statute barred in five years, but the State provides extension to the above mentioned period (for example, tax obligations of FY 2000 have not been statute barred yet).
Return disclosures/related-party disclosures
Taxpayers disclose their intra-group transactions by annually submitting a list to the Ministry of Development. In particular, the list should be filed within four months and 15 days from their fiscal year-end.
Audit risk/transfer pricing scrutiny
Transfer pricing audits are expected to become more frequent and intensive. It is likely that the tax authorities will try to increase revenue through the imposition of penalties on companies that are not complying with transfer pricing requirements.
In general, the likelihood of an annual tax audit is characterised as high.
Also, based on Circular (POL) 1159/2011 regarding the issuance of the Annual Tax Certificate, the certified auditors are required to review the transfer pricing file in order to provide the certificate.
APA opportunity
The use of advance pricing agreements (APA) is not permitted (as of 2012). It is expected that the introduction of APAs will be discussed in the near future. However, a unilateral APA procedure has been introduced to address intra-group service centres operating for the exclusive benefit of affiliates abroad. Under this proposal, after filing an application with the tax authorities, the entities may be taxed on a cost-plus basis, using an agreed-upon markup, for a period of up to five years.
