The Greek Tax Authorities (GTA) have recently released guidelines (Circular E. 2167/13.09.2019) for the uniform implementation of anti-avoidance rules (General and Targeted, hereinafter GAAR and TAAR). The circular deals with:
The GAAR provided under Article 38, L.4174/2013;
The TAAR for tax losses forfeiture provided under Article 27 (L.4172/2013, Greek Income Tax (GITC));
The TAAR for corporate restructurings provided under Article 56, GITC.
General principles
As a general remark, GAARs provide principles to counter potential avoidance of tax, whereas the scope of TAARs is to target specific arrangements of tax avoidance.
On the basis of the issued circular, it seems that the GTA’s intended approach on GAAR/TAAR is to achieve a reasonable balance between mitigating tax avoidance while adhering to the evolving business of enterprises. To this effect, the following general principles are outlined:
GAAR/TAAR should be applied exceptionally, only in cases where an actual abuse of the tax provisions has been identified. It appears that the intention of the GTA is to distinguish the genuine transactions effected in a tax efficient manner from the artificial arrangements aiming at tax avoidance.
GAAR should apply only in cases where no TAAR could be invoked (based on the general principle that special provisions override the general). Therefore, TAAR for tax losses forfeiture overrides both GAAR and TAAR provided for corporate restructurings, whereas TAAR for corporate restructurings overrides GAAR.
TAAR on corporate restructurings
Setting aside the general guidelines provided for the GAAR implementation, it is worth focusing on the guidelines provided - for the first time - for the TAAR applicable on corporate restructurings (Article 56, GITC):
TAAR on corporate restructurings is aligned with the provisions of 2009/133/EU Directive and applies for restructurings (both domestic and cross border) effected under Article 52-55 of GITC (mergers, full/ partial demergers, spin offs, share exchanges, transfer of the registered seat).
More in detail, per said TAAR, to the extent that tax avoidance or tax evasion is identified as the main or one of the main objectives of the companies under restructuring, all benefits granted in accordance with Article 52 -55 of GITC are fully or partially disallowed. Where a transaction is not performed for valid economic reasons, such as the restructuring or the rationalisation of the activities, this may constitute an evidence that the main or one of the principal objectives of the transaction is the tax avoidance or tax evasion.
According to the recently issued circular, TAAR on corporate restructurings addresses only tax avoidance cases from an income tax perspective, whereas any other tax area should be addressed on the basis of GAAR. Similarly, restructurings effected under provisions other than GITC (i.e. L.1297/1972 and L.2166/1993) are captured by GAAR.
Another important issue addressed in the circular is that the burden of proof for applying TAAR lies with the GTA.
The circular makes indicative reference to Court of Justice of the European Union (CJEU) decisions for the interpretation and application of said TAAR:
The tax administration should apply the TAAR and assess tax liability according to the specific details of the transaction and not on the basis of predetermined general criteria (Leur- Bloem C-28/95).
A restructuring based on several objectives, which may also include tax considerations, can constitute a valid commercial reason provided, however, that those considerations are not predominant in the context of the proposed transaction (Foggia C-126/10). In other words, the concept of valid economic reasons is broader than pursuit of purely tax advantage. Therefore, a restructuring performed for several purposes, including tax purposes, may be carried out for valid economic reasons, to the extent that the pursuit of tax benefits is not the principal objective satisfied by virtue of the restructuring concerned.
Finally, it can be noted that in order to determine whether valid economic reasons exist in the case of a restructuring, the actual motive, purpose and will of the parties involved should be examined. The actual purpose for the performance of the restructuring may be proven in any possible way (e.g. through the correspondence between the parties involved, respective directorial decisions, correspondence with authorities of other countries, etc.).
To sum up, the circular provides important guidance on the rather vague scope of application of GAAR and TAARs. It is also worth noting that the GTA set the pace of applicability of these rules based on the CJEU hallmark decisions and on the balanced allocation of burden of proof between the taxpayer and the GTA. Going forward, the challenge of the GTA is to apply this guidance consistently and in a uniform manner in the course of tax audits.
Nasia Kasidou
