GREECE Law and Practice Contributed by: Maria Zoupa, Daphne Cozonis, Ioanna Tapeinou and Diana Tsourapa, Zepos & Yannopoulos
4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices
ness of selected transfer pricing methods and alloca - tion keys for expenses have also been coming into the discussion. As tax authorities focus increasingly on transfer pric - ing, the discussions surrounding it are expected to increase. 4.5 Challenges to Related-Party Limited Risk Distribution Arrangements Limited risk distribution arrangements are extensively applied by multinational enterprises doing business in Greece. Tax authorities are carefully scrutinising these arrangements in the context of transfer pricing audits and primarily focusing on whether the return of the local entity can be considered consistent with the arm’s length principle following in-depth reviews of its functional and risk profile. The reliability of com - parables is also challenged in this context. In some instances, the tax authorities challenge the selection of the transfer pricing method or of the tested party. 4.6 Local Transfer Pricing Rules and OECD Standards The current legal framework in Greece fully endorses the arm’s length principle, defined in Article 9 of the OECD Model and interpreted by the OECD Transfer Pricing Guidelines, following the revisions introduced as a result of Actions 8–10. 4.7 Transfer Pricing Disputes and Mutual Agreement Procedures Greek tax authorities have been focusing increas - ingly on transfer pricing when auditing Greek taxpay - ers during the past decade. Considering the lack of extensive case law on transfer pricing issues, aggres - sive approaches are often witnessed on the Greek tax authorities’ part. International transfer pricing disputes are not often resolved through double tax treaties and mutual agreement procedures. As regards the MAP process, it should be noted that the Greek tax authorities have focused in the most recent years on providing the procedural framework for MAPs and on align - ing the domestic framework with the recommenda - tions received in the context of the MAP Peer Review Reports (Stages 1 and 2). Until recently, however, the
Where appropriate documentation (including a tax residence certificate signed by the competent foreign authorities) is available, in practice, it has been rare up to now for local tax authorities to challenge the use of treaty-country entities by non-treaty-country residents. It should be noted that Greece ratified the OECD Mul - tilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI), which came into force on 1 July 2021, and has adopted the principal purpose test in order to prevent arrangements and transactions whose main purpose is to obtain the ben - efits of the tax treaty. 4.4 Transfer Pricing Issues for Inbound Investors Taxable profits of Greek legal persons and entities are subject to readjustment in the case of transactions between related parties that are not in line with the arm’s length principle. Most transfer pricing disputes revolved around the applicability of more lenient penalties for failure to comply with transfer pricing documentation require - ments and the burden of proving compliance with the arm’s length principle. This latter issue has evolved over time. Administrative courts have confirmed OECD TP guidelines approach that – as long as the taxpayer produces the appropriate transfer pricing documentation – the burden lies with the tax author - ity, which is required to justify any challenge made to the taxpayer’s position. More recently, the role of each related party in the development, enhancement, maintenance, protec - tion and exploitation (DEMPE) functions of intan - gible assets has become increasingly significant to the scrutiny of related-party transactions between domestic licensees and foreign IP-holding entities. Matters concerning the reliability of comparable data (particularly in cases of financial transactions), the definition of related parties, the use of full or inter - quartile range, the reasonableness of comparability adjustments and – more recently – the appropriate -
197 CHAMBERS.COM
Powered by FlippingBook