Authors: Stavros Sapountzakis

Title: The tax control of intra-group transactions: evolution over time and comparative analysis of the institutional framework of Greece

Abstract

The structure of affiliated enterprises is a constantly evolving form of organization of entrepreneurship and concentration of enterprises, which goes hand in hand with the economy and technology in response to market needs.  The morphology and legal structure of a group of companies depends on the type, number and complexity of the relationships of its members as well as on the purposes it is intended to serve.

The Greek Tax Administration, seeking to establish a tax system more in line with developments at the international level, especially in the OECD context, with the main focus on the economic substance and not on the formula, has undertaken the modernization of the legislative, tax and audit framework governing, inter alia, affiliated companies, the control of the conditions created or imposed between companies of the same group in the context of their commercial and financial relations, the control of the conditions created or imposed between companies of the same group in the context of their commercial and financial relations, the control of the conditions created or imposed between companies of the same group in the context of their commercial and financial relations.

The aim of this article is to describe the audit procedures and audit standards applied by the audit services of the Greek Tax Administration and to highlight the dynamics and importance of intra-group transactions in the Greek and international environment.

More specifically:

In the first chapter we provide a brief historical account:

(a) the need developed by the United Kingdom and the United States of America to establish specific provisions for the documentation of intra-group transactions; and

(b) the actions developed by the Organisation for Economic Co-operation and Development and the Council of Europe regarding intra-group invoicing and related tax issues.

In the second chapter we refer to the framework set out by the OECD Guidelines on Intra-group Pricing.

After quoting the formal definition of the arm's length principle (paragraph 1 Article 9 of the OECD Model Tax Treaties), reference is made to:

(a) the procedure for carrying out comparative analyses,

(b) the comparability factors,

(c) the methods of intra-group pricing,

(d) the type of comparables; and

(e) the range of the value of the statistical analysis considered by the audit to be compatible with the arm's length principle.

Following the harmonisation of the Greek legislative framework with the OECD Guidelines on intra-group transactions, we provide relevant definitions of concepts related to intra-group invoicing (concept of related person and intra-group transactions as well as elements related to the intra-group transactions file), as well as the general provision against tax avoidance.

The third chapter deals with the tax control of intra-group transactions in Greece and is divided into two parts:

In the first part we refer to:

(a) the Audit Programmes applied by the audit services of the Independent Authority for Public Revenue (IAPR) for the purposes of determining the taxable amount resulting from the non-respect of the principle of equal distances in intra-group invoicing,

(b) the statistical tools and databases used by the Hellenic Tax Administration for the purposes of carrying out comparative analyses in the field of intra-group transactions,

(c) the harmonisation of income tax return forms as a consequence of the incorporation in Greek legislation of international practices and rules for the control of invoicing between companies of a group.

The second part of the third chapter presents relevant available data on both the audits of intra-group transactions carried out by the audit services of the Tax Administration and relevant decisions issued by the Dispute Resolution Directorate of the Independent Authority for Public Revenue (IAPR), following the submission of an appeal by the audited company, which is mandatory prior to the exercise of legal action.

Then, in the fourth chapter, reference is made to the current developments in the field of intra-group transactions in Greece related both to the development of a special cooperation network of the Independent Authority for Public Revenue (IAPR) with tax administrations of other OECD and EU member states and to the initiatives undertaken by the Tax Administration regarding the consequences of coronavirus in the application of the principle of equal distances in the context of intra-group transactions.

Finally, useful statistics are provided on the change over time in the adoption of intra-group invoicing rules by OECD member states and the number of cases in which the competent tax authorities have pre-approved an intra-group invoicing method.

Key words: associated enterprises, group, intra-group transactions, control programme, principle of equidistance