Tax treatment of invoices issued by companies established in tax concessions or non-cooperating states according to the Greek legislative network

Greece/October 2014

On July 2013 the legislation L.4172/2013 brought the new tax framework in Greece. The new tax bill is clearly a sophisticated conjunction of the prior Greek tax legislative framework and the European directives. This law sets stricter requirements on tax-deductible purchases and supplies of the Greek companies from entities belonging to more favorable tax regimes.

The Article 65 of the new law defines the meaning of the tax concessions as countries with a tax rate of less than or equal to 50% of the Greek tax rate and also defines the concept of non-cooperating states as those that have not signed and do not apply the convention on administrative assistance in tax matters with Greece and have not signed such an agreement on administrative assistance with at least twelve other countries. More specifically according to published decisions the Ministry of Finance defined the countries included in those categories.

Additionally Article 66 provides that the taxable income of a physical person or a legal entity has to be increased by the undistributed profits of a legal entity established in a country with a favorable tax regime or in a non-cooperating state if

a)the person or the entity owns directly or indirectly shares, voting rights or equity in excess of fifty percent (50%)


b)the person or the entity is entitled to receive more than fifty percent (50%) of the profits of that legal entity. Precondition for this increase is that above 30% of the total income of this entity has to derive from

i.interest or other financial instruments, or

ii.assets or rights or any other income generated by intellectual property rights, or

iii.dividends and income from the transfer shares, or

iv.income by current assets or income by incurrent property, or

v.income by insurance, banking and other financial activities.

The article 23 includes one of many innovations of this new legislative framework as for the first time the non-tax deductible expenses are defined. According to this article expenditure is non-deductible if the supplier/provider is a legal person who is a tax resident in a non-cooperating state or in a preferential tax regime, unless there is proof that the transaction was at arms’ length and customary with business activities and did not occur for tax avoidance or evasion reasons.

The Ministry of Finance has not defined the appropriate ways of proof of actual transactions; apart from the obvious correlation which must exist among the client’s activities and the kind of goods or services delivered. Indicative, but not limited to, evidence which may be requested during a potential tax audit is the consignment of goods, the import documents, the invoice, a copy of the signed agreement for the delivery of goods or the provision of services and the certificate of the supplier’s tax residence.

Another thing that the tax authorities are interested about related to this kind of transactions is to have evidence about the substance of the supplier’s company. In this case if deemed necessary, the tax authorities may require evidence regarding the permanent establishment of the shareholders and the members of the BOD, information about the headquarters and a payroll list including the employees’ roles of the supplier company.

The local tax authorities are oriented to increase control of the global transactions operating in Greece, in order to counter tax avoidance following the European Directives. The new formed framework affects the multinational entities as they have to re-evaluate their global trade and financial agreements and to create a detailed tax strategy considering the national tax laws of the traders in order to maximize their benefit from the global trade channels and be lawful towards the local tax authorities.

Maria Anastasiou
Eurofast Global, Athens office
+30 210 8257720-22