Transfer pricing has become a central focus for the Greek tax authorities as they seek to ensure that multinational companies are paying their fair share of taxes on cross-border transactions. Understanding how the Greek tax authority approaches transfer pricing audits is crucial for businesses operating in Greece or having Greek subsidiaries. Here’s what you need to know :
Why Transfer Pricing Audits Are Increasing?
In recent years, Greece has strengthened its transfer pricing regulations in line with OECD guidelines and EU directives. As a result, the tax authority (Independent Authority for Public Revenue – AADE) has ramped up its scrutiny of related-party transactions, especially those involving cross-border dealings and high-value intangibles.
What Triggers a Transfer Pricing Audit?
- Threshold Exceedance: Related-party transactions exceeding specific thresholds
- transactions or transfer of operations amounted to more than EUR 100,000 annually when the total turnover of the liable party does not exceed EUR 5 million per year, require documentation.
- transactions or transfer of operations amounted to more than EUR 200,000 annually when the total turnover of the liable party exceeds EUR 5 million per year, require documentation.
- Inconsistencies: Discrepancies between the Master File, Local File, and actual business conduct may trigger further investigation.
- Profitability Outliers: Companies reporting losses or unusually low profits compared to industry norms often attract attention.
- Random Selection: Some cases are selected randomly as part of routine compliance checks.
The Audit Process: What to Expect
- Initial Notification:
The tax authority notifies the taxpayer and requests transfer pricing documentation (typically within 30 days). - Document Review:
Auditors examine the Master File, Local File, benchmarking studies, and supporting contracts. They assess whether the transfer pricing methods and results are consistent with the arm’s length principle. - Interviews and Requests for Clarification:
Auditors may interview key personnel and request additional information or explanations regarding the business model and transactions. - Functional and Economic Analysis:
The audit focuses on the functional analysis (functions, assets, risks) and the appropriateness of the chosen transfer pricing method. - Audit Findings and Adjustments:
If discrepancies or non-compliance are identified the Independent Authority for Public Revenue AADE may propose adjustments, resulting in additional tax liabilities, interest, and penalties. - Enhanced Audit Process details
A specially qualified audit team has been established for benchmarking studies review and multi-lateral control audits are part of IAPR’s operational strategy.
Key Areas of Focus
- Consistency: Alignment between documentation, contracts, and actual conduct.
- Benchmarking: Robustness and relevance of the comparable set used.
- Intangibles: Proper valuation and documentation of intellectual property transactions.
- Intragroup Services: Evidence of actual benefit received and arm’s length pricing.
- Digital economy activities (increased scrutiny under OECD updates)
How to Prepare for a Transfer Pricing Audit
- Maintain Up-to-Date Documentation: Prepare and update your Master File and Local File annually, even if not requested.
- Substantiate Your Methods: Use defensible benchmarking studies and clearly explain your transfer pricing methodology.
- Ensure Internal Consistency: Align your documentation with your business’s real-world operations and contracts.
- Train Your Team: Make sure relevant staff understand your transfer pricing policies and can respond to auditor queries.
How Privel Partners Can Help
Privel Partners offers comprehensive audit support, from preparing robust documentation to representing you during tax authority inquiries. Our experts help you anticipate audit risks, respond to challenges, and minimize potential adjustments or penalties.
Greek tax authorities are taking a proactive and sophisticated approach to transfer pricing audits. With careful preparation and expert guidance, your business can navigate audits confidently and maintain full compliance. Let Privel Partners be your trusted ally in transfer pricing risk management. Feel free to contact us at tp@privelpartners.gr .
