Transfer Pricing: Latest Developments

According to the provisions of L. 3728/2008 as per fiscal years from 2008 and onwards all intercompany transactions among associated companies, regardless of the type and legal form under which they operate in Greece, are obliged to submit to the Ministry of Development a list including all the intra-group transactions and especially, the volume and the prices, within 4 ½ months after the end of first fiscal year following the enactment of the new provision. In practice that would mean for companies ending their fiscal year on December 31, 2008, the deadline is up to 15 May 2009.

Based on the main points of the new legislation all Greek companies, members of MNE’s, as well as branches of foreign companies, are obliged to conclude at arm’s length prices with all their affiliate entities around the world and need to document and justify the intra-group prices charged in a specific transfer pricing study.

In particular, Greek companies and Greek branches of foreign MNEs need to draft the “Greek Documentation File” (Local File), which includes all the necessary information for the justification of the pricing followed by the Greek affiliate with the other entities of the group. The Local File needs to be available to the competent authorities of the Ministry of Development within 30 days from the receipt of an initial request to do so; moreover, the aforementioned companies are also obliged to submit to the Ministry of Development a list including the value and the volume of all their intra-group transactions within a period of four and a half months after the end of their accounting period.

In case companies fail to comply with the new documentation requirements onerous financial and administrative fines are provided. Specifically, a fine equal to 10% of the value of the inter-company transactions in case of non-compliance with the list filing or non-filing the transfer pricing documentation in due time, when requested, is provided, while potential penal sanctions as set by the Greek Market Inspection Code could be imposed to the Company's legal representatives as well as a fine equal to 5,000 Euros, if the compliance with the arm’s length principle is not evidenced for inter-company transactions. In this case, the tax authorities are being notified to carry out a transfer pricing audit and impose additional taxes and sanctions provided in the relevant tax legislation.

For your convenience we mention hereunder the information that should be included in the Transfer Pricing File.

Information regarding the Group:

  1. General description of the organisational, legal and operational structure of the Group, the companies of the Group, including their legal establishments, and any participation in partnerships, within the general frame of operation and its financial records.
  2. General description of the corporate activities and the strategy of the group, including any alterations in the corporate strategy compared to that performed in the immediate previous fiscal year.
  3. General description and application of the intra-group transfer pricing policy on the intra-group transactions, if available.
  4. General definition of the transactions between the Greek subsidiary or the foreign company established in Greece and the associated with it companies (Greek and foreign).
  5. General description of functions and the risks undertaken by the associated parties, also including those alterations occurred in this field compared to the immediate previous fiscal year.
  6. The ownership of the intangible assets by the group (trademarks, patents, know-how etc.) and payments (Royalties) paid in or received for those.
  7. A list of the Intra-group Advance Pricing Agreements that might have been concluded by the companies of the Group with foreign tax authorities.

 

B. Information regarding the Company:

  1. A detailed report to the transactions between associated parties for which there is an obligation for documentation.
    • the nature of transactions (sale of goods, provision of services, financial transactions etc.)
    • Invoice flow
    • Transactions amount
  2. A comparative study:
    • characteristics of goods and services
    • functional analysis (functions, undertaken risks, corporate assets used etc.)
    • contractual terms
    • economic circumstances
    • special corporate strategies
  3. Description of the associated parties, or /and of their permanent establishments related to those transactions or agreements.
  4. Description of the adopted method for the calculation of the intra-group transfer pricing, under the OECD Guidelines (OECD Transfer Pricing Guidelines), as they are specifically described and determined in art. 3 of the present, and the argumentation on the selection criteria for the adoption of such method
  5. Relevant information related to internal or/and external comparables, if available.
  6. Description of other data or circumstances that are considered vital for the audited company.

To be noted that the above documentation files are mandatorily updated, where the available market or transaction comparables are amended, affecting the valuation of the followed transfer pricing policy.

 

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