Adjustment of profits of related enterprises for intra-group transactions after profits’ adjustment in the framework of tax audit.
Article 171 of the draft law submitted to the Parliament proposes provisions whereby, if the profits of alegal entity subject to tax in Greece include profits subject to tax in Greece in the name of an associated person and which have arisen as a result of a tax audit of the first taxable legal entity, the second associated legal entity may request a corresponding adjustment to its taxable profits, following submission of an amending tax declaration accompanied by a notification of its audit report of the first taxable legal entity. That legislation also has retroactive effect, since, at the time of the entry into force of the draft law in question, cases are pending before the Tax Administration or the ordinary administrative courts or the Council of State. (Article 171). Until now, the tax administration has unilaterally accepted any tax reform, without at the same time allowing reverse reform by the other contracting party. This obviously results in double taxation of income, which is in direct conflict with the spirit of Article 9. For example, if the connected party A was overpriced at 80K€ the related part B, then after a possible check the tax reform would only concern the related part B which reduced the larger expense. That is, the connected face B would reshape (plus 80K€) in the tax return, its taxable results. The related party A was not entitled to reverse adjust its taxable profit. Therefore, the income arising from that transaction had been taxed in the related person A and the tax reform in the related party B was to be re-taxed. With the new layout, in the example above, the associated entity B will increase its taxable income by 80K€ (reducing the amount of expenses to be deducted), whereas, respectively, the connected entity A will reduce its revenues by 80K. In addition, as regards the relevant timetable, this amending tax return and the accompanying audit report shall be submitted within an exclusive period of three (3) months from the notification of the tax adjustment notice to the first taxable person (in the related part B in the above example).Read More