The majority of tax controversies arise following a tax audit initiated by the tax authorities. The taxpayers to be audited are selected on the basis of a risk analysis made centrally by the tax administration, using criteria not officially published. Once the taxpayer is selected for audit, an audit order is issued and notified to the taxpayer, thus initiating the tax audit. Furthermore, unannounced tax audits may be performed on the spot to check the compliance of taxpayers. Depending on the findings, tax audits may result in the assessment of taxes, penalties and interest against the taxpayer, which the latter has the right to dispute.
Tax controversy may also be initiated in cases where:
In both the above-mentioned cases, the tax authorities may:
There is no official statistical data as regards the taxes that more often give rise to tax controversies, either in terms of nature or values involved. In practice, however, it appears that the most common areas of tax controversy for legal entities concern corporate income tax (including transfer pricing), VAT and stamp duty. For individuals, tax controversies arise mostly in relation to personal income tax and property taxes.
Tax legislation is often complex, and at times outdated, not adjusting to the changing economic reality and new types of transactions carried out. As a result, there are many issues whose tax treatment is currently not being regulated by Greek tax law. At the same time, tax legislation is widely fragmented, with many decisions and circulars being issued for the interpretation of the applicable legal framework and the provision of guidelines for its implementation. Furthermore, especially since the financial crisis, tax legislation has been subject to constant amendments, which sometimes are not easy to keep up with.
In view of the above, it can be difficult for taxpayers to achieve full compliance with their tax obligations and therefore mitigate the possibility of tax controversy. They are protected, however, when they have followed the interpretation and guidelines contained in the circulars and decisions issued by the tax administration, which are binding for the tax authorities. As long as this is the case, the taxpayers cannot be assessed with taxes and penalties.
However, Greek tax legislation does not provide for the issuance of binding tax rulings, so it is not possible to receive, in advance, the binding position of the tax administration on the tax treatment of certain transactions, and thus reduce uncertainty. Written queries can be filed with the tax administration anyway, although their prevailing policy is no longer to issue individual replies, but, when they receive multiple queries on the same issue, to issue (where possible) general guidelines through circulars. However, even when they issue individual replies, the tax auditors are not bound by them and can adopt a different position.
There is an exception for transfer pricing, where advance pricing agreements (APAs) can be concluded with the tax authorities.
The base erosion and profit shifting (BEPS) recommendations and the EU’s recent measures to combat tax avoidance have not yet had an impact on tax controversies in Greece. The reason for this is that they are relatively new and not many audits have yet been performed for the fiscal years in which these rules have been in effect. It should be noted that the statute of limitations for the right of the tax authorities to perform audits is, in principle, five years starting from the end of the tax year in which the relevant tax return should be filed and usually the tax authorities perform the audits towards the end of that period.
There have been isolated cases where the General Anti-Abuse Rule, contained in the Tax Procedures Code, has been invoked by the tax authorities; however, the Administrative Courts have not yet examined and commented on this rule.
Upon issuance of the final tax assessment note following an audit, the taxpayer is obliged to pay the total amount assessed within 30 days. Making this payment is not a pre-condition for disputing the assessment further. However, when an administrative appeal is filed and 50% of the assessed amount is paid, payment of the remaining 50% can be suspended by law. If the administrative appeal is rejected and the taxpayer proceeds with a judicial appeal at first instance, the suspension remains (although in the event that the appeal is dismissed, payment of the suspended amount will be burdened with 8.76% interest per year, from the date it had originally become due).
However, if the judicial appeal is dismissed at first instance, payment of 20% of the main tax upheld by the first instance court that is due (excluding penalties and interest) is a condition for the admissibility of the second instance appeal.
If the assessed amounts are not paid when they become due, without being lawfully suspended, they become overdue and the tax administration has the right to take enforcement measures.
Nevertheless, even before the tax debt becomes due and payable, the tax administration may impose so-called “safeguard measures” in order to avoid the imminent risk of not collecting taxes. Such measures include the seizure of movable and immovable assets or claims of the debtor.
In a case where, in the context of a tax audit, the tax authorities consider that the taxpayer has not paid VAT; insurance premium tax; or taxes, duties and contributions which are either withheld or passed on to the counter party, the amount of which exceeds EUR150,000, they have the right to proceed with the following safeguard measures against the taxpayer:
Where the taxpayer who is found not to have paid the above amount of taxes is a legal entity, the aforementioned safeguard measures are also imposed against any individual involved in the management, administration and representation of the legal entity.
The safeguard measures are lifted if 70% of the total assessed amount is paid, or the taxpayer submits a guarantee letter of an equal amount in favour of the Greek State.
When an additional tax assessment is made, apart from the main tax due, penalties and interest are also assessed. These penalties include the administrative penalties that are applicable to the tax infringements identified and therefore administrative offences are not subject to a procedure separate from the additional tax assessment.
Should, however, the tax infringements result in tax evasion that triggers criminal liability, criminal proceedings may be initiated against the taxpayer (or his or her representatives, when the taxpayer is a legal entity) that run in parallel with the dispute over the additional tax assessment.
COVID-19 had a two-fold impact on pending tax litigation, given that the operation of courts has largely been suspended for a period of over two months. On the one hand, the hearings that were scheduled to take place during the suspension period have been postponed for later dates and therefore decisions have been and will be delayed. Furthermore, the filing of appeals has also suspended and this has resulted in an equal delay of the respective judicial procedures.
On the other hand, since no hearings have been taking place, the courts have used this opportunity to accelerate the issuance of decisions for cases, whose hearings had already taken place.
So far, the decisions themselves, which have been issued during this period, do not appear to have been influenced by the COVID-19 pandemic and the impact the latter has had on tax revenues. On the contrary, the Supreme Court have issued decisions that have resolved complex tax issues that had remained pending for years, in favour of the taxpayers.
Furthermore, the Greek State has adopted measures to facilitate the payments of taxes that were due during the pandemic. The facilitation concerns either the postponement of payments for a few months, or payment at the time the taxes are due but with a discount.
As regards the impact of COVID-19 in the future, the loss of tax revenues should be expected to make tax authorities stricter in tax audits and therefore this potentially could create more tax controversies. The Greek government, however, does not appear to have the intention of imposing new taxes to counterbalance the decrease of revenues from existing ones. As regards the courts, it remains to be seen whether the Supreme Court will maintain the favourable position it currently appears to have adopted towards taxpayers.
As mentioned in 1.1 Tax Controversies in this Jurisdiction, the taxpayers to be audited are selected on the basis of a risk analysis made centrally by the tax administration, using criteria not published. Therefore, the tax administration identifies those taxpayers for whom there is an auditing priority; however, the way in which this qualification is made is not disclosed. In this respect, tax audits may also be triggered by information the tax authorities receive from other countries (when the taxpayer is involved in cross-border transactions) or from audits performed on other taxpayers, for example when a supplier is found to have been issuing fictitious invoices. Furthermore, unannounced tax audits may be performed on the spot to check the compliance of taxpayers, usually those engaged in the retail sector where the risk of tax evasion is high (eg, unannounced visits to restaurants to check the issuance of retail receipts to the customers).
A tax audit can be initiated at any time within the statute of limitations, ie, as long as the right of the tax authorities to proceed with an assessment has not expired under the statute of limitations rules. According to these rules, the tax authorities have the right to assess taxes within five years, starting from the end of the tax year in which the relevant tax return should be filed.
The aforementioned statute of limitations is extended as follows:
As long as the statute of limitations has not lapsed, there is no time limit for the completion of the audit, although the tax audit order issued for the particular audit provides an indicative duration of the audit.
The issuance of a tax audit order, or the tax audit itself, does not suspend or interrupt the statute of limitations. Any such suspension occurs only upon the issuance of the final tax assessment note to the taxpayer.
Usually, the main part of the audit is performed from the tax authorities’ offices. Upon initiation of the tax audit, the tax authorities serve a written request to the taxpayer, requesting him or her to provide certain data from their books and records. The taxpayer provides them electronically and then the audit is performed remotely. However, during the audit, the tax auditors may regularly visit the taxpayer’s premises to discuss with him or her certain issues they need to clarify, or to check additional documentation.
As regards corporate income tax, the deductibility of expenses is still the main focus of tax auditors. In this respect, the tax auditors may challenge this deductibility on two grounds:
In relation to VAT, the application of exemptions and reduced VAT rates is scrutinised, both with regard to the substantive conditions for their application, as well as the formal conditions (eg, the existence of supporting documentation evidencing the nature of the VAT-exempt activity or the goods that are subject to the reduced rates).
Stamp duty has been another area of focus for tax auditors, especially cross-border intercompany loans and whether their execution is deemed to have taken place in Greece, as per the territoriality rule. In this respect, auditors will review the flow of payments made in the context of such loans.
Lately, the focus of audits has also shifted to transfer pricing, with the tax auditors scrutinising the benchmarking studies; cross-border cost-plus structures are also reviewed for permanent/fixed establishment purposes.
Overall, the tax authorities still focus equally on substantive issues as well as formal ones (as regards the existence and proper issuance of fiscal documentation); in the coming years, however, it is expected that more focus will be placed on the substantive issues.
Cross-border exchanges of information and mutual assistance have increased, especially with regard to VAT audits, where such exchanges and assistance are more common. The audits usually focus on discrepancies detected in the transactions declared in EC Sales Lists, whereas audits on possible carousel frauds are also performed. Lately, multi-country audits have started being conducted, again with regard to VAT.
From a strategic point of view, during a tax audit it is important for the taxpayer to respond in a timely manner to any requests raised by tax authorities. This means that the taxpayer should provide all documentation and data requested, and be prepared to provide explanations and clarifications on issues not clear to the tax auditor. Orderly bookkeeping, prompt retrieval of any supporting documentation requested and solid explanations may have a positive impact, since otherwise the tax auditors may be negatively predisposed and therefore become more aggressive.
Upon completion of the tax audit, the competent tax authorities that performed it shall serve the taxpayer with a preliminary audit findings report, together with a provisional assessment note on the amount of taxes and penalties to be assessed.
The taxpayer shall have a 20-day deadline to submit an explanatory memorandum raising arguments against the audit findings together with any supporting documentation.
Following the review of the aforementioned memorandum, the tax authorities may accept the arguments raised by the taxpayer either fully or partially, or may reject them entirely. Accordingly, and within a month from receiving the memorandum, they shall issue the final audit report and the final tax assessment notes assessing the taxes and penalties.
Upon being served the final assessment notes, the taxpayer shall have a 30-day deadline (60 days if the taxpayer is not established in Greece) to submit an administrative appeal before the Dispute Resolution Unit, a special directorate of the Independent Authority for Public Revenue, which is exclusively competent to review administrative appeals.
The submission of such an administrative appeal is a condition of admissibility for any subsequent judicial appeal before the competent court.
The Dispute Resolution Unit shall have a 120-day deadline to issue a decision on the administrative appeal (the deadline is suspended from 1 to 31 August). Upon the lapse of the aforementioned deadline, and insofar as no decision has been issued, the administrative appeal shall be considered as tacitly rejected.
In such a case the tacit rejection can be challenged by filing a judicial appeal with the competent administrative court, in the same way the explicit rejection of the administrative appeal is challenged.
Judicial tax litigation is only initiated following the explicit or tacit rejection by the Dispute Resolution Unit of the administrative appeal filed by the taxpayer. Direct recourse to the court without prior filing of an administrative appeal is not permitted. The judicial appeal is filed within 30 days (or 90 days for taxpayers not established in Greece) from the service of the negative decision by the Dispute Resolution Unit or the tacit rejection of the administrative appeal.
As long as the amount of the main tax or tax penalty under dispute is lower than EUR150,000, the case is lodged before the Administrative Court of First Instance. If the amount exceeds the aforementioned threshold, the case is directly lodged at first instance before the Administrative Court of Appeals.
Initially, the taxpayer must submit an appeal before the competent court, as defined above. The competent court is also determined by reference to the place of establishment of the taxpayer filing the appeal. The appeal should include the legal and factual arguments against the negative decision of the Dispute Resolution Unit or the tacit rejection of the administrative appeal. Subsequently, and in any case no later than fifteen days before the hearing date, the taxpayer has the right to submit additional grounds for the appeal. The document containing these additional grounds should be officially served by the taxpayer to the litigant tax authorities through a court bailiff.
The competent court shall set a hearing date and notify the parties accordingly. The taxpayer has the right to ask for an adjournment of the hearing, explaining the reasons he or she is asking for it. Usually, the first time an adjournment is requested, the court agrees to it. However, requests for adjournment in subsequent hearings are less likely to be accepted.
The tax administration must submit before the court the case file, together with a report which sets out its position on the case, at the latest 30 days before the hearing date (although in practice this deadline is usually not observed). The taxpayer must furnish any supporting documentation and evidence to the court up to one day prior to the hearing date.
Following the hearing, the parties shall have three working days to submit a memorandum to elaborate further on any arguments already raised. Upon the lapse of this deadline, each party shall have three more working days to rebut the arguments offered by the other party in its memorandum.
The procedure is then completed, the court examines all documents submitted and issues its decision.
As mentioned in 4.2 Procedure of Judicial Tax Litigation, any supporting documentation and evidence should be submitted to the court up to one day prior to the hearing date. The supporting documentation submitted by the taxpayer is very important for the substantiation of his or her arguments and it is taken into account by the court. It is often the case that the court will dismiss appeals on the ground that the supporting documentation submitted by the taxpayer was not sufficient to prove his or her arguments.
Witnesses testimony is possible both in the form of an affidavit and through direct examination in court.
An affidavit may be furnished to the court, together with the other supporting documentation. In order for such an affidavit to be admissible, at least ten days prior to the testimony date, the taxpayer should notify the State (with an invitation served to the litigant tax authorities through a court bailiff), on the date, time and place (ie, the notary public’s office) where the testimony will take place. This is to allow the tax authorities to have the opportunity to attend the testimony and ask questions if they so wish, but in practice they never attend.
The court may, of its own motion or following the request of a litigant party, order the examination of a witness before the court or before the Judge-Rapporteur, even if the witness has already testified via an affidavit. The request of a party for such an examination must be either included in the appeal or in a special application submitted to the court five days prior to the hearing date. This option, however, is not usually followed in practice.
It is often the case that witness testimonies are not equally taken into account by the court with the rest of the supporting documentation (eg, agreements, invoices, extracts from the accounting books).
In the tax litigation proceedings before the administrative courts, each party has the burden to prove any facts it has invoked and support the argumentation it has raised, unless otherwise provided by law. The other party shall have the right to submit evidence in rebuttal.
As regards criminal proceedings, the competent criminal authorities should provide all the necessary evidence to substantiate the accusation, while the taxpayer needs to prove his or her own arguments.
The procedure before the court is standard: all legal arguments should be included in the judicial appeal at the time of its filing with the court, or with an additional document that can be filed up to fifteen days prior to the hearing. Therefore, the Greek State will have the time and opportunity to review these arguments and rebut them with its own memoranda. Thus, there is no room for a strategy to be planned as regards the timing of the raising of arguments. The same applies for supporting documentation and evidence. They should be submitted to the court up to the one day before the hearing date. Usually, the tax authorities do not comment on the documentation and evidence submitted, but they focus on rebutting the legal argumentation raised by the taxpayer.
Until recently it was debated whether all arguments should already be raised, and the supporting documentation and evidence submitted, at the level of the administrative appeal, or whether it was possible for them to be raised and submitted for the first time at the level of the judicial appeal. The Supreme Administrative Court recently ruled that arguments relating to the facts of the case cannot be raised for the first time at the level of the judicial appeal, if they had not already been raised with the administrative appeal. On the other hand, legal arguments related to the validity and interpretation of the applicable legislation or legal principles may be raised for the first time with the judicial appeal. In this respect, it is advisable for the taxpayer to raise all his or her arguments and submit all evidence at the level of the administrative appeal.
In principle, and with certain limited exceptions, Greek law does not provide for a settlement procedure during the judicial phase, which, if entered into by the taxpayer, could result in the reduction of the payable amounts.
The payment of the amounts assessed is not considered as acceptance of the assessment by the courts. As mentioned above, in 1.5 Additional Tax Assessments, upon filing of the administrative appeal and payment of 50% of the assessed amount, payment of the remaining 50% is suspended. The suspension continues even if the administrative appeal is rejected and a judicial appeal is filed. If the court issues a negative decision for the taxpayer, the taxpayer needs to pay the remaining 50%, however this will be burdened with interest of 8.76% annually (from the date this amount had originally become due). Therefore, when it is ambiguous whether the case will be won at court, taxpayers opt to pay the total amount assessed at the beginning, in order to avoid paying interest if they lose.
Expert reports can be submitted as additional evidence. This could be opportune, especially as regards issues that present a certain degree of complexity for judges, eg, transfer-pricing issues or issues requiring clarification on the accounting treatment of transactions.
The jurisprudence of international courts is usually taken into account by Greek courts and it is often the case that the courts base their rulings on such jurisprudence. This occurs especially when they examine VAT cases, where they almost always invoke relevant ECJ jurisprudence.
Doctrine may be referenced by Greek courts, in order to substantiate a position they have taken, but not that often. The same applies for the jurisprudence of foreign courts, with the Supreme Administrative Court being more likely to reference it, rather than the lower courts.
As regards international guidelines, BEPS reports have not yet started being invoked, whereas the OECD Commentary on the Model Convention on Income and on Capital, and the OECD Transfer Pricing Guidelines are invoked when relevant issues are examined by the courts.
If the amount of the main tax or tax penalty under dispute exceeds EUR150,000, the case is lodged directly before the Administrative Court of Appeals. In such a case, this court rules at first and last instance and its decision is not subject to an appeal (at second instance) but only to a writ of cassation before the Supreme Administrative Court.
Recourse to the Supreme Court is allowed only for matters relating to the interpretation of law. The writ of cassation is admissible insofar as the disputed amount exceeds EUR40,000. This amount refers to the main tax (not including penalties or interest). An additional condition of admissibility is that for the legal matter in question, there is no prior jurisprudence of the Supreme Administration Court, or the contested decision of the Administrative Court of Appeals is contrary to existing jurisprudence of the Supreme Administrative Court or other supreme courts (including the ECJ or the ECHR), or to an irrevocable decision of an Administrative Court.
If the amount of the main tax or tax penalty under dispute does not exceed EUR150,000, the case is lodged before the Administrative Court of First Instance. In such a case, its decision is subject to an appeal (at second instance) before the Administrative Court of Appeals, provided that the amount under dispute exceeds EUR5,000. The appeal may be based on both legal and factual grounds. The decision of the Administrative Court of Appeals is again subject to a writ of cassation, under the conditions mentioned above.
The second instance appeal before the Administrative Court of Appeals is filed within 60 days from the date on which the decision of the Administrative Court of First Instance is served. The deadline is extended to 120 days for taxpayers not established in Greece. Additional grounds other than those included in the initial appeal can be put forward; however, the relevant document should be submitted to the Administrative Court of Appeals, at the latest, 15 days before the hearing date. The document with the additional grounds should be officially served to the litigant tax authorities through a court bailiff.
The court will set a hearing date and notify the litigant parties accordingly. The taxpayer has the right to ask for an adjournment of the hearing, explaining the reasons for which he or she asks for that adjournment. Usually, the first time an adjournment is requested, the court agrees to it. However, requests for adjournment in subsequent hearings are less likely to be accepted.
The taxpayer should submit all supporting documentation and evidence, at the latest, by the day before the hearing. The tax administration must also submit before the court the file of the case, together with a report which sets out its position on the case, 30 days before the hearing date (although this deadline is usually not observed in practice).
Following the hearing, the parties shall have three working days in which to submit a memorandum to elaborate further on any arguments already raised. Upon the lapse of that deadline, each party shall have three more working days to rebut the arguments elaborated by the other party in its memorandum.
The procedure is then completed, the court examines all the documents submitted and issues its decision.
As regards the writ of cassation before the Supreme Administrative Court, it is filed 60 days after the contested decision of the Administrative Court of Appeals is served to the taxpayer. If the taxpayer is not established in Greece, the deadline for the filing is extended to 90 days.
The Supreme Court shall set a hearing date and notify the applicant taxpayer accordingly. The latter should further serve the writ to the litigant tax authorities 20 days prior to the hearing date. Given the nature of the writ of cassation, no supporting documentation and evidence is submitted. The parties may submit a memorandum, to elaborate further on their arguments, six full days prior to the hearing. At the hearing, they may also make a request to the court president to submit an additional memorandum, within a fixed deadline to be determined by the president.
At the hearing, both representative lawyers of the taxpayer and the Greek State have the right to elaborate fully on their arguments and they may receive questions from the judges.
It is often the case that the hearings before the Supreme Administrative Court are adjourned ex officio, due to the heavy workload of the judges.
Cases where the amount in dispute is less than EUR60,000 (this amount refers to the main tax, not including penalties and interest) are heard by the single judge Administrative Court of First Instance. If the amount exceeds EUR60,000 and up to EUR150,000, the case is heard by the Administrative Court of First Instance sitting with three judges.
If the amount exceeds the amount of EUR150,000, the case is heard at first and last instance by the Administrative Court of Appeals sitting with three judges.
The appeal against the decision of the single-judge Administrative Court of First Instance is heard by the single-judge Administrative Court of Appeals, while the appeal against the decision of the Administrative Court of First Instance sitting with three judges is heard by the Administrative Court of Appeals sitting with three judges.
Both the Administrative Court of First Instance and the Administrative Court of Appeals have many chambers comprised of different judges. The allocation of the cases to each chamber is made internally.
The writ of cassation before the Supreme Administrative Court is heard by the competent chamber of the Court sitting with five judges, who differ for each case, depending on the internal allocation of the cases that has been made. Important cases may be referred to the chamber sitting with seven judges or the Plenary of the Supreme Administrative Court.
In principle, there is no alternative dispute resolution (ADR) mechanism applicable for taxes in Greece.
Please see 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction.
Please see 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction.
Greek tax law does not provide for the issuance of binding rulings. Written queries can be filed with the tax authorities and the latter can provide written answers; however, these answers are not binding and the tax auditors can adopt a different position in the context of a tax audit. There is an exception, however, as regards transfer pricing, where APAs are available.
Please see 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction.
Please see 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction.
When an additional tax assessment is made, apart from the main tax due, penalties and interest are also assessed. These penalties include the administrative penalties that are applicable to the tax infringements identified, and therefore the administrative offences are not subject to a separate procedure from the additional tax assessment. When the taxpayer assessed is a legal entity, the individuals managing and representing the legal entity are also jointly liable for payment of the assessed amounts (taxes and penalties). Namely, if the legal entity does not pay its tax debt and it becomes overdue, the tax authorities have the right to approach the aforementioned individuals and request payment of the debt. At the same time, as mentioned in 1.5 Additional Tax Assessments, the tax authorities have the right to impose safeguard measures against the taxpayer (or his or her representing individuals) in order to ensure collection of the tax debts.
If the taxpayer commits tax evasion, he or she also has criminal liability. Tax evasion is an offence triggering criminal liability, when the taxpayer intentionally avoids the payment of taxes, evidenced by omitting to file a tax return or filing an inaccurate tax return, or recording fictitious expenses in his or her accounting books.
Tax evasion also requires that certain thresholds of tax not paid be exceeded on an annual basis, ie, EUR50,000 for VAT or EUR100,000 for any other tax, this threshold being applicable separately to each type of tax.
When the taxpayer is a legal person and tax evasion is committed, the burden of criminal liability is borne by the individuals who manage and represent the legal entity.
In practice, following the issuance of the final tax assessment notes, and as long as the aforementioned thresholds for committing tax evasion are met, the tax officers – without examining or assessing whether the element of “intention”, as required by law for the offence of tax evasion, actually exists – will submit a criminal complaint to the competent Public Prosecutor against the persons bearing criminal liability.
The tax administration has clarified through relevant guidelines that ordinary income tax adjustments (ie, disallowed expenses), as well as TP adjustments, should not be considered as falling under the scope of tax evasion.
Furthermore, a separate criminal offence is provided by Greek law, when the tax debts of a taxpayer exceeding EUR100,000 have become overdue and the taxpayer does not pay them within four months from when they became overdue.
Criminal proceedings, if initiated, run in parallel with the submission of an administrative or a judicial appeal concerning the tax assessment. Where the outcome of the pending appeals is important for the outcome of the criminal proceedings, the criminal court can suspend the trial until the judgment of the administrative court is issued.
Please see 7.1 Interaction of Tax Assessments with Tax Infringements and 7.2 Relationship Between Administrative and Criminal Processes.
As mentioned in 7.1 Interaction of Tax Assessments with Tax Infringements, the tax administrative infringement process is not separate from the additional tax assessment.
As regards the tax criminal procedure, following the submission of the criminal complaint by the tax authorities against the persons bearing criminal liability for the offence of tax evasion, the Public Prosecutor, on the basis of the evidence available, can decide either to initiate a pre-interrogation or interrogation procedure, to send the case directly to the competent criminal court, or to close the file. At the pre-interrogation or interrogation stage, the accused individual has the right to submit a defence statement along with all available supporting documentation. At this point, the Public Prosecutor may decide not to continue the criminal procedure or to send the case to the criminal court. In the latter case and at the hearing, the accused individual should present all substantiating documentation, in order to support his or her case. Following the hearing and the examination of the facts and evidence, the court shall issue its decision.
Criminal tax cases are heard exclusively by criminal courts, which are totally separate from administrative courts, which only decide on the tax assessments, on the basis of tax law.
Reduction of the applicable penalties for tax offences is only possible during the course of the audit and until the issuance of the preliminary audit findings report. After the audit has started, the taxpayer can voluntarily file corrective tax returns and pay any tax due, prior to that tax being assessed. In such a case, the applicable penalties are reduced. However, the reduction applies under the condition that the taxpayer will waive his or her right to challenge the payment of the taxes and penalties further.
Furthermore, once the tax assessment is finalised, no reduction is provided in the event that the taxpayer pays the total amount assessed, which becomes due anyway within 30 days from the assessment.
No such agreement is possible, whereas if the total amount assessed is paid, although the criminal tax trial will still take place, in practice it should be expected that the individual will be acquitted.
In criminal proceedings, the decision of the first instance court is subject to an appeal at second instance before the competent criminal court.
Pursuant to guidelines issued by the Greek tax administration, transfer pricing adjustments should not be considered as falling under the scope of tax evasion. Therefore, in the event of such findings, criminal proceedings are not initiated.
However, as regards tax assessments arising from the application of GAAR or SAAR, tax authorities should be expected to submit a criminal complaint, where the relevant thresholds for committing tax evasion have been exceeded. Nevertheless, such rules are still not commonly invoked by tax authorities and therefore they do not result in tax disputes. There have been isolated cases where the GAAR has been invoked, especially in stamp duty cases; given, however, that the non-payment of stamp duty does not fall within the definition of tax evasion, no criminal proceedings have been initiated in this respect.
Until now, limited use of MAPs has been made in cases of tax assessments concerning cross-border elements, due mainly to the lack of response by the Greek tax authorities. Therefore, it has been more common for recourse to be made solely to domestic litigation.
In 2017, however, a renewed legislative framework was introduced for the processing of applications through MAPs, which provides for a structured review and response to such applications. Therefore, it may be possible for MAPs to start being used more by taxpayers. Nevertheless, it should be noted that if recourse has also been made for the same matter to a domestic court and the latter issues a decision, then the MAP can no longer proceed.
As mentioned in 7.8 Rules Challenging Transactions and Operations in this Jurisdiction, the GAAR or SAAR are still not commonly used and therefore no tax disputes have arisen due to their application.
Transfer-pricing adjustments have mostly been challenged under domestic litigation. There have been fewer cases where the MAP has been used, on the basis of both the EU Directive and the applicable double tax treaty.
APAs are provided for in Greek tax legislation and are increasingly used as a mechanism to mitigate litigation in transfer-pricing matters.
APA applications are filed with the Directorate of Tax Audits of the tax administration and comprise the following stages:
The decision on the APA should be issued within 120 days from filing the relevant application. However, in cases where arrangements with foreign tax authorities need to be made, the above deadline is not applicable. The duration of the decision on the APA cannot exceed four years.
Until now, it was more common for litigation to be generated from cases concerning withholding taxes, and more specifically the definition of royalties (which are subject to withholding tax) versus business income (which is not subject to withholding tax). In such a case litigation could be mitigated, if the agreements in place gave a detailed description of the services actually provided (in order for their nature to be more easily defined) and, accordingly, the invoices contained sufficient descriptions or made reference to the agreements in place.
However, transfer-pricing litigation is increasing, with APAs being suitable to mitigate litigation. Furthermore, there has been some litigation involving permanent/fixed establishment assessments concerning cost-plus structures, with the tax authorities adopting aggressive interpretations of the respective provisions of double taxation treaties and VAT legislation, which, however, have so far been upheld by the courts as well.
No fees apply at the administrative stage.
For lodging an appeal at first and at second instance, the taxpayer shall pay a court duty equal to 1% of the amount under dispute and up to the amount of EUR15,000.
If the aforementioned court duty exceeds the amount of EUR3,000, only this amount has to be paid; any remaining amount up to the amount of EUR15,000 will be assessed by the court decision, if negative for the taxpayer.
Upon submission of the appeal at first or second instance the taxpayer shall pay one third of the court duty, whereas the remaining amount should be paid prior to the hearing date.
If the appeal is rejected, the court duty shall be forfeited in favour of the Greek State. However, if the appeal is accepted, the court duty is refunded to the taxpayer (any such refund does not bear any interest).
With the appeal, the taxpayer can ask for the assessed amount of taxes and penalties he or she has already paid to be refunded with interest. Indeed, when they issue positive decisions for the taxpayers and order the refund of taxes and penalties, the courts usually award interest as well.
Please see 6.1 Mechanisms for Tax-Related ADR in this Jurisdiction.
The Greek Ministry of Justice issues, on a quarterly basis, certain statistics regarding the number of court cases per instance.
As regards the administrative courts, based on the latest report available for the third quarter of 2019, the pending tax cases (including customs cases) on 30 September 2019 are as follows:
In the Administrative Court of First Instance:
In the Administrative Court of Appeals:
As regards the Supreme Administrative Court, based on the latest report available for the third quarter of 2019, the total pending tax cases on 30 September 2019 were 3,604 analysed per amount under dispute as follows:
No statistical data is available as regards the number of cases per tax type and their value.
No statistical data is available regarding which parties have succeeded in litigation.
Given the multiple stages of a tax controversy, it is important that the taxpayer sets the defensive line from the very early stage of the audit in order to be in a position to present a solid case before the tax administration and the competent courts. In this context, depending on the issues involved, the best efforts should be put forward in order to present the tax administration and courts with detailed and conclusive evidence on the factual background of the case as well as any administrative guidelines and jurisprudence on the interpretation of the applicable provisions. It should go without saying that the whole tax controversy procedure requires close monitoring at each stage in order to meet the deadlines and safeguard the best outcome.
Greek tax legislation has not always kept up to date with the complexities of economic reality, and necessary adjustments have not always been made to take into account the ever increasing number of different (and novel) types of transaction taking place, especially between legal entities. As a result, in practice, tax authorities often adopt their own interpretation of the proper tax treatment of transactions and structures that have been set up by taxpayers. This, in turn, leads to the assessment of taxes and penalties. In such cases the only means of defence for the taxpayer is to initiate tax litigation, since no settlement or arbitration procedure is available.
Historically, the factor that often convinced taxpayers not to initiate tax litigation was its duration. It would take many years for litigation to be completed and this resulted in a very large number of tax cases being pending before administrative courts. Accordingly, tax disputes remained unresolved for a length of time that was far too long to serve the interests of either taxpayers or the State.
Several legislative measures have been adopted in recent years to shorten the duration of tax litigation, and to a certain extent this has been achieved, especially recently. Temporarily, however, this progress may be impacted by the COVID-19 pandemic. The operation of the courts was largely suspended for a period of over two months and during this period no hearings took place, nor were any filings made. This suspension did, however, give the courts the opportunity to accelerate the issuance of decisions on pending cases, whose hearings had taken place before the suspension.
Some of the measures for shortening the duration of tax litigation, and their relative effectiveness, are discussed below.
In the case of tax assessments, the taxpayer is not allowed to have direct recourse to the court. It is mandatory first to file an administrative appeal with a special directorate within the tax administration (ie, the Dispute Resolution Unit – DRU). The introduction of this mandatory administrative procedure was aimed at reducing the workload of the courts. Such a procedure gives the tax administration the opportunity to re-examine the issues that gave rise to the tax assessment and, if possible, resolve the dispute in a very short period of time, without it being necessary for the dispute to be brought before the administrative courts. In this respect, the DRU is obliged to issue a decision within 120 days from the filing of the administrative appeal and, if it issues a decision in favour of the taxpayer, the dispute is resolved irrevocably, since the tax authorities do not have the right to challenge the decision before the court.
In addition, the decisions of the DRU usually serve as a binding precedent for the tax auditors. If the DRU has resolved a certain issue in favour of the taxpayer, the tax auditors normally refrain from challenging that same issue in the audits they perform subsequently, since they know that the assessment will be overturned by the DRU if the taxpayer files an administrative appeal.
In the beginning of its operation, the DRU was not functioning properly, as, for many of the cases that were brought before it, it did not issue any decision at all. This had a negative impact on taxpayers, since, according to the applicable legislation, the non-issuance of decisions by the DRU amounts to a tacit rejection of the respective administrative appeals. At the same time, the DRU was clearly operating in favour of the tax authorities as only a small percentage of the administrative appeals were accepted. This had much to do with the fact that the personnel of the DRU included many officers who had served as tax auditors in the past.
The above is clearly demonstrated in the following figures: in 2014, which was the second year of operation of the DRU and the first under the then newly introduced Code of Tax Procedures, the DRU only issued decisions for 55% of the administrative appeals that were filed in that year. Furthermore, the DRU issued decisions that were positive for the taxpayer in only 17% of the administrative appeals filed.
However, early in its existence, its purpose to reduce the number of cases brought before the administrative courts (and therefore to reduce the latter’s burden) was achieved: in 2014, judicial appeals were filed for 51% of the cases (expressly or tacitly) rejected by the DRU.
As the years have passed, however, the DRU has started to function as a more independent body, which objectively reviews the tax disputes brought before it. It now issues decisions for the vast majority of the administrative appeals filed and the percentage of the decisions which are positive for the taxpayers has doubled. At the same time, the percentage of the cases brought before the courts has been further reduced.
The above is reflected in the figures for 2019: the DRU issued decisions for 89.5% of the administrative appeals filed in that year and it issued decisions positive to the taxpayer for 35% of the appeals filed. Furthermore, 39% of the cases (expressly or tacitly) rejected by the DRU were brought before the administrative courts.
Experience has shown that the DRU will at times refrain from reviewing more complex tax issues and it does not also decide on the legality of tax rules. However, it has often applied Supreme Court case law, even before the latter has been officially endorsed by the Greek tax administration, and it will issue positive decisions where the contradiction of the tax assessments with the existing tax rules is obvious.
Although there is no official data as to the types of taxes or values involved in the positive decisions the DRU issues, it is true that it has contributed to the decrease of cases brought before the administrative courts, thus allowing the latter to process at a faster pace the (usually more complex) tax cases pending before them.
Pilot Cases Before the Supreme Court
When a taxpayer challenges a tax assessment, in order to obtain an irrevocable court decision, normally he or she would have to mandatorily go through all the stages of tax litigation: first file an administrative appeal before the Dispute Resolution Unit. Subsequently, he or she needs to file a judicial appeal. If the amount of the tax disputed is lower than EUR150,000, the appeal is filed with the Administrative Court of First Instance and in case of negative decision, a second instance appeal is filed with the Administrative Court of Appeals. On the other hand, if the amount of the tax disputed is greater than EUR150,000, the appeal is filed at first and only instance with the Administrative Court of Appeals. In both cases, the decisions of the Court of Appeals can be challenged by filing a writ of cassation with the Supreme Administrative Court, only however as regards matters of the interpretation of law.
Going through all the above stages is usually time consuming. However, the applicable law provides for the possibility of certain cases being referred directly to the Supreme Court, and thus being resolved in a much shorter period of time.
More specifically, when a judicial appeal has been filed before the Administrative Court of First Instance or the Administrative Court of Appeals, either of the litigating parties may apply to a special committee with the Supreme Court requesting that the Supreme Court review and decide on the case directly without waiting for a decision to be issued by the aforementioned lower court(s). The application may be filed and be accepted only if the judicial appeal raises a legal issue of general interest which has an impact on a wider circle of taxpayers. When such an issue is raised, the lower court itself may also refer the case directly to the Supreme Court.
If the above application is accepted and, therefore, a hearing is set before the Supreme Court for these so called “pilot” cases, the hearings before all administrative lower courts of all cases in which the same legal issue is raised are suspended. Once the Supreme Court issues its decision on the pilot case, it may also decide on the substantive part of the appeal of that pilot case or refer the case back to the lower Administrative Court, where the appeal was originally filed.
As regards the other cases which involve the same legal issue, and whose hearings had been suspended, new hearings are set following the issuance of the Supreme Court decision on the pilot case. Since, however, the legal issue has been resolved in the meantime, the lower Administrative Court will issue a decision in accordance with the Supreme Court ruling, thus in essence deciding irrevocably on the case. Accordingly, this saves significant time, since the case itself will no longer need to be brought to the Supreme Court to be resolved.
Recently through the above procedure several significant tax issues have been resolved.
Recovery of VAT on bad debts
Greek VAT law, as it currently stands, does not provide for the recovery of VAT invoiced to the client and paid to the State by the issuer of the invoice, when, due to the fact that the client has not paid the invoices and therefore a bad debt has been created, the invoice issuer never collected, from his or her client, the VAT he or her paid him or herself to the State.
The above issue arose in an urgent manner, when, following the bankruptcy of a major retailer in the Greek market, a large number of bad debts were created for many suppliers of the retailer. Following the filing of many judicial appeals by the suppliers, the Greek State itself decided to ask for one of the pending cases to be referred directly to the Supreme Court under the pilot case procedure, in order for the latter to decide irrevocably on the compatibility of Greek VAT law with the VAT Directive. In this respect, the Supreme Court ruled that the prohibition of the recovery of VAT on bad debts by Greek VAT law indeed violated the VAT Directive and was therefore illegal.
Tax audits in the case of "clear" certificates
Greek tax law provides for the issuance of tax certificates for legal entities, which are subject to statutory audit. More specifically, and for the years up to 2013, the companies that were audited for statutory purposes were obliged to undergo (by the statutory auditors) a tax audit as well and obtain a tax certificate which was issued by the statutory auditors (this certificate has now become optional). If there are no findings and the company is tax compliant, the statutory auditors issue the so called “clear” tax certificate. According to the guidelines issued, the tax authorities had the right to perform an audit on the fiscal year for which a clear tax certificate had been issued, within 18 months from the issuance of the tax certificate.
In practice however the tax auditors interpreted this rule differently and in essence disregarded it, performing audits within the regular five-year prescription period. This created many disputes and respective appeals were filed before the administrative courts.
One of the cases was referred to the Supreme Court under the pilot case procedure and in this respect the Supreme Court ruled that the State did not have the right to perform audits beyond the prescribed 18-month period.
Qualification of the special solidarity contribution tax
In 2011, in view of the financial crisis, a special contribution was introduced on: (i) the income of Greek tax-resident individuals from all sources; and (ii) the Greek-sourced income of non-Greek tax residents. This was irrespective of whether such income was taxable or exempt (with certain exceptions). Though this contribution was intended to be temporary, it eventually became permanent.
The Legal Council of State (ie, the lawyers of the Greek State) issued an opinion, which was endorsed by the tax administration, that this contribution did not qualify as tax, because it did not have the characteristics of a tax.
Again, many disputes arose in relation to the imposition of the contribution and, under the pilot case procedure, the Supreme Court ruled that the contribution was actually a tax and therefore fell within the scope of double taxation treaties, if an issue of application of such a treaty were to arise.