Greece: The Evolution of Transfer Pricing Rules and Case Law Developments

The evolution of Greek transfer pricing rules

For the last 50, years the "arm’s length" rule has governed Greek tax law's approach to the allocation of profits between affiliated entities and the attribution of income to the permanent establishment of a foreign entity. This concept was first introduced by Legislative Decree 3843/1958 and later included in a separate law – Article 55 of Law 1041/1980 – which was replaced, from 1994 until 2013, by Article 39 of the Income Tax Code, enacted with Law 2238/1994. Currently, it is enshrined in Article 50 of the new Greek Income Tax Code (“GITC”), enacted with Law 4172/2013, which replaced the previous code in 2014.

Over time, the definition of these entities proved inadequate, as more Greek companies expanded their operations outside Greece, and transactions between multinational enterprise group members rapidly increased. Indeed, the rule, as initially designed and relating to cross-border transactions, captured only the over or underpricing of transactions flowing to or from Greek subsidiaries and local permanent establishments, not their treatment from the perspective of Greek parent entities, or entities transacting with foreign affiliates other than their parent entity.

Therefore, the definition of the addressees of the "arm’s length" rule was expanded. Once in 2011, to include Greek parent entities transacting with their foreign subsidiaries, and, more broadly, Greek entities transacting with foreign affiliates, then again in 2013, to also include Greek head offices having dealings with their permanent establishments abroad.

Most importantly, the current GITC –  Law 4172/2013 – contains the following additions.

• An autonomous definition of the term “related parties”: parties are related when one directly or indirectly holds a 33% or higher stake in the other, or when another party holds at least 33% of both, in terms of profit distributions or voting rights. Regardless of the fulfillment of the above criteria, the parties are still considered to be related in case of management control or dependance, or if decisive influence can be exercised by one over the other, or by the same third person in both;
• the incorporation of the Organisation for Economic Cooperation and Development ("OECD") transfer pricing ("TP") guidelines into the national tax law: it is explicitly stipulated in Article 50, Paragraph 2 of the GITC that the OECD transfer pricing guidelines shall govern the interpretation and application of the "arm’s length" rule, as opposed to the reference in the previous income tax code, where it was mentioned that they shall be merely taken into account;
• a distinct rule regulating the TP aspects of business restructurings: Following the addition in the OECD TP guidelines of a separate chapter for business restructurings, Article 51 of the GITC regulates how domestic or cross-border business restructurings shall be treated. Specifically, it is stipulated that the restructuring of functions, risks and business opportunities between related parties shall entail the payment of an "arm’s length" consideration for the transfer or reassignment of use of any existing goodwill, or other intangible. These payments will take into account the relevant function, risk reallocation and net present value of expected profits, or any other appropriate method for substantiating the "arm’s length" character of the transaction. Should no substantial intangibles be transferred, nor their use be reassigned, the consideration paid should reflect the appropriate "arm’s length" price for the functions and risk reallocation by considering other comparable cases; and
• following an amendment of Article 50, enacted in 2022 and relating to domestic intercompany transactions only, secondary TP adjustments are made possible through the filing of an amending corporate income tax return to counterbalance the effect of primary TP audit adjustments on domestic counterparties.

Transfer pricing documentation requirements and selection of transfer pricing method

Every legal entity established in Greece, including corporate entities, partnerships and consortia, as well as foreign entities operating in Greece through a permanent establishment, are subject to the TP documentation obligation.

The relevant obligation is triggered when the value of an intercompany transaction in which the local entity is involved exceeds, during the year, EUR200 thousand for entities with turnover exceeding EUR5 million, or EUR100 thousand for entities with a smaller turnover. This valuation metric also includes the value of any intra-group consideration for a business restructuring and the interest on loans to or from related parties, but excludes the loan principal itself.

Thus, each year a vast number of entities must prepare a TP documentation file to show how they have ensured that their dealings with domestic and foreign-related parties are consistent with the "arm’s length" principle. Essentially, this means explaining how their business arrangement is not different from what independent parties would be ready to agree to.

Groups that are exempt from this requirement are as follows:

• Intra-group shared service centers; and
• general group entities or offices of foreign entities exclusively rendering consulting, data processing, software development, IT-support, R&D, HR, marketing or back-office services to the foreign head office or to members of the group.

These exemptions presuppose that the local entity or office meets specific minimum annual operating expense and personnel headcount requirements. They also need to have obtained the administrative approval to determine their taxable profits are in line with a pre-approved net cost, plus a mark-up derived from a relevant benchmark study submitted to the relevant authority for pre-approval and renewed every five years, or earlier if the market conditions change significantly or the activity of the local entity is modified.

On the other hand, all other entities that are subject to TP documentation obligation must submit a summary matrix of their intercompany transactions, indicating the value, the counterparty and the TP method applied for each transaction. The TP documentation file is only submitted upon the tax auditor’s request and within a short deadline, since entities are expected to have prepared it before the filing due date of the corporate income tax return.

Detailed rules have been issued regarding the minimum statutory content of the TP documentation file. Specifically, by virtue of Article 21 of Law 4174/2013 (ie, the former Greek Tax Procedures Code, more recently replaced by Law 5104/2024 (“the new GTPC”) and Article 25). A TP documentation regulation was issued in April 2014 and amended by another one issued in May 2014.

This occurred a few months before the release of the OECD deliverable on the Base Erosion and Profit Shifting (“BEPS”) project Action 13, offering guidance on TP documentation and country-by-country reporting, aimed at enhancing tax transparency.

The part relating to country-by-country reporting is applicable to groups of companies with consolidated revenues of EUR750 million or more and was enacted in Greece in 2017, by incorporating EU Directive 2016/881 into Law 4484/2017, and by ratifying, with Law 4490/2017, the accession of Greece to the Mutual Competent Authority Agreement (“MCAA”) framework of the OECD for the exchange of country-by-country reporting with participating jurisdictions. Law 4534/2018, for the exchange of country-by-country reporting with the USA, the Greek legal requirements on the minimum content of TP documentation has, since as early as 2014, largely reflected the relevant guidelines of the OECD derived from this BEPS action.

On the contrary, when it comes to the guidelines for the selection of TP methods, the language of the Greek TP documentation regulations (ie POL 1144/2014 and POL 1097/2014) does not appear to be very much aligned with the respective OECD guidelines, which favour the selection of the most appropriate one for each case examined.

Instead, the Greek regulations’ language resembles an older version of the OECD guidelines dating from 1995, which still made reference to a hierarchy of TP methods and the preference of traditional transaction methods (ie, the Comparable Uncontrolled Price method ("CUP"), the Resale Price method ("RPM") and the Cost Plus method ("CPM")) over the transactional profit methods (ie, the Transactional Net Margin method ("TNMM") and the Profit Split method ("PSM")).

Nevertheless, the administrative courts tend to apply in practice the most appropriate TP method by adhering to the OECD guidelines, and not to adopt an a priori preference of one method over the others. Indeed, in cases where the Greek Independent Authority for Public Revenue ("IAPR") have rejected the taxpayer’s selection of the TNMM and proceeded with a new calculation of the taxable profits, albeit with the absence of internal comparable transactions with independent parties.

The courts requested that the IAPR provide evidence on the similarity of the functions of the entities selected in its sample, as well as on the accounting policy applied by each one of them regarding the allocation of expenses above and below the gross margin line, given that the sample contained companies from different jurisdictions. Eventually, the courts validated the taxpayer’s approach after the IAPR failed to provide such evidence (see court ruling nr. 39/2024 in the Administrative Court of Appeals of Larisa; and court ruling nr.1938/2023 in the Administrative Court of First Instance of Piraeus).

Therefore, though courts have not directly challenged the specific misalignment of the wording of the Greek TP regulations with the more recent OECD versions of 2010, 2017 and 2022, which adopt the selection of the most appropriate TP method, they have, in effect, overcome this discrepancy by insisting that the IAPR provide evidence on the comparability of the external data used for the gross profit tax audit adjustment, in terms of the similarity of the functions performed and the traceability of accounting policy differences in the determination of each entity’s gross profits. In this context, the IAPR's argument that the selection of the lower quartile’s gross profit rate could cover the imperfection in the comparability of the data used was considered by the courts as unsatisfactory.

With a circular issued in 2015, the IAPR provided guidance on the point of time that benchmarking data should refer to. Depending on whether the CUP method or another TP method is applied, the prices used for the comparison should be contemporaneous with the conclusion of the intercompany transaction. In the case of benchmarking the gross or net margin of the tested party against data from independent entities, the information should pertain to the weighted average of the preceding three years, based on data published not earlier than the end of the fiscal year audited, and not later than the filing due date of the relevant summary matrix of intercompany transactions.

Developments in transfer pricing case law

The introduction in 2008 and 2011 of TP documentation requirements, and the shift they entailed in the allocation of the burden of proof between the IAPR and the taxpayer regarding compliance with the "arm’s length" standard triggered a significant rise in TP disputes. The court rulings thus far issued shed light on how administrative courts in Greece treat matters, as regards such issues as:

• The selection of TP methods, tested party and geographic markets of the entities included in the benchmark analysis;
• whether entities controlled by 33% or more by an individual should be excluded or not from the sample of comparables;
• whether year-end TP adjustments can affect taxable profits;
• the right of the IAPR to use the median point of the interquartile range upon a valid challenge of the relevant taxpayer’s analysis; and
• the documentation required for proving the absence of profit shifting in intra-group cost recharges, regardless of the absence of profit mark-up etc.

Below are the highlights of the court rulings.

• In its ruling with nr5045/2024,the Administrative Court of First Instance of Thessaloniki held that the existence of internal comparable transactions of the taxpayer with an independent party can justify the application of a gross margin TP method (in the specific case examined, the application of the CPM) and the rejection by the IAPR of the TNMM applied by the taxpayer, even if the transaction is only with one independent party. However, penetration in a specific geographic market targeted for larger volumes of sales (Turkey in the case examined by the court) can justify the exclusion from the corresponding tax audit profit adjustment of transactions with an affiliate from the specific country, provided appropriate supporting documentation is presented to the IAPR that evidences the substantial difference in the pricing of the product between the geographic markets considered.
• The rejection by the IAPR of the TNMM, and its substitution with a gross margin TP method, cannot be justified by reference to a general preference of the traditional methods over the transactional profit methods. The selection of a gross margin method for drawing conclusions from the comparison, with external gross margin data extracted from databases, is inappropriate if no evidence is presented about the similarity of functions performed by the specific entities and the accounting policies followed;
• Conversely, in the case examined by the Administrative Court of First Instance of Athens, in the ruling nr. 8112/2025, the IAPR rejected the gross margin method applied by the taxpayer (specifically the RPM) and used the TNMM, due to the absence of internal comparables or other information on the comparability of the gross profit margins of the external benchmarking data. For that reason, the court agreed with the IAPR report explanations and dismissed the taxpayer’s appeal.
• In its ruling nr 365/2025,the Administrative Court of Appeals of Thessaloniki validated the approach of the IAPR to apply the TNMM by reference to the taxpayer’s counterparty as tested party. The case involved a contract manufacturing agreement between a Greek entity and its Bulgarian affiliate. The court held that the IAPR report was correct in replacing the sample of comparables with entities operating in the Balkans, as opposed to the sample used by the taxpayer and consisting of Greek entities, given that the Bulgarian affiliate performed less complex functions and almost its entire sales were to the Greek entity, thus its profits were based primarily on its intercompany transaction with the Greek entity. Hence, a sample of comparables with entities operating in the Balkans, benchmarked against the profitability of the Bulgarian affiliate, was considered more appropriate than the sample of Greek entities used by the local entity to justify, for TP purposes, its own profitability instead.
• According to case law, the fact that an entity is controlled by 33% or more by an individual cannot justify its exclusion from the sample of comparable independent entities (see nr 3076/2019 in the Administrative Court of Appeals of Thessaloniki; nr 7478/2025 in the Administrative Court of First Instance of Athens). Therefore, unless the same individual participates with a 33% or higher stake in more than one operating entity, the independence check filters applied should not lead to a rejection from the sample of comparable uncontrolled entities of companies in which an individual is found to participate with a 33% or larger stake.
• Regardless of whether the supplementary invoicing to the local entity is triggered by the applicable TP rules of the country of its affiliate, it is required to be aligned with the minimum profit margin benchmarked as acceptable. In ruling 966/2025, the Supreme Administrative Court dismissed the cassation of the local entity and validated the decision of the Administrative Court of Appeals, which had ruled that the tax recognition of the relevant expense pre-supposes that the additional charge is correlated with specific sale invoices already issued by the affiliate to the local entity, as evidenced by the reference of the additional invoice to them, or at least by the allocation of the amount to specific purchases made from that affiliate, and not its recording as a separate expense.
• When the tax audit authorities provide sufficient reasons for disregarding the benchmarking sample or the TP method used by the taxpayer, the courts tend to accept the IAPR TP adjustment to the median of the interquartile range. They do so based on the argument derived from the OECD TPG regarding the use of measures of central tendency, eg the median, to counter unknown or unquantifiable comparability defects (see nr 670/2024 in the Administrative Court of Appeals of Thessaloniki; nr 7988/2025 in the Administrative Court of First Instance of Athens). With the latter ruling, the court also validated the use by the IAPR of the Berry ratio as a more appropriate PLI (Profit Level Indicator) for performance, in view of the functional profile of the tested party – the "arm’s length" compliance test – than the operating margin selected in the benchmarking analysis of the company.
• Transactions invoiced to the local entity at cost must be well documented, especially if the amounts involved are not insignificant and do not represent incidental charges. Simply noting in the TP file that the intra-group counterparty received no profit from the transaction is insufficient. Absence of supporting documentation for the cost recharge (eg, a written agreement between the two entities, a Cost Contribution Agreement ("CCA") or information on the costs of the underlying transactions of the affiliate with third parties, and how it was agreed that these would be split among several operating companies of the group) can justify, according to the court, the benchmarking by the IAPR of the profitability of the party with the less complex functional profile (usually the local entity), thereby leading to a respective readjustment of its taxable profits (see nr 7478/2025 in the Administrative Court of First Instance of Athens).

Takeaways

• TP audits are becoming more sophisticated and may lead to the assessment of significant tax and penalty amounts if no robust documentation is available. A lack of TP documentation with accurate, reasonable and adequate analysis may give a court the basis to formulate why the sample of comparables is determined by the IAPR and ensure the profit margin of the taxpayer is adjusted to the median of the interquartile range. As a result, a significant amount of taxable profits will be added.
• Courts generally follow the OECD TPG when they resolve a transfer pricing dispute.
• Any amounts ordered for refund by the administrative courts are subject to immediate payment, together with default interest, provided such a request is included in the appeal.
• To enhance tax certainty, the taxpayer may request an Advance Pricing Arrangement ("APA"), in accordance with the relevant provision of the Tax Procedures Code.
• A Mutual Agreement Procedure ("MAP") for the resolution of a TP dispute can run in parallel with the launch of an appeal at the Greek court, as long as it is filed within its tight filing deadline. In that case, the court may reschedule, at the request of the taxpayer, the hearing date of the case, as is needed for the MAP to be first completed.