Implications Of Doing Business With Non-Cooperative Jurisdictions: The Greek Perspective

The Greek authorities maintain an active list of non-cooperative jurisdictions for tax purposes (including tax heavens). A question we often receive from clients in Greece revolves around the practical implications of doing business with such countries.For instance, if a Greek company has received an invoice from a country on the list, would this expense be acceptable for the Greek authorities?

With the internationalization of transactions, e-commerce, the freedom on relocation of individuals and companies, as well as other globalization developments, the line between legal tax planning and tax avoidance becomes difficult to define. Sometimes, as a result, authorities lean back on simple definitions in order to define clear cut strategies. Tax heavens are considered to be countries that maintain discretion via their legislation and/or refusal in tax cooperation as well as countries with significantly lower or zero taxation.

The current tax regime of an expense payable to an off-shore company from Greece is determined by the Tax Law no. 4172/2013. Under this law as well as some additional local directives (P.O.L 's ) there is a general rule concerning unacceptable invoices from abroad (regardless of the country of their origin). According to this rule, if the rate of the corporate taxation of the country of origin of the disputed invoice is less than the 50% of the Greek corporate income tax rate (currently 29%; will be 28% as of 2020) the invoice is not acceptable as a recognized expense. Therefore, invoices from countries that have a corporate income tax rate of less than 14% are not acceptable.

In case that the invoice is from a country included in the non-cooperative jurisdictions list published annually in Greece, there are some additional prerequisites in order for the invoice to be accepted . Those include the following: 1) The goods/services purchased must be essential for the operation of the Greek company and must be within the usual scope of the company's expenses. So for example, an offshore company selling coffee, can export to a Greek coffee trading company (but not to, say, steel industry company); 2) The transaction must be a real one and the value of goods or services must not be lower or higher than the usual prices available in the local market; 3) The goods must be recorded in company's books and accompanied by all legal documents such as delivery notes, bank payments, customs documents, etc.

According to the directive...