The taxable period is the calendar year, which may end either on 30 June (for legal persons or legal entities keeping double entry books) or 31 December. The taxable year should not, in any case, exceed 12 months.
The exceptional case of closing the accounting period, for income tax purposes, at a date other than the 31 December or 30 June is limited only to Greek legal entities/other entities that are directly or indirectly owned at a percentage exceeding 50% by foreign legal entities/other entities.
CIT returns of Greek SAs, limited liability companies (LLCs), and branches of foreign companies are filed on a special form by the last day of the sixth month following the end of the tax year.
Tax returns are required to be submitted electronically.
The CIT return constitutes the basis for the direct assessment of tax, which arises without a further action by the tax administration, simultaneously with the submission of the tax return by the taxpayer.
The taxpayer also has the right to amend the tax return by paying the respective difference in tax or by establishing one’s rights for a refund of tax paid in excess according to the amended tax return.
Moreover, the taxpayer may request the issuance of a corrective tax assessment act in case of filing an amending tax return for which an administrative assessment tax act has been issued, and the tax administration is obligated to issue such corrective tax assessment if the amending tax return is accepted.
Payment of tax
100% prepayment of the current year’s CIT, less tax withheld at source, based on the tax return is paid in six equal monthly instalments.
CIT and tax prepayment based on the tax return are paid in six equal monthly instalments, the first of which should be paid until the last day of the seventh month following the end of the tax year and the remaining five until the last day of each consecutive month, which, however, may not extend beyond the same tax year.
For newly established companies, the prepayment is reduced to 50% for the first three years of operations.
Tax audit process
Tax audit procedures
The tax audit commences with the issuance of an audit order for open tax years, usually not more than five. The order concerns the audit of all tax issues (CIT, VAT, WHT, capital gain tax, etc.). The duration of the audit may vary from a few weeks to a few months, in certain cases.
The tax administration performs a tax audit from its offices on the basis of the financial statements, tax returns, and other documents that are submitted by the taxpayer, as well as the documents and information in its possession.
The performance of a complete on-site tax audit must be notified to the taxpayer by a previous written notification. A complete on-site tax audit is performed without prior notification in cases where indications of tax avoidance exist.
The tax administration may have access to the books and records and to other documents of the taxpayers, as well as to the receipt of copies thereof. The tax administration has the same rights with regard to books and records that are kept electronically. It is noted that the legal entity subject to keeping books and records must maintain these books and records for at least five years.
An extension of the on-site tax audit may be granted once for six months, as well as for another six months in extraordinary cases.
The right for a new audit of a tax period already audited is provided only in case new data arises that affects the calculation of the tax liability. ‘New data’ is defined as all data that could not have been known to the tax administration upon the commencement of the original tax audit.
The election of the cases subject to audit will be made on the basis of risk analysis criteria. Exceptionally, cases may be elected on the basis of other criteria, according to a decision of the General Secretary of Public Revenue. It should be noted that, based on Law 4389/2016, the General Secretarial for Public Revenue is abolished and a new Independent Public Revenue Authority is formed aiming to the determination, the assessment, and the collection of tax, customs, and others public revenues.
The tax administration may use the following audit techniques for the indirect determination of the taxable basis:
- The proportionality principle.
- The analysis of the liquidity of the taxpayer.
- The net position of the relation between the sales price to the total turnover.
- The amount of bank deposits and expenses in cash.
The procedure of notification of the taxpayer of the results of the tax audit is provided. More specifically, a temporary corrective assessment of tax is issued in case a differentiation of tax arises on the basis of the tax returns of the taxpayer and the results of the audit.
Following the submission of such decisions and within 20 days from the receipt of the notification thereof, the taxpayer may submit its views in writing, whilst after that point a final corrective assessment of tax sheet is issued, which is notified to the taxpayer, within a month from the end of the deadline for submitting the taxpayer’s views in writing.
Audit Centre for Taxpayers with Great Wealth
The special audit authority ‘Audit Centre for Taxpayers with Great Wealth’, competent for the whole Greek territory, performs provisional, temporary, and ordinary tax audits, as well as the audit of real estate property and of the annual expenses of individuals. The audit of foreign real estate companies not disclosing their ultimate beneficiary individuals and of Greek real estate companies in which a foreign legal entity participates without disclosing the ultimate beneficiary individuals are also assigned to the Audit Centre for Taxpayers with Great Wealth. Moreover, the Audit Centre for Taxpayers with Great Wealth is also competent for the certification and enforced collection of revenue of taxpayers with great wealth.
Audit Centre for Large Enterprises
The ‘Audit Centre for Large Enterprises’ is responsible for the performance of ordinary audits of taxpayers with annual gross income exceeding EUR 25 million for the fiscal year closing within 2009, of affiliated enterprises drafting consolidated financial statements irrespective of their gross income on the condition that the gross income of at least one of the affiliated enterprises exceeds EUR 25 million for the fiscal year closing within 2009, and unaudited cases prior to any business restructuring effected until 2011, irrespective of the gross revenues and the competent tax authority responsible for the taxation of their income, on the condition that the company or any of the companies resulting from the business restructuring falls within the ambit of the Audit Centre for Large Enterprises. The Audit Centre for Large Enterprises is also competent for the enforced collection of revenue of large enterprises located in the whole Greek territory.
Following the audit and the notification of tax audit findings, the company may in turn:
- File a mandatory administrative recourse within the framework of the special administrative procedure (out-of-court settlement procedure) before the Directorate for Dispute Resolution with the claim of reviewing any act of the tax authorities (including the tax assessment act), in case the content of the tax assessment act is questioned within a deadline of 30 days for Greek tax residents and 60 days for foreign tax residents from the notification of the act or the realisation of the failure. The direct filing of a recourse before the competent administrative courts against acts of the tax administration is inadmissible.
- Take the case to court (filing of a recourse) against the explicit/tacit negative reply of the Dispute Resolution Directorate. For tax/customs cases exceeding EUR 150,000, the competent court is the Court of Appeal (of first and last instance, which could normally issue a decision within six to 12 months; said timeframe may be longer, taking up to one to two years in case the competent court is the Court of First Instance [i.e. for disputes of an amount less than EUR 150,000]). The Supreme Administrative Court may take up to three to four years.
- Criminal sanctions are also imposed on the company’s legal representative under certain conditions.
Moreover, based on the provisions of Law 4438/2016, which was enacted on 28 November 2016, a Mutual Agreement Procedure is introduced in the Code of Tax Procedures, designated to cover the cases of elimination of double taxation in connection with the adjustment of transfers of profits between associated enterprises. Based on these provisions, the taxpayer may file a claim for the initiation of a Mutual Agreement Procedure by application of the Double Tax Conventions as well as the European Convention on the elimination of double taxation in connection with the adjustment of transfers of profits between associated undertakings. The details of application of this new procedure are determined by virtue of a Ministerial Circular issued by the Independent Authority for Public Revenue.
The Ministerial Circular issued by the Independent Authority for Public Revenue provides guidelines as regards the procedure for claiming the initiation of a Mutual Agreement Procedure, the content, the competent authorities for examining the relevant claims, the process for achievement of a Mutual Agreement, the notification of the outcome of the Mutual Agreement Procedure to the taxpayer, and the procedure for accepting such Agreement, as well as any relevant issue with respect to the above.
Tax auditors’ practice
In the past, complexity of the Greek tax legislation and the vagueness of its requirements enabled the tax auditors to dispute either the company’s results reflected in its accounting records or to disallow expenses. This is true in all tax audits and, in spite of companies’ endeavours to comply with the tax requirements, tax audits have always resulted in assessment of additional taxes and penalties.
The amount of additional taxes depends mainly on the following:
- Company’s vulnerability because of nature of business and transactions.
- Taxes already paid on the basis of the company’s income tax returns.
- Profits declared by competitors.
- Weaknesses and shortcomings that the tax auditors might reveal if a full audit is carried out.
In respect of deductible expenses, the legislation prescribes, among other requirements, that such expenses must be realised for the benefit of the company or in its ordinary course of normal business activity to represent, a valid transaction at a value that is not over or under the market value based on the data available by the tax administration, properly recorded in the company’s books in the respective period to which they relate, and can be evidenced by appropriate documentation, without defining what a business expense is. Consequently, the tax auditors dispute the deductibility of various items arguing that, in their opinion, they are not contributing to the company’s business income.
Greek SAs and LLCs whose annual financial statements are subject to a statutory audit by individual Certified Auditors and audit firms may optionally obtain an 'annual tax certificate' from their certified auditors upon the completion of a tax audit conducted, confirming compliance with Greek tax legislation. The tax audit is conducted on specific tax areas as defined by a special audit program issued by the Ministry of Finance in cooperation with the Committee of Accounting Standardization and Auditing (ELTE). The audit program is updated annually and is in accordance with the provisions of International Standard on Non-Audit Assurance Engagements 3000.
Statute of limitations
The tax administration may issue an administrative, estimated, or corrective tax assessment within five years from the end of the year in which the deadline for filing the respective tax return lapsed.
This five-year prescription period may be extended for one year if:
- the taxpayer files an initial or amending tax return within the fifth year of the prescription period or in case any information becomes available to the tax administration in the last year of the five-year period for a case that has been subject to full audit or in any other case that information, based on which a tax liability arises, comes to the attention of the tax administration from any source and solely for the matter to which it relates
- an application for the granting of information from a foreign state has been filed and commences from the date of the receipt of the respective information by the tax authority
- a mandatory administrative recourse has been filed and commences from the issuance of a decision that is not subject to recourse, or
- a Mutual Agreement Procedure is initiated, pursuant to the application of DTTs and the Arbitration Convention.
For tax years, periods, and cases as of 1 January 2018 onwards, the statute of limitation period may be extended to ten years from the end of the year within which the deadline for filing the (last) return expires if no tax return has been filed within the five-year period. The same also applies if any new or not possibly known information within the five-year period comes to the attention of any tax administration service, based on which it appears that the actual tax liability exceeds the one determined by a previous tax assessment and solely for the matter to which it relates.
Especially, for cases of tax evasion pertaining to years 2012 and 2013 and fiscal years 2014 to 2017, an extended statute of limitation period of ten years from the end of the year within which the deadline for filing a tax return expires, applies.
In case of a corrective tax assessment resulting in an amendment of the tax assessment act for a year for which the prescription period of the state’s right to audit has lapsed, the adaptation is made to the last year for which said right has not been prescribed.