TAX CASE STUDIES
Interpretation of accounting standards and business analysis in a tax dispute
Our client, a large heavy industry company, sells its key product (which is traded on global commodities exchanges) to a multinational firm, at prices agreed under a long-term, standardized contract in common practice, world-wide. Within the space of a few years from the signing of the contract, the spot prices for the product significantly exceeded the agreed price. The Tax Authority auditors contended that our client was under dominant influence by its customer. Thus, they argued that the true selling price for income tax purposes should be the spot price. After a thorough review of all relevant case parameters, including applicable Accounting Standards, Greek corporate legislation, relevant EU Directives, and best international practices, we prepared a detailed report. This report demonstrated that our client was not under the dominant influence of its customer and that the contracted price, rather than the spot price, should determine taxable income. We further extended our analysis to show that the contract price, increased by the economic benefit of a significant upfront deposit by the customer, was comparable to the five-year forward prices at the time of contract signing and to prices agreed between independent firms under similar conditions. Thus, the contract price was fair and justifiable under the circumstances.
Interpretation of accounting standards for legal use in a tax dispute
In order to respond to questions raised during a tax audit, a major multinational insurance company requested our opinion regarding the appropriate accounting treatment of certain types of investments. Following an in depth evaluation of the terms of these investments, we concluded that the investments in questions are treated off balance sheet, given that under the relevant terms and conditions, the clients of the insurance company bear substantially all the risk of their investments. In other words, gains and losses arising from the valuation of the investments in question at year end, should not be recognized by the insurance company and that it should only recognize as income the commission(s) earned.
Policy document on prepayment of taxes
In assisting with public policy development, our client requested a policy paper on the impact of pre-paying taxes (e.g., income tax, VAT, property tax) for future fiscal years. Our detailed analysis concluded that advance tax payments, made voluntarily by entities with excess liquidity, align with current Greek legislation, which is based on the European System of Accounts (ESAs) and the International Public Sector Accounting Standards (IPSAS).
Interpretation of tax rules and related accounting standards for legal use in a tax dispute
Our client, had had signed a pre-agreement in the early 2000s to buy the net assets of a grocery store, under an agreement which gave it the right to cancel the purchase, if certain terms were not met. As these terms were not eventually met, our client formally withdrew from the pre-agreement. Yet, the Tax Authority auditor claimed that the transaction was valid and that our client was liable to pay a very significant amount in taxes and fines on the purchase (over €1,5m). We prepared a detailed report to rebut the arguments of the Tax Authority for use at the Court of Appeal and at the Council of the State (the highest court of appeal).
Interpretation of tax legislation and related accounting standards for legal use in a tax dispute
Our client had financed, as a natural person, the acquisition of property by a wholly-owned offshore entity. Tax auditors contended that the funds used for the purchase were classified as a “donation” for tax purposes, resulting in a tax charge. Although the Appeals Court dismissed the case, the Tax Authority appealed to the Council of State. We compiled a comprehensive report and convincingly rebutted the Tax Authority’s stance.
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