A decision (POL.) 1049/2017) issued by the Director of the Independent Public Revenue Authority (IPRA) (referred to as the General Secretary of Public Revenue prior to January 1 2017), published in the Greek government gazette on April 7 2017, contains comprehensive guidance on the application of the mutual agreement procedure (MAP) in Greece’s tax treaties. The decision is applicable for MAP requests filed as from the date of its publication. The MAP was introduced in article 63A of the Tax Procedure Code in November 2016 via Law 4438.
The MAP is a mechanism found in tax treaties that allows the competent authorities of the contracting states to engage with each other to attempt to resolve tax disputes arising under the treaty. The MAP can involve cases of double taxation, as well as cases concerning the interpretation and application of a treaty. The MAP is independent from any remedies provided under the national legislation for the resolution of tax disputes.
Greece currently has 57 tax treaties, which (except for the treaty with the UK) include MAP articles that are based on article 25 of the OECD model treaty. Prior to the decision of the IPRA, the MAP had been used only sporadically in Greece because there were no relevant guidelines. The decision addresses all stages of the MAP process.
Scope of MAP
The IPRA decision provides that the MAP will be applicable only to taxes that are explicitly covered by the relevant tax treaty and to persons that are residents of one of the contracting states based on the provisions of the treaty.
A taxpayer may seek competent authority assistance under a MAP with respect to the following issues:
- Dual residence;
- Cases relating to the deduction of withholding tax in the source country, i.e. the application of a withholding tax rate that is higher than the rate provided for by the relevant treaty;
- Cases of taxation of a particular type of income in one contracting state, where the applicable treaty allocates exclusive taxing rights to the other state;
- Cases where both contracting states take the position that they have the right to impose tax;
- Conflicts arising from the characterisation of income;
- Attribution of profits to permanent establishments; and
- Cases where a taxpayer is subject to additional tax in one country as a result of a transfer pricing adjustment made in the other country.
Where a MAP is invoked, any interest/surcharges and penalties arising from the actions that give rise to the MAP may be examined by the competent authorities within the framework of the procedure.
MAP process and requirements
Individuals or legal entities that are tax residents of one of the contracting states may submit a request to invoke the MAP. The request must be in writing and submitted to the competent authority of the state in which the taxpayer, who considers it has not been taxed according to the provisions of the applicable treaty, is considered to be a national. A request submitted to the Greek competent authority must be in the Greek language. No fees are charged for submitting a MAP request.
The competent authority role in Greece is held by two departments:
- Tax Affairs Department (First Section) of the International Economic Relations Directorate of the IPRA, for issues other than those relating to intragroup transactions; and
- Special Tax Audits Department (Fourth Section) of the Audit Directorate of the General Directorate of Tax Administration of the IPRA, for issues relating to intragroup transactions.
Content of MAP request
To initiate a MAP request with the Greek tax authorities a taxpayer must submit a written request to one of the above authorities, both electronically and in hard copy, which must include at least the following information:
- Identity (i.e. name, address, tax ID) of the taxpayer;
- A summary of the relevant facts of the case, including the tax years involved;
- The legal basis for the MAP request, i.e. the provision of the relevant treaty that the taxpayer considers has not been correctly applied by either or both contracting states;
- Information and supporting documentation (in Greek) that substantiates the taxpayer’s claim regarding double taxation;
- Whether the taxpayer previously initiated a MAP request on the same or a similar issue to the competent authority of the other contracting state, and if so, a copy of that request together with the supporting documentation and the date of submission to the foreign competent authority;
- Where a MAP request involves issues that are ongoing before the tax authorities or previously were decided, information on the means of resolving the dispute (e.g. tax amnesty, administrative resolution, administrative settlement);
- Where the issues are pending before the courts, documentation certifying that the case has not been heard; and
- A declaration by the taxpayer that the information in the MAP request and the supporting documentation is accurate.
- Any hard copy supporting documents also must be submitted electronically.
The competent authority may request additional information from the applicant. In such cases, the applicant must respond to the request within two months from the date of the request, although the applicant can request an extension of this deadline. The applicant retains the right to voluntarily submit additional information at any stage of the procedure.
The relevant treaty will set out the deadline for submitting a MAP request; under Greece’s treaties, the deadline typically is two or three years following the date of notification of the action that is alleged not to be in accordance with the treaty. If the treaty does not specify a deadline, it will be deemed to be three years.
Evaluation of MAP request
After receiving a MAP request, the competent authority will conduct a formal review, i.e. consider whether the request was submitted in a timely manner and whether all documentation was provided and ensure that the request concerns fiscal years for which the statute of limitations has not expired. If any of these conditions is not fulfilled, the competent authority will notify the taxpayer that the request will be rejected. No specific timeframe is provided for the acceptance or rejection of a MAP request.
Following the formal review, the competent authority will review the substance of the application, i.e. whether taxation complied with the treaty provisions. At this stage, consultation and the exchange of position papers with the foreign tax authority may take place.
If the Greek competent authority and its counterpart in the other contracting state are able to reach an agreement on the subject of the MAP request, the agreement will be provided to the taxpayer, who then has 60 days to accept or reject the agreement. If the taxpayer accepts the agreement, the minutes for the acceptance will be drafted and the MAP decision will be issued within a 30-day period. (In such a case, the taxpayer will be required to withdraw any pending judicial proceeding.) The decision will be signed by the Director of the IPRA and delivered to all parties involved, as well as the other competent authority. MAP decisions will be published on the IPRA website, although all personal data of the taxpayer will be anonymised. If the taxpayer rejects the agreement, the minutes for the rejection will be drafted and the other competent authority will be notified.A MAP decision is final and may not be appealed through an out-of-court petition or via recourse to the domestic courts.
Deloitte, tax partner
Deloitte, tax assistant manager