The transaction concerned intra-group transactions carried out by a Greek company whose main activity was the wholesale of motor vehicles. In addition to wholesale activities, the company also engaged in retail sales of vehicles and parts, as well as providing limited repair services. For the 2010 and 2011 financial years, the company documented its transfer pricing using a TNMM and a set of comparable companies, declaring losses for 2010 which were carried forward to 2011.
The tax authorities rejected parts of the transfer pricing documentation, excluded comparable companies that carried out both wholesale and retail activities, and adjusted the results to the median of the arm’s length range. Based on this, they converted the declared loss for 2010 into taxable profits, disallowed the loss carry forward to 2011 and imposed additional income tax and penalties.
The company challenged these decisions in the Administrative Court of Appeal in Athens. It argued that the exclusion of comparable companies was unjustified, that limited retail activities did not undermine comparability, that minor deviations from the arm’s length range should not lead to adjustments, and that OECD guidance should be taken into account. The court largely upheld the tax adjustments. The company then appealed to the Supreme Administrative Court.
Judgment
The Supreme Administrative Court held that the Administrative Court of Appeal had relied on a ministerial decision that was not applicable to the year in question, a legal error which affected the determination of taxable income for both 2010 and 2011. The Administrative Court of Appeal’s decision was therefore overturned, and the case was sent back for a new ruling.
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