Following an audit of “Cyprus Corp” for FY 2011, the tax authorities found that the intra-group purchases worth 6.363.281,83 € for mechanical and medical equipment from a group company in Cyprus, were overpriced by 3.833.503,78 €.
Corporate taxation i Cyprus is significantly lower than in Greece. Hence, the overpricing resulted in the Cyprus Corp having technically increased its (high) tax depreciation in Greece and (low) tax profits in Cyprus, which in combination resulted in a lower overall tax payment of the group.
An revised tax assessment – and a substantial fine – was issued by the tax authorities.
Cypres Corp filed an appeal.
Judgement of the Court
The court predominantly decided in favor of the tax authorities.
“Because, during the financial period 1/1-31/12/2011, Mr K. is a shareholder in the applicant company with a 22.81% share, chairman and managing director until 23/08/2011 and from 30/06/2010 to 01/11/2012 the sole shareholder of the Cypriot company ” “, with the result that the transacting companies in the present case are linked by a direct relationship of direct material management, financial dependence and control.
Because, the amount of 135.471,48 € declared as accounting difference with the amended Income Tax Return for the financial period 01/01/2011 – 31/12/2011 with the number and date of filing 29/05/17 in application of the provisions of Law 4446 /2016, relates to part of the total amount of depreciation of EUR 194,077.55, which the applicant carried out on the fixed assets purchased from the Cypriot company ” “, as stated in the relevant partial income tax audit report of D. O.Y.A. PATRON and is apparent from the documents No 5 and 7 lodged with the appeal, namely (over-invoicing/ value of purchases from the Cypriot company x total depreciation: € 3 833 503,78/ € 6 363 281,83 = 60,24 % X € 322 174,55 = € 194 077,95).
Since the purchases of the applicant company from the Cypriot company ” “, relate to fixed capital goods on which depreciation is carried out and were not deducted as expenditure from the gross income for the financial year 2011, the profit within the meaning of paragraphs 1 and 2 of Article 39 of Law No 2238/1994 is made through the depreciation carried out each year on fixed assets worth € 6,363,281.83.
The fifth (fifth) plea of the applicant company is therefore accepted, all the others being rejected.”1109-2018