Greece vs “VSR Inc”, December 2019, Court, Case No A 2631/2019

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At issue was the transfer of taxable assets from a shareholder to a 100% owned company, “VSR Inc”. This transfer of resulted in an understatement of profits in a controlled sale of vehicle scrapping rights.

Following an audit, the tax authority concluded that the rights had been acquired in the previous quarter from the one transferred and that a sale value below cost could not be justified. According to the tax authorities the arrangement lacked economic or commercial substance. The sole purpose had been to lower the overall taxation.

An revised tax assessment – and a substantial fine – was issued by the tax authorities.

VSR filed an appeal.

Judgement of the Court

The court dismissed the appeal and decided in favor of the tax authorities.

“Since it is apparent from the above that the above transactions were intended to transfer taxable material from the applicant’s sole proprietorship to the associated company under the name of ” “, TIN and to tax them at a lower average tax rate, all the above transactions are therefore artificial arrangements which are not consistent with normal business behaviour and lead to a significant tax advantage without any assumption of business risk on the part of ” “, TIN

Because, for each of the 2005 withdrawal rights, which is identical to a vehicle registration number, the tax authority identified the corresponding purchase document and determined the total acquisition value of these rights at the amount of six hundred and six thousand one hundred and sixty euros (€ 606,160.00), i.e. an average acquisition price per withdrawal right of € 302.32.

Consequently, the taxable amount transferred, in the form of an artificial arrangement, from the applicant’s sole proprietorship to the associated company with the name ” “, VAT number , amounts to € 405,580.00 (€ 606,160.00 – € 200,580.00).

In the light of the foregoing, the applicant’s claims concerning the tax authority’s unsubstantiated assessment of the existence of artificial arrangements and the absence of the element of intention are rejected as unfounded.

Since the public administration is bound by the principle of legality, as laid down in Article 26(1)(b) of the Staff Regulations, the Commission is bound by the principle of proportionality. 2, 43, 50, 50, 82, 83 and 95 & 1 of the Constitution (Council of State 8721/1992, Council of State 2987/1994), which implies that the administration must or may take only those actions provided for and imposed or permitted by the rules laid down by the Constitution, legislative acts, administrative regulatory acts adopted on the basis of legislative authorisation, as well as by any rule of higher or equivalent formal force to them.

Since the review of constitutionality is a matter for the courts and does not fall within the competence of the administrative bodies, which are required to apply the existing legislative framework, it is inadmissible and is not being examined in the context of the present action.

Consequently, the applicant’s allegation of a breach of the principle of economic freedom in Article 5 of the Constitution, the principle of proportionality in Article 25 para. 1 of the Constitution and the requirements of the Charter of Fundamental Rights of the European Union is rejected as being unfounded.

Because the applicant’s claim that the excess amount already paid by ” “, TIN, as income tax (EUR 118 073,21) should be deducted from the income tax assessed on the applicant’s sole proprietorship, TIN, is rejected as unfounded in substance and in law, since there is no relevant provision in the tax legislation providing for such a deduction. With regard to the individual claim that the amount of the income difference found by the audit for his sole proprietorship of € 405,580.00 should be added to the expenses of the I.C.E., this is a matter that should be raised and dealt with by the I.C.E., which is a separate tax entity, and not by the applicant as a natural person, and is therefore irrelevant.

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