Monday, 16 May 2016 07:21

Transfer pricing: Definition of related parties

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As you may already know, transfer pricing is an international attempt of the tax authorities of each country to battle the transfer of gains from the jurisdiction where they have occurred to a lower tax jurisdiction through subsidiaries and associated entities.  

According to Law 4174/2013, entities which have transactions with related parties (domestic or foreign) are obliged to submit electronically the “Summary Information Sheet” regarding the intra-group transactions and to prepare a Transfer Pricing File.

What is crucial is the definition of the “related entities” which has been broadened following the enactment of Law 4337/2015.  Indicatively, we note that in case a company possesses 33% of the capital of another company (directly or indirectly) or in case two companies have at least one common shareholder or one common member of the board of directors or a third party can be considered that has influence on the decision making of both companies, then it can be considered as related companies and the above (Summary Information Sheet and Transfer Pricing File) should be maintained as part of the Books and Records of the Company.

The Summary Information Sheet includes information in relation to the object of the obliged entity, the related parties, the functions that perform and the risks that undertakes as well as information in relation to the nature and amount of its intra-group transactions, whereas the Transfer Pricing File analyzes the pricing policy between the related entities.

The deadline for the submission of the Summary Information Sheet is the end of the fourth month following the year end, whereas there is no official deadline for the preparation of the Transfer Pricing File which should be submitted to the tax authorities no later than one month following the relevant request.

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