From tax interpretation to tax certainty

For many years businesses in Greece took critical investment decisions based on circulars, opinions and interpretative approaches to tax legislation.

But the reality is that modern business decisions are becoming increasingly complex.

Acquisitions, mergers, group restructurings, international transactions, investments in property and new business models create tax issues that often do not admit a single interpretation.

In such cases, the greatest concern for businesses is not the amount of tax.

It is uncertainty.

Uncertainty as to whether a choice that is considered correct today will be challenged in a tax audit after three or five years.

What is a Tax Ruling or Tax Binding Response?

With the introduction of the institution of Tax Binding Responses (Φ.Δ.Α.) , known internationally as Advance Tax Rulings , Greece is following a practice that has been applied for years in advanced tax systems.

The institution enables natural persons, businesses and investors to submit a question to the tax administration regarding the tax treatment of a future transaction or business action and to receive an official and binding answer before proceeding with its implementation.

In simple terms:

If a business is planning a significant transaction and wants to know in advance how it will be treated for tax purposes, it can request the position of AADE before taking on the business risk.

Why is the institution important for businesses?

Serious businesses do not look for loopholes.

They seek predictability.

The ability to obtain a binding response from the tax administration can make a substantial contribution to:

  • reducing tax risk,
  • safer investment planning,
  • protecting shareholders and management,
  • improving corporate governance,
  • strengthening investor confidence.

In many cases, the cost of an incorrect tax choice is far greater than the cost of the tax itself.

When is it worth considering submitting a Tax Ruling request?

Using the institution can be particularly useful in cases such as:

  • acquisitions and mergers of businesses,
  • corporate transformations,
  • group restructurings,
  • investments in real estate,
  • international transactions,
  • complex financing structures,
  • new business activities with unclear tax treatment.

In such decisions, tax certainty is not a luxury.

It is a factor of strategic importance.

Tax compliance as a competitive advantage

The era in which taxation was treated solely as an accounting process is over.

Today, tax compliance is an integral part of strategic management and business risk management.

Tax Binding Responses constitute an important step towards a more mature, predictable and investment-friendly environment.

Because ultimately businesses do not only need lower taxes.

They need rules they can trust.

And above all they need certainty.

“Tax strategy is not only about compliance. It is about making decisions with security, predictability and long-term business perspective.”