Our Tax Controversy & Litigation team has successfully defended, before the Dispute Resolution Committee, the right of the applicant company to benefit from the tax deferral on the goodwill arising from a business sector spin-off, achieving the full cancellation of a tax assessment of apprοximately €2 million.
The team was led by Diana Tsourapa, partner, with the assistance of Alex Karopoulos, head of Tax Controversy & Litigation, and Eva Sakellaridou, associate.
Background
The company had benefited from a tax-neutral spin-off of a business sector under the favourable provisions of Legislative Decree 1297/1972 granting tax deferral on the goodwill arising therefrom until the eventual dissolution of the entity.
Tax Authority's position
The competent tax authority argued that the company had failed to record the goodwill in a separate "memorandum account” (“off-balance-sheet" account), as allegedly required by Supreme Court case law. On this basis, the auditors concluded that, absent such a dedicated account, the company had forfeited its right to the deferred taxation, rendering the goodwill immediately taxable at the then applicable 24% corporate income tax rate (CIT) and proceeded to issue the relevant assessment.
Dispute Resolution Committee's landmark ruling
In a significant ruling, the Committee accepted our arguments in full and cancelled the tax assessment entirely. The Committee held that:
The prior case law of the Supreme Court was developed under the former accounting framework (Code of Books and Records), which imposed stricter rules on how accounts had to be named and how accounting events had to be recorded — rules that no longer apply under the current Greek Accounting Standards (Law 4308/2014), which mandate that the accounting system and records be assessed as a whole and not in a fragmented manner.
The company had recorded the goodwill in two clearly identified, discrete general ledger accounts, with explicit accounting entries referencing Law 1297/1972, whereas a relevant note was also included in the financial statements, thus providing all necessary transparency and traceability to the tax authorities.
Significance of the ruling
This decision is particularly important as it recognises that, under Greek Accounting Standards, strict formalism in accounting entries should not override the substance of accurate and transparent bookkeeping, provided that events and transactions are clearly traceable through the overall accounting records and published financial statements.