Tax Certificate - EY

1 October 2011. Tax Alert Athens, Greece Tax Certificate According to article 82 par. 5 of law 2238/1994 Certified Auditors are obliged to issue a In case the Certified Auditor's Tax Tax Certificate to the companies they audit by performing a special audit in their tax affairs Compliance Report is unqualified, taking place in parallel with the statutory audit. Although the above provision is applicable the company will not be subject as of April 2010, the procedure, the way and the formalities of issuing the Tax Certificate to an audit by the tax authorities, have been determined with the Ministerial decision 1159 unless it is included in the sample of cases that will be re-audited Which companies should be subject to an audit for the from the Ministry of Finance.

2 Tax Certificate S. ocietes Anonymes and Limited Liability Companies, whose annual financial statements are obligatorily subject to a statutory audit by individual Certified Auditors / Audit Firms for all fiscal years ending on or after 30/06/2011. According to provisions of Law 2190/1920 and Law 3190/1955, Societes Anonymes and Limited Liability Companies are obligatorily audited by Certified Auditors, in case where two (2) out of three (3) following criteria are exceeded for two (2)consecutive years: Total Assets > 2,5 millions, Net Turnover > 5 millions, Average Staff > 50 employees In addition, companies that prepare, either mandatorily or optionally, their annual financial statements and annual consolidated financial statements under IFRS are obligatorily audited by Certified Auditors.

3 Moreover, under certain conditions, Certified Auditors also audit branches of foreign banks and insurance companies. Since the Ministerial Decision does not explicitly state which companies should be obligatorily audited by Certified Auditors / Audit Firms for the purpose of issuance of the Tax Certificate , respective clarifications are expected. Who issues the Tax Certificate It is not clear from article 82 par. 5 of law 2238/1994 whether the Tax Certificate may be issued by a Certified Auditor / Audit Firm other than the one undertaking the statutory audit. However, there are references in Ministerial Decision POL 1159/2011, from which it may be deduced that the Ministry's intention is to provide that the Tax Certificate will be issued by the Certified Auditor / Audit Firm that undertakes the statutory audit.

4 Taxation areas covered by the tax audit program T. he tax audit is conducted on specific tax areas as defined by a Special Audit Program : Corporate Income Tax Value Added Tax Greek Code of Books and Records Real Estate Taxes Stamp Duty Withholding Tax obligations Business Transformations Transfer Pricing E-Commerce T. he Special Audit Program is issued by the Ministry of Finance in cooperation with the Committee of Accounting Standardization and Auditing ( ELTE ), it is updated annually and it is in accordance with the provisions of International Standard on Assurance Engagement ISAE 3000. A. udit issues not covered by the Special Audit Program will be treated in terms of ISAE.

5 3000. If company performed intercompany transactions in the current fiscal year, it is necessary to document the pricing applied on these transactions, as required in Tax Audit Program. T. he tax audit is performed on a sample basis. Especially with respect to the audit of tax deductibility of expenses for income tax purposes, the sample covers at least 10% of each expense's category T. he sample consists of expenses exceeding certain thresholds depending on the companies' gross income, as depicted in the following table: Gross Revenues Expense amount < 50 millions > 15 thousands 50 millions - 100 millions > 25 thousands 100 millions - 200 millions > 35 thousands 200 millions - 500 millions > 50 thousands 500 millions - millions > 70 thousands I f the 10% sample is not covered by the above expenses, then the audit sample is extended E.

6 Specially in case of private car expenses, taxes/duties, provisions and conference/. reception expenses, the respective tax records are audited irrespective of their amount I n case violations are identified, Certified Auditors/Audit Firms are obliged to extend their audit procedures. In such case, the above expense thresholds and audit samples do not apply 2 Tax Alert October 2011. Clarifications are expected on the procedures for selecting the sample, especially with respect to car expenses, taxes/duties etc. which should be audited regardless of their value. T. he Certified Auditors/Audit Firms are obliged to apply the appropriate audit procedures and audit all taxation areas.

7 Responsibility for the preparation and the correctness of the tax records . T. he management of the audited company is responsible for the preparation of the tax records . A. ll the tax records are signed by a tax accountant T. he determination of the tax adjustments should derive in detail from the books kept T. he determination and the finalization of the tax adjustments should be performed: either directly by the staff performing the entries or the latest until the finalization of the monthly accounting entries It clearly derives from the relevant provisions that a change in the organizational and operational structure of companies' accounting departments may occur, so that the tax adjustments are specified in a way that enables the audit for the issuance of the Tax Certificate .

8 Content of the Tax Certificate T. he Annual Tax Certificate consists of the following two sections: a) the Tax Compliance Report and b) the Appendix of detailed data . a) Tax Compliance Report The Tax Compliance Report is drafted according to the Sample of Appendix I of Ministerial Decision 1159/2011 and it is distinguished, depending on the type of the conclusion, as depicted in the following table: Tax Alert October 2011 3. Unqualified Tax Unqualified Tax Qualified Tax Tax Compliance Compliance Report Compliance Report with Compliance Report Report with adverse or emphasis of matter disclaimer conclusion In which case it is When no tax violations or When issues arise, whose When reservations issues When failure to reach issued insignificant violations tax treatment is disputed arise (non compliance a conclusion exists arise with tax legislation) ( when data are not provided) or when the conclusion is negative ( when the audit verifications cannot be performed).

9 What are the Within fifteen (15) days An audit order is issued An audit order is issued An audit order is issued consequences after submission of the by the competent Tax by the competent Tax by the competent Tax Report to the Ministry of Audit Office for the Audit Office. Audit Office Finance, a letter is sent issues of emphasis. In case of taxes that to the audited company, The audits are conducted could be assessed by tax stating that a) according by the competent audit authorities only upon to the audit performed authorities and are an audit of specific tax by the auditors, no tax completed within a areas, an audit order is violations arise, b)the period not exceeding issued for these areas.

10 Above is in principle eighteen (18) months accepted by the Ministry The competent Tax as of the deadline set of Finance and c)the tax Audit Office of the to Certified Auditors/. entries will be finalized Ministry of Finance Audit Firms to file the after completion of may request from the Tax Compliance Report sample audit. Certified Auditor all the to the Ministry of Finance appropriate documents ( the company with for the preparation of the year-end on 31/12/2011. audit report. said deadline is on 10/01/2014). After the assessment of taxes (if any), the fiscal year is considered closed . b) Appendix of detailed data It is drafted according to the sample of Appendix II of Ministerial Decision 1159/2011.