€5 million fine from AADE on tax representative of Italian company

A Greek company acting as the tax representative in Greece of an Italian firm that committed tax evasion through fictitious exports, violating the rules of intra-community trade, was hit with a “mammoth” fine.

The Greek company, in its capacity as tax representative, was deemed jointly liable for the violations of the Italian firm and was slapped with fines exceeding €5 million.

It all began with an intelligence report from the Financial and Economic Crime Unit (YEDDE), which targeted an Italian company and its tax representative in Greece.

The Italian parent company maintained storage facilities in Greece, mainly at the port of Piraeus, for goods it imported from other countries.

The YEDDE audit revealed that the company under investigation had issued invoices for intra-community deliveries to companies in Bulgaria and Italy, but the physical transportation of goods was never proven.

Because these were declared as intra-community transactions, no VAT was charged, but the goods were instead distributed tax-free on the Greek market.

This is a “carousel fraud” case, a method where products are declared as being shipped to companies in various EU countries without VAT being paid (since intra-community transactions are VAT-exempt), and eventually the liable company disappears (known as a missing trader).

Millions at Stake

In this case, the Independent Authority for Public Revenue (AADE) identified the company at the source and acted immediately, assessing the unpaid VAT and the corresponding fines.

The case was referred to the 1st Dispute Resolution Directorate (EL.KE), which, adopting the findings of YEDDE, added the value of the intra-community deliveries to the taxable outputs and assessed VAT and fines amounting to over €5 million.

Since the Italian company did not pay the taxes, they were charged to its appointed tax representative in Greece.

The total “bill” amounted to €5,016,092.15, broken down as follows:

• €1,119,596.97 for 2020
• €615,092.57 for 2021
• €3,281,402.62 for 2022

The Greek company appealed to the Dispute Resolution Directorate (DED), arguing that it was not liable as tax representative of the Italian firm, that its designation as such was erroneous, and that the auditors’ judgment was incorrect.

It further claimed that the Italian-registered company had already obtained a Greek VAT number and therefore was not required to appoint a tax representative.

Additionally, it argued that it never carried out tax representative functions: it had no knowledge of the company’s counterparties, did not keep books and records, did not represent the company in any EU or non-EU state, did not collect payments on its behalf, and had no involvement in the handling of goods.

It only filed periodic VAT returns on behalf of the company under its Greek VAT number. The entry of the Greek firm as tax representative in the Taxis registry was attributed to limitations of the Tax Administration’s IT system.

Joint Liability

The DED rejected these arguments and upheld the fines, reminding that the role of a tax representative is not merely formal, but carries substantive responsibilities, which may result in personal liability for taxes and fines.

Specifically, the DED emphasized the following points:

• “The tax representative has joint liability with the taxable person (Article 7 of POL.1282/93 A.Y.O). It is understood that the tax representative obtains a VAT number on behalf of each client, which must not be confused with the VAT number they hold as a natural or legal person.”
• “For taxable transactions carried out within Greece by a company established in another EU member state, where the place of taxation is Greece, and provided that there is no obligation for a permanent establishment in the country, the company may choose either to obtain a Greek VAT number through the appointment of a tax representative (who becomes responsible for filing returns and paying the VAT due and bears joint liability), or to obtain its own Greek VAT number and fulfill its filing obligations directly, paying the VAT itself.”