Following an audit the tax authorities issued a tax assessment and a substantial fine to S.p.A. ST. MEDICAL related to costs deducted in FY 2010, which the tax authorities claimed were partially fictitious. “the Economic Police carried out, on 22.10.2012, a tax audit of the appellant, which, during the contested management period (1.1.-31.12.2010), had as its business the wholesale trade in medical and surgical equipment, tools and similar items, keeping, for the purpose of monitoring its business, books and records of category C of the Commercial Code. During the audit carried out, in addition to the books kept by the appellant, various items of information found at its registered office (sales invoices, service receipts, delivery notes, delivery notes, exclusive distribution contracts between the appellant and foreign companies, with attached price lists of the products to be distributed, etc.) were seized for further processing, including items issued by the limited liability company ‘Praxis Company of Medical Equipment Ltd’ (‘Praxis’), established in Cyprus, the object of whose activity is either Following the completion of the processing of that information, the audit report of 12.3.2014 of the Financial Police was drawn up, which included the following findings: (a) the appellant company had Praxis as its main supplier, of which it was, in essence, the sole customer; (b) from 2008 onwards, the Cyprus company had as its sole shareholder the company ‘Poren Ventures Limited’, a company incorporated under the laws of the British Virgin Islands, with capital consisting of 50. 000 shares, of which 49 999 shares were held by the sole partner and manager of the appellant; c) the Cypriot company operated, in the context of triangular transactions, as an intermediary between suppliers – foreign companies (Alphatec Spine, Misonix INV, PFM, Sorin Group and Sorin Biomedica Cardio S.R.L. ) and the appellant, despite the fact that the latter was able to obtain the same products directly from foreign companies, with some of which it had concluded exclusive distribution agreements (Alphatec Spine, Misonix INV and PFM), (d) in the context of the transactions between them, the Cypriot company issued invoices to the appellant, in which it indicated purchase prices for the products supplied which were, on average, 241% higher than the prices at which the same products were priced by the foreign companies …and (e) the goods supplied were sent by the foreign firms directly to the appellant, which then sold them to public hospitals in the country at the high prices at which they had been supplied by the Cypriot company, thereby technically inflating the cost of their purchase (by recording the invoices issued in that regard in its books) and reducing its profit accordingly, to the detriment of the interests of the Greek State. ” “according to the auditors’ estimate, to the value of these products in case their purchase had been made directly by the foreign companies, without the mediation of the Cypriot company, amounted to 1.531.457€, i.e. an amount, by 3.384.906€, lower than the value indicated on the invoices issued for the respective transactions (4.916.364€). During the audit, it was also found that, for the supply of those goods, the appellant, although it had entered in its books all the purchase invoices issued by Praxis in 2010, ultimately paid to Praxis, by means of bank transfers, only part of the value indicated on those invoices, namely €4,809,073, against a total debt of €10,119,105. The report of the Economic Police was sent to the appellant’s Income Tax Department IZ of Athens, which carried out a new tax audit…” “Following this, the auditor of the Athens IZ Tax Office…..drew up the report of 29. 4.4.2015, in which it fully adopted the findings of the Financial Police, from which, in its assessment, it appeared that the foreign firms treated the appellant and Praxis as a single enterprise, in the interests of the same person. In the same report, it proposed to impose a fine on the appellant for the receipt by it of invoices issued by the Cypriot company which were partially fictitious in terms of price. There followed the 173/29.4.2015 act of the Head of the Athens IZ Tax Office, by which, invoking Articles 2(2)(a) and (b) of the Greek Tax Code, the Head of the Athens Tax Office issued a decision of the Head of the Athens Tax Office. 1 and 18 par. 2 of the Commercial Code and 5 par. 10 and 19 par. 4 of Law No. 2523/1997, imposed a fine on the appellant for receiving partially fictitious tax information, amounting to twice the value of the transactions classified as fictitious (€3,384,906 x 2 = €6,769,813). “ The assessment and fine was later upheld by the Administrative Court and the Administrative Court of Appeal. Not satisfied with this result, S.p.A. ST. MEDICAL filed an appeal with the Supreme Administrative Court. Judgement of the Supreme Administrative Court The Court partially allowed the appeal of S.p.A. ST. MEDICAL and remanded the case back to the tax authorities in order to examine whether instead the conditions for imposition of a penalty provided for in Article 39(7) of the Income Tax Code were fulfilled. Excerpts ” transactions in which the value shown on the tax documents is higher than the value which could have been agreed under the prevailing market conditions do not, in principle, constitute a case of partial deception, provided that that value corresponds, as stated above, to the price actually agreed between the parties. ” “In the view of the Court of First Instance, such is the nature of the overpricing of the products sold by the Cypriot company, resulting, in its view, from the large discrepancy between the purchase price and the selling price, from the close economic dependence of the two companies and from the general circumstances in which those transactions took place. However, in the light of what has already been said, that finding is incorrect, in the light of the ground of appeal in the main proceedings, as set out in the appeal of 24.10.2008 C ...