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Greek Tax Office Deploys AI Algorithm to Combat Tax Evasion through Foreign Shell Companies

The Greek Tax Office has introduced a sophisticated algorithm capable of automatically detecting financial transactions directed abroad and into countries with favorable tax regimes, as well as identifying virtual expenses generated by shell companies. According to Greek media outlet *newmoney.gr*, this new tax office “robot” can trace suspicious triangular transactions, track the flow of “black money,” and expose entire networks of tax evasion in real time.



Equipped with this AI-driven system, a specialized audit team from the Independent Public Revenue Authority (IRA) can now detect the use of “straw men” and identify shell companies. By cross-checking transaction data, payment records, deposits, and the physical presence of businesses, the “robot” can determine if a company is genuinely headquartered in a low-tax jurisdiction or if it is manipulating expenses to reduce its tax liability within Greece.


Current investigations have spotlighted triangular transactions by companies purportedly based in Cyprus and Bulgaria, but whose actual headquarters remain in Greece. The Independent Authority for Public Revenue (AADE) has already begun to untangle these webs, often originating with tax specialists and legal firms. As the report indicates, “instigators” create fictitious companies in these low-tax regions, attracting Greek business owners to exploit tax loopholes by presenting these companies as business partners. The scheme typically involves Greek businesses feigning headquarters relocation abroad, while these shell entities, often little more than VAT registration numbers, exist solely to record false expenses and reduce Greek tax obligations. Meanwhile, profits are shifted to these shell entities in tax havens to enjoy preferential rates.


These tax havens have become an “easy and simple” solution for Greek entrepreneurs and freelancers seeking to minimize tax burdens, though the scheme has deprived the Greek state of substantial revenue. While legitimate business activity exists, some are taking advantage of these arrangements to evade taxes, often transferring funds to bank accounts in neighboring countries to circumvent domestic controls. In many cases, this approach allows participants to acquire luxury items or real estate investments at minimal tax cost. Previously, AADE staff had to manually investigate cases of this nature, an arduous and time-intensive process. With the new algorithm, cases now “light up the computers” at the tax office in real time, alerting auditors to instances that would have otherwise taken considerable effort to detect.


Cyprus Company Formation

One prominent case involved a logistics entrepreneur from Crete who, with the help of accountants and business management software providers, orchestrated a network of 60 companies in Cyprus to take advantage of the favorable Cypriot tax and insurance regime, evading Greek taxes and contributions. The AADE’s “robot” flagged this case, uncovering a tax evasion operation involving taxable material exceeding 20 million euros. The orchestrator co-owned an international transport company based in Crete and was also the sole shareholder of a fictitious company in Cyprus, which solely issued invoices to the Cretan company and other local businesses. This fictional entity declared income that benefitted from Cyprus’s tax regime, concealing the real income owed by the Cretan company. An investigation revealed that the 60 companies operated with the same accountant and shared a registered office in Cyprus.


The AADE’s probe is expanding, now focusing on transactions linked to other “suspect” jurisdictions such as Albania, Cyprus, Bulgaria, Ireland, Hungary, North Macedonia, and Moldova. Auditors are particularly scrutinizing expense invoices and fund transfers from these countries, while Greek businesses must demonstrate that all transactions comply with legal requirements and that the foreign entity in question operates as a legitimate business in its registered country.


AADE officials emphasize that techniques designed to fictitiously transfer costs from a parent company to a foreign subsidiary or branch will not be recognized by Greek authorities, regardless of whether companies are aware of the illegality. Greek tax law permits the state to claim a company as a Greek tax resident, even if its headquarters have been moved abroad, if the business’s actual management is conducted within Greece.

By fLEXI tEAM

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