So who is right? How much – if any – does AIA, a company which until 2013 was managed by German firm Hochtief, owe the Greek state?
“AIA has fulfilled and keeps fulfilling all of its legal obligations and, therefore, has no past due debts to the Greek State, either from VAT, or other direct, or indirect taxes, social contributions, or municipal duties,” AIA said in a written statement.
The company also dismissed the reports as media hype and that the amount awarded to the Greek state was far lower at €12 million.
“The decision recently issued by the Administrative Court of Appeals, as reported in recent press clippings, relates to part of the total dispute of 12 million euros, imposed for the period 2004-09 of which 50% has already been paid in advance in accordance with standing legislation,” the ATIA said.
The court decision appears in conflict with an earlier ruling, in 2013, by the International Court of Arbitration in London (LIAC) which exempted the company from paying the tax until it makes a return on its initial investment.
Owned by the Greek state, managed by the Germans
The AIA has claimed in two press releases and in a phone interview with the company’s press office head – Ioakeim Tsimbidis with ThePressProject – that “it is a purely Greek company” in which the Greek State holds a 55% stake.
However, this is inaccurate and misleading. The Greek state does indeed hold a majority stake in the AIA, but, according to the obligations outlined in the contract between the two parties, the management and the right to select the top executive of the company is reserved for the minor partner. Hochtief Airport Capital held a 40% stake until 2013 when it sold its share to a Canadian fund (which manages insurance funds capital) which, in turn, took over the management. (In late 2010, Hochtief was taken over by Spanish construction firm GrupoACS).
After an examination of the facts presented before the International Court of Arbitration in London (LIAC) in 2013, TPP has discovered that the case is far more complicated than suggested in initial media reports.
The AIA, which refutes the allegations, has been in a legal dispute with the Greek state since 2001 over its refusal to pay VAT and tax on the dividends it metes out to shareholders, citing a special agreement stipulated in the contract between both parties – signaling a fundamental disagreement between both sides over which company activities are exempt from VAT and which ones are not.
The contract for the development of the airport that was signed in Athens on July 31, 1995 – between the Greek State and Hochtief Aktiengesellschaft vorm. Helfamann, ABB Calor Emag Schaltanlagen AG, H. Krantz-TkT GmbH and Flughafen Athen – Spata Projektgesellschaft mbH -was ratified in law-2338/1995 which stipulated that the AIA could observe two financial statements – a financial one and a tax one.
Dividends were distributed to shareholders on the basis of the former while, according to the latter, taxes were not paid until the investment paid itself off and showed a profit.
But after conducting a tax audit, the Greek State nonetheless demanded €150,3m, in VAT and dividend tax.
According to AIA’s annual report for 2013, the Greek tax authority proceeded with the finalisation of the interim audit report imposing VAT –including penalties- for the years 2001-2013 of €150,3m, which corresponds to VAT on the acquisition of fixed assets and operating expenses related to VAT exempt activities. Furthermore, authorities proceeded with the audit of the years 2004-2009 imposing VAT –including penalties- for the years 2004-2009 of €11,8m. AIA disputed both decisions referring them to the Arbitration Court in London and to an Athens administrative court. AIA was vindicated by the London arbitration in 2013 but lost the case before the Athens court in 2014.
‘The smudge’
The AIA had told the London court that the tax will be paid after it recouped the funds it expended in its investment and thus the Greek state would not incur a loss.
According to the State’s legal defense, the AIA – under the management of Hochtief – demanded an exemption from income tax on the dividends that were meted out – and still are – to shareholders, because it had accumulated losses from a depreciation of its investment. It seems that for tax purposes alone, the AIA presented – in its first tax year – the total amount of its investment worth €1.5 billion thus presenting huge losses.
According to the case in London, the AIA must pay 30% of this amount (in VAT, tax on dividends etc) after it makes a return on its investment. This raises the figure to somewhere between €450-600 million.
Describing the ruling made in London as “a smudge”, the Greek state’s legal team claimed that deferring the payment of taxes would land future AIA shareholders after Hochtief with retroactive taxes, regardless of the time they were shareholders.
Asked about the ruling by the Greek court, Government Spokesperson Sofia Voultepsi told Real FM 98.7: “Whatever the court had decided will be enforced.”