C. spółka z o.o. is part of a larger group and mainly (95%) sells products (boxes, metal enclosures, etc.) and related services to related parties. According to its transfer pricing documentation the “cost-plus” method had been used to determine the prices of products sold to related parties. The company was audited for FY 2016. According to the tax authorities, the company did not provide enough evidence to support the cost-plus method. The tax authority instead used the transactional net profit method to estimate the company’s income for the year 2016, taking into account factors such as characteristics of goods or services, functional analysis, contractual conditions, economic conditions, and economic strategy by comparing the company’s performance with similar companies over a 3 year period by using EBIT margin. As a result, the authority adjusted the company’s loss and established income based on a EBIT margin of ... Read more

“H. LVAS Sp. z oo” had deducted expenses related to intra-group services in its taxable income. The services had been provided by its German parent company, H. GmbH. The services (supervision and management support, coordination of projects, support in accounting, controlling, IT and personnel) had been classified by the group as low value-added services. Following a inspection, the tax authority issued an assessment where these deductions had been denied resulting in additional taxable income. An appeal was filed by H with the Administrative Court. Judgement of the Administrative Court The Court found that the assessment issued by the tax authorities was incorrect and remanded the case for further considerations. Excerpts “Inaccuracies or incompleteness of documentation, and in particular its absence, may result in the necessity to estimate income (cf. the judgments of the Supreme Administrative Court of 22 October 2014, II FSK 2494/12 and of ... Read more

A Polish company, “Shopping Centre Lender sp.k.”, had been granted three intra group loans in FY 2013 for a maximum amount of EUR 2 million, EUR 115 million and EUR 43.5 million. The interest rate on the loans had been set at 9%. The tax authorities found that the 9% interest rate was higher than the arm’s length rate, and issued an assessment where the interest rate had been lowered to 3.667%, resulting in lower interest expenses and thus additional taxable income. “Shopping Centre Lender sp.k.” filed an appeal with the Administrative Court claiming that the procedure for estimating income – determining the arm’s length interest rate – had not been conducted correctly by the tax authority. In a judgement issued in May 2019 (no. III SA/Wa 1777/18) the Administrative Court issued a judgement in favour of the company. An appeal was then filed by ... Read more

C. spółka z o.o. is part of a larger group and mainly (95%) sells products (metal containers) and related services to related parties. According to its transfer pricing documentation the “cost-plus” method had been used to determine the prices of products sold to related parties. The company was audited for FY 2016. According to the tax authorities, the company did not provide enough evidence to support the cost-plus method. The tax authority instead used the transactional net profit method to estimate the company’s income for the year 2016, taking into account factors such as characteristics of goods or services, functional analysis, contractual conditions, economic conditions, and economic strategy by comparing the company’s performance with similar companies over a 3 year period by using EBIT margin. As a result, the authority adjusted the company’s loss and established income based on a EBIT margin of 3.66%, resulting ... Read more

D. Sp. z oo had deducted interest expenses on intra-group loans and expenses related to intra-group services in its taxable income for FY 2015. The loans and services had been provided by a related party in Delaware, USA. Following a inspection, the tax authority issued an assessment where deductions for these costs had been denied resulting in additional taxable income. In regards to the interest expenses the authority held that the circumstances of the transactions indicated that they were made primarily in order to achieve a tax advantage contrary to the object and purpose of the Tax Act (reduction of the tax base by creating a tax cost in the form of interest on loans to finance the purchase of own assets), and the modus operandi of the participating entities was artificial, since under normal trading conditions economic operators, guided primarily by economic objectives and ... Read more

“Fertilizer Licence SA” (“A”) transferred its trademarks to “B” in 2013, previously financed the transfer through a cash contribution, and then, following the transfer, paid royalties to “A” in exchange for the ability to use the assets. According to the tax authorities, a situation where an entity transfers its assets to another entity, finances the transfer and then pays for access to use those assets does not reflect the conditions that unrelated parties would establish. An unrelated party, in order to obtain such licence fees from another unrelated party, would first have to incur the costs of manufacturing or acquiring the trademarks and to finance these costs itself without the involvement of the licensee. An independent entity which has finances the creation or purchase of an intangible asset, should not incur further costs for the use of that asset. Furthermore, in determining the licence fee ... Read more

Following a business restructuring, rights in a trademark developed and used by O.B SA was transferred to a related party “A”. The newly established company A had no employees and all functions in the company was performed by O.B. SA. Anyhow, going forward O.B SA would now pay a license fee to A for using the trademark. The payments from O.B SA were the only source of income for “A” (apart from interest). According to the O.B. group placement of the trademark into a separate entity was motivated by a desire to increase recognition and creditworthiness of the group, which was a normal practice for business entities at the time. In 2014 and 2015 O.B. SA deducted license fees paid to A of PLN 6 647 596.19 and PLN 7 206 578.24. The tax authorities opened an audited of O.B. SA and determined that the ... Read more

On 30 November 2012, X sold its trademarks to subsidiary C which in turn sold the trademarks to subsidiary D. X and D then entered into a trademark license agreement according to which X would pay license fees to D. These license fees were deducted by X in its 2013 tax return. The tax authorities claimed that X had understated its taxabel income as the license fees paid by X to D for the use of trademarks were not related to obtaining or securing a source of revenue. The decision stated that in the light of the principles of logic and experience, the actions taken by the taxpayer made no sense and were not aimed at achieving the revenue in question, but instead at generating costs artificially – only for tax purposes. An appeal was filed by X. Judgement of the Administrative Court The court ... Read more

The Administrative Court found that a voluntary redemption of shares was not a controlled transaction covered by arm’s length provisions. A redemption is a corporation’s repurchase of all or a portion of the shares held by a shareholder at an amount not in excess of the amount stated in the articles or calculated according to a formula stated in the articles. A redemption of shares can only take place between a company and its shareholders. Hence, terms and pricing of the transaction cannot be determined based on unrelated transactions. The purpose of the redemption of shares is not to modify the amount of income achieved by the related parties by applying a non-arm’s length price. Click here for English Translation Click here for other translation ... Read more

By judgment of 13 March 2020, the Provincial Administrative Court upheld the complaint filed by K.O. and revoked a decision issued by the tax authorities on the determination of the amount of the tax liability resulting from a transfer of shares between K.O. and a related party in 2016. An appeal was filed by the tax authorities with the Supreme Administrative Court in which the authorities stated that Provincial Administrative Court incorrectly had concluded that the nominal value of shares taken up by a taxpayer is not subject to market mechanisms and, therefore, the authority should not question the revenue thus generated. According to the tax authorities the taxpayer effected a transaction with a related entity of which it was the owner and determined without justification a contribution in-kind disproportionately high in relation to the shares acquired in the related entity, while the authority, taking ... Read more

A. Sp. z o.o. was established to carry out an investment project consisting in construction of a shopping center. In order to raise funds, the company concluded a loan agreement. The loan agreement was guaranteed by shareholders and other related parties. By virtue of the guarantees, the guarantors became solitarily liable for the Applicant’s obligations. The guarantees were granted free of charge. A. Sp. z o.o. was not obliged to pay any remuneration or provide any other mutual benefit to the guarantors. In connection with the above description, the following questions were asked: (1) Will A. Sp. z o.o. be obliged to prepare transfer pricing documentation in connection with the gratuitous service received, and if so, both for the year in which the surety is granted to the Applicant or also for subsequent tax years during the term of the security? (2) Will A. Sp ... Read more

R. Sp. z o.o. had requested a binding ruling/interpretation regarding tax deduction for the price paid to a related entity under restructuring. The request was denied by the tax authorities, as the question – according to the authorities – could only be answered under an Advance Pricing Agreement. R. Sp. z.o.o brought the issue before the Administrative Court, where a decision in favour of R. Sp. z.o.o. was issued. An appeal was then filed by the tax authorities. Judgement of the Supreme Administrative Court The Court dismissed the appeal of the tax authorities. The tax authorities could not refuse to issue a binding ruling/interpretation on whether or not a price paid to a related party under restructuring was tax deductible. According to the Court such a question could not only be dispelled by the issuance of an Advance Pricing Agreement. Click here for English Translation ... Read more

The company is a producer of household chemicals and belongs to the R. B. (“the Group”), which is active in the manufacture and sale of consumer products in the home, health and hygiene products industry. The Company has entered into supply agreements for the goods it produces with Group companies. On the basis of the agreements, the Applicant sells goods produced by it to entities of the Group indicated by R. A. h. Companies and to R.B. [E.] B.V. The remuneration of the Polish company was determined based on a target margin – and if the profits were below or above the target margin, an invoice was issued subtracting or adding income to arrive at the target income. The tax authorities held that the quarterly “Transfer Pricing-adjustment” was not a transfer in regards of VAT. The company then filed a request for a individual interpretation ... Read more

The business activity of A S.A. was wholesale of pharmaceutical products to external pharmacies, hospitals, wholesalers (including: to affiliated wholesalers). The tax authority had noted that the company’s name had been changed in FY 2013, and a loss in the amount of PLN […] had been reported in the company’s tax return. An audit revealed that the Company had transferred significant assets (real estate) to a related entity on non-arm’s length terms. The same real estate was then going forward made available to the company on a fee basis under lease and tenancy agreements. The tax authority issued an assessment where a “restructuring fee” in the amount of PLN […] was added to the taxable income, reflecting the amount which would have been achieved if the transaction had been agreed between independent parties. According to the company the tax authority was not entitled at all ... Read more

A request for an interpretation was submitted by a company in regards to financial transactions (loans and guarantees) with related parties. The requested interpretation was relevant in determining the amount of the controlled transactions and on that basis whether the taxpayer was required to prepare TP documentation or not. The company held that in determining the value of a loan transaction, only the value of interest should be taken into account. The tax authorities held that both the amount of interest and the amount of capital were to be included in amount of the transaction. Judgement of the Supreme Administrative Court The Court decided in favour of the tax authorities. Applying a linguistic interpretation, the court found no support for excluding the capital part of a loan transaction from the amount of the transaction. Click here for English Translation Click here for other translation ... Read more

At issue in this case was the remuneration of a Polish manufacturing subsidiary in an international group dealing in the production and sale of metal packaging for food products, including beverage cans, food cans, household cans and metal lids for jars etc. The Polish tax authorities had issued an tax assessment for FY 2009 – 2012 based on a TNMM benchmark study where financial results of comparable independent manufactures operating in the packaging industry showed that the the Polish manufacturing site had underestimated revenues obtained from the sale of goods to related entities The Court of first instance held in favor of the tax authorities. The case was then brought before the Administrative Court of Appeal. In the Court’s view, the authorities did not subject the case to thorough verification in accordance with the legal standards on which the decision was based – including, in ... Read more

The activity of Spółka A sp. z o.o. included salmon breeding, processing, smoking and sale and distribution of the finished products. The company operated within Group A with head quarter in the Netherlands. By decision of 27 May 2019, the tax authorities determined that the operating expenses determined by transactions with related parties were inflated by PLN 29,613,156.00. The authorities did not accept calculations presented by the Company, as there were no reliable accounting records regarding the amount of costs incurred. Furthermore, the authorities held that the cost plus method, which should guarantee profit on the transaction in the Company, had been applied incorrect. The dispute before the administrative Court boils down to assessing whether the court of first instance, in compliance with the provisions in force, reversed the decision of the authorities in its entirety and referred the case back for reconsideration due to ... Read more

A shared service center in Poland both provided intra-group services to the group and in doing so also received and paid for services from other group companies. At issue was payments for the services that the Shared Service Center in Poland received. Under some circumstances intra-group service costs are non-deductible in Poland according to local anti-avoidance provisions aimed at base eroding payments, and according to the tax authorities the payments for intra group services received by the Shared Service Center were non-deductible according to these anti-avoidance provisions. The tax authorities had considered that the payments for the received services were non-deductible according to these provisions. Court decision Service costs that are directly connected with provision of services that generate income, and are included in the base for remuneration of the services provided are deductable and thus not covered by the non-deduction provisions. The Company’s revenues ... Read more

K. sp. z o.o. is a Polish company belonging to an international group. The main activity of K is local sale of goods purchased from a intra group supplier. K is best characterized as a limited risk distributor and as such should achieve an certain predetermined level of profitability as a result of its activities. In order to achieve the determined level of profitability, the group had established that, if the operating margin actually achieved by the distributor during a given period is less or more than the assumed level of profit, it will be adjusted. The year-end adjustment will not be directly related to the prices of goods purchased from the intra-group supplier and will be made after the end of each financial year. The Administrative Court decided that the year-end adjustment is not sufficiently linked to obtaining, maintaining or securing the company’s income. Hence ... Read more

A Polish subsidiary performed manufacturing on a limited risk basis (a so-called contract manufacturer) on behalf of the group parent and should be remunerated based on the functions performed. During the year, sales of products are made at constant registration prices based on the standard cost. It is only after the end of the year and the summary of costs and revenues of operations that the applicant is able to determine her own profit level to a fixed level at the level of operating profit. In view of the above, the parties apply a mechanism for determining profitability, including the correction of mutual settlements. The necessary adjustment of profitability to a certain level can take place only after an annual summary of costs and revenues of operations, with detailed data on the applicant’s actual profitability only available at the end of the year or even ... Read more

At issue in this case was whether a deposit in a cash pool constituted a loan. According to the company, cash transfers made as part of cash pooling cannot be considered a loan agreement because they do not contain elements that are material to the content of such contracts. In 2018 the provincial court issued a decision stating that a cash pool deposit constituted the granting of a loan irrespective of lacking written contracts. This decision was then appealed to the Supreme Administrative Court by the company. From the decision of the Supreme Administrative Court From an economic point of view, the financial system presented in the application involves the granting of loans because, as a result of financing the negative balance shown by the contractual participant by a surplus of funds accumulated by other participants, the participant is not obliged to pay interest to ... Read more

At issue in this case was the remuneration of a Polish manufacturing subsidiary in an international group dealing in the production and sale of metal packaging for food products, including beverage cans, food cans, household cans and metal closures. The tax authorities had issued an tax assessment for FY 2009 – 2012 based on a benchmark study. Decision of the Administrative Court The Court upheld the decision of the tax authorities concerning income for the tax year from 01/01/2012 to 31/12/2012. In 2012, the Polish manufacturing site operated by producing lids for jars. In the course of the audit proceedings against the Party regarding corporate income tax for 2012, the first instance authority determined – based on a comparative analysis of the financial results of similar independent manufactures operating in the packaging industry on the market in Central and Eastern Europe, that this market showed ... Read more

The question in this case was whether or not year-end-adjustments/profit adjustments should be considered part of the market price for acquisition of raw materials used in the production of non-wovens products in the Polish company operating partially under a tax exempt zone. The Court of First Instance had come to the conclusion, that the payment of year end adjustments were part of the price for acquisition of raw materials and thus not tax deductible as related to tax exempt activities. This decision was appealed by the company. The Supreme Administrative Court considered the following : The appeal should be upheld. It should be noted that one of the assumptions of transfer prices is respect for the so-called market price rules. It consists in the fact that when transactions are concluded by related entities , the agreed conditions should be consistent with the conditions applied in ... Read more

A Polish subsidiary in a German Group had taken out a significant inter-company loan resulting in a significantly reduced income due to interest deductions. At issue was application of the Polish arm’s length provisions and the arm’s length nature of the interest rate on the loan. The tax authorities had issued an assessment where the interest rate on the loans had been adjusted and the taxable income increased. On that basis, a complaint was filed by the company to the Administrative Court. The administrative court rejected the complaint and ruled in favor of the tax authorities. An appeal was then brought before the Supreme Administrative Court. The Supreme Administrative Court rejected the appeal, although it did not share some of the conclusions and statements of the Court of first instance. The key issue in the case was to determine is whether the provisions of Art ... Read more

A Polish Subsidiary A SP. z o.o. had incurred a loss in 2012 in the amount of PLN 1,357,333.66 and following an audit the tax authorities issued an assessment whereby the loss was reduced by an amount of PLN 234,019.90. The disputable issue was whether, in the circumstances of the case under consideration, the tax authorities correctly determined the amount of the applicant’s loss for 2012 in an amount other than that resulting from the correction of the declaration due to the finding that the Company undervalued income from transactions concluded with related entities for a total amount of PLN 234,019.90. The Administrative Court dismissed the complaint of A SP z o.o. According the the provided transfer pricing documentation the company had applied a TNMM and determined remuneration based on cost added a fixed percentage of 4% for the parent company, 8% for other companies ... Read more

A Polish company, “Shopping Centre Lender sp.k.”, had been granted three intra group loans in FY 2013 for EUR 2 million, EUR 115 million and EUR 43.5 million. The interest rate on the loans had been set at 9%. The tax authorities found that the 9% interest rate was higher than the arm’s length rate and carried out its own analysis on the basis of the comparative data from 66 transactions. In addition, data posted on the internet on the website of the National Bank of Poland was consulted. The summary showed that in the aforementioned period, the average interest rates applied by Polish financial institutions for loans granted to enterprises in EUR ranged from 2.4% to 3.6%. Furthermore, by letters in April 2017 the tax authorities requested information from domestic financial institutions regarding the interest rates and commission rates for loans granted to commercial ... Read more

A. Sp. z o.o. was established to carry out an investment project consisting in construction of a shopping center. In order to raise funds, the company concluded a loan agreement. The loan agreement was guaranteed by shareholders and other related parties. By virtue of the guarantees, the guarantors became solitarily liable for the Applicant’s obligations. The guarantees were granted free of charge. A. Sp. z o.o. was not obliged to pay any remuneration or provide any other mutual benefit to the guarantors. In connection with the above description, the following questions were asked: (1) Will A. Sp. z o.o. be obliged to prepare transfer pricing documentation in connection with the gratuitous service received, and if so, both for the year in which the surety is granted to the Applicant or also for subsequent tax years during the term of the security? (2) Will A. Sp ... Read more

R. Sp. z o.o. had requested a binding ruling/interpretation regarding tax deduction for the price paid to a related entity under restructuring. The request was denied by the tax authorities, as the question – according to the authorities – could only be answered under an Advance Pricing Agreement. R. Sp. z.o.o brought the issue before the Administrative Court Judgement of the Administrative Court The Court decided in favour of R. Sp. z.o.o. According to the Court, the tax authorities could not refuse to issue a binding ruling/interpretation on whether or not a price paid to a related party under restructuring was tax deductible. Click here for English Translation Click here for other translation ... Read more

In this case there were family, capital and personal ties between the Blueberry Factory and its shareholders, and the terms and conditions of the Company’s transactions with its shareholders (purchase of blueberry fruit) had not been at arm’s length. The higher prices paid by the Blueberry Farm benefited the shareholders (suppliers), who thus generated higher income from their agricultural activities, not subject to income tax. The company generated only losses in the years 2011 – 2013. According to the Polish tax authorities, the Blueberry Farm purchased blueberry fruit at excessive prices and thus overstated its tax-deductible expenses by PLN 347,845.48. The excessive prices (relative to market prices) increased the income of its shareholders (agricultural producers), whose income was not subject to personal income tax as being derived from agricultural activities. The tax authorities applied the provisions of Art. 11.1, Par. 2.2 of the Corporate Income ... Read more

A Polish company were planning to enter into a inter-group cash pooling agreement. The cash pooling operation were to be managed by a foreign bank, which would open a group account as a basic account for Norwegien parent company, the pool leader. The question was whether the taxation of interest payments made from the Polish company to the pool leader will apply art. 21 par. 3 of the Corporate Income Tax Act, as a result of which interest should be exempt from withholding tax, and if not – whether the taxation of the interest will apply art. 11 of the tax treaty between Norway and Poland. In this judgement the Court stated that the cash pool leader cannot be regarded as the owner of all receivables paid to the group account, because it is not entitled to dispose of the interest in its sole discretion ... Read more

A Group had established a physical cash-pool where funds from participants was transferred to and from a consolidating account (cash pool). The Polish Supreme Administrative Court concluded that every agreement in which the lender is obligated to transfer ownership of a specified amount of funds to the borrower, and the borrower is obligated to return the amount and pay interest, even if obligations of the parties to the agreement are implicit, constitutes a loan agreement. 2016 Decision Click here for translation 2015 Decision Click here for translation ... Read more

In a request for a binding ruling, a Polish Company indicated that it was joining an inter-group Cash Pooling Agreement (“Agreement”) in which the leader was based in Luxembourg. Under the Agreement, the pool leader acts as a regional financial center and consolidates the balances of current accounts of all the cash pool participants. The banking platform used by the Group for the purposes of Cash Pooling is operated by D. Bank (“DB”) based in Germany. The actual operation of the Cash pooling system will consist in automated transfers of positive balances existing on the accounts of participants of Cash pooling, including the applicant’s account at the end of the settlement day into the superior account of Leader. The Minister of Finance found that the role of Cash pool leader boils down to the management of cash that will flow from participants in the cash ... Read more

In a request for a binding ruling, a Polish Company indicated that it was joining an inter-group Cash Pooling Agreement (“Agreement”) in which the leader was based in Luxembourg. Under the Agreement, the pool leader acts as a regional financial center and consolidates the balances of current accounts of all the cash pool participants. The banking platform used by the Group for the purposes of Cash Pooling is operated by D. Bank (“DB”) based in Germany. The actual operation of the Cash pooling system will consist in automated transfers of positive balances existing on the accounts of participants of Cash pooling, including the applicant’s account at the end of the settlement day into the superior account of Leader. The Minister of Finance found that the role of Cash pool leader boils down to the management of cash that will flow from participants in the cash ... Read more

At issue in this case is the choice of method for determening interest rates on an intra group loan – More precisely whether or not internal comparables existed that were in fact independent. It is also discussed whether a intra group loan is comparable to a bank loan or not. Click here for translation ... Read more

“H-S Goods S.A.” was active in wholesale trade of heating and sanitary goods. The main supplier of the products was a related company from Germany, and the cusomers/recipients of the goods were both unrelated domestic companies and foreign related companies (in Latvia and Ukraine). Approximately 30 % of sales were to related parties. Sales prices for the controlled transactions, were determined based on the purchase prices from the supplier. “H-S Goods S.A.” argued that transactions with the related parties were not sale of goods, but rather provision of warehousing services on behalf of the related German supplier. For these services “H-S Goods S.A.” received a 5% margin. The tax authorities found that the activities and the fact that legal title to the goods was transferred to “H-S Goods S.A.”, meant that the transaction was in fact distribution of goods. Furthermore, the margins obtained by “H-S ... Read more

Lender S.A had granted a loan to a related entity but had not collected the agreed interest payments and not added the interest to its taxable income. The tax authorities stated that granting an interest-bearing loan to a related entity but not collecting the interest still results in taxable revenue. The reason Lender S.A. did not collect interest on the loan was due to the group relationship. Lender S.A. filed an appeal where it argued that since the interest was not received, it could not be taxed. Judgement of the Court The Supreme Administrative Court stated that the arm’s length principle applies to agreements concluded on arm’s length terms, where these are not implemented in accordance with there wording. Hence, the arm’s length standard also applies when the parties do not follow the agreement. Click here for English translation Click here for other translation ... Read more

K-steel S.A. purchased steel from its parent company which again purchased steel from unrelated steel mills. The tax authorities found that prices paid to the parent company by “K-steel S.A.” were not arm’s-length. The arm’s length price was established based on the prices paid for similar steel products by unrelated companies active in similar business activities. According to the tax authorities, purchasing steel directly from manufacturers would be a better alternative in terms of prices. Judgement of the Court The Court found that the authorities correctly established that arm’s-length prices were not applied and dismissed the appeal of “K-steel S.A.”. According to the court, a option realistically available for the taxpayer, and at the same time cheaper, would be to purchase the goods in question directly from steel mills, without the participation of the parent. Click here for English translation Click here for other translation ... Read more

“H-trademark S.A.” applied for a ruling on the tax rules governing a business restructuring where trademarks were transferred to another group company and licensed back – whether Polish arm’s length provisions would apply to the transaction. The company was of the opinion that Polish arm’s length provision (article 11) would not apply, since the arrangement was covered by special Polish provisions related to financial leasing (article 17b-g). Judgement of the Court The Court found that the Polish arm’s length provisions applied to the transaction. Excerpts “In the present case, the legal problem boils down to the correct identification of the nature of the norms arising from Article 11 of the A.p.d.o.p. and its relationship with the provisions on leasing raised by the applicant (Articles 17b – 17g of the A.p.d.o.p.). Indeed, the applicant takes the view that the leasing provisions themselves introduce derogations from market ... Read more

“H-S Goods S.A.” was active in wholesale trade of heating and sanitary goods. The main supplier of the products was a related company from Germany, and the cusomers/recipients of the goods were both unrelated domestic companies and foreign related companies (in Latvia and Ukraine). Approximately 30 % of sales were to related parties. Sales prices for the controlled transactions, were determined based on the purchase prices from the supplier. “H-S Goods S.A.” argued that transactions with the related parties were not sale of goods, but rather provision of warehousing services on behalf of the related German supplier. For these services “H-S Goods S.A.” received a 5% margin. The tax authorities found that the activities and the fact that legal title to the goods was transferred to “H-S Goods S.A.”, meant that the transaction was in fact distribution of goods. Furthermore, the margins obtained by “H-S ... Read more

“F-inance. Sp. z o.o.” provided loans in 2004 – 2006 to a special-purpose vehicle (SPV) which had established to finance an investment. According to the loan agreements repayment of the principal amount and incurred interest for each loan was 31 December 2007. In 2008, these deadlines were extended to 31 December 2008. The tax authorities found that the controlled arrangement deviated from the arm’s length principle, since neither the loans nor the interest had been paid in accordance with the agreement and issued an assessment of additional income. A complaint was filed by “F-inance. Sp. z o.o.” with the Administrative Court. Judgement of the Court The Administrative Court found the complaint to merited consideration. According to the Court the tax authorities had not specified the way in which the agreements was considered to differ from the arm’s length principle. Furthermore, comparable transactions had not been ... Read more

On 17 February 2003, the President of the Polish Supreme Administrative Court and the Ombudsman requested the Constitutional Court to declare that Article 24b par. 1 of the Tax Ordinance of 29 August 1997 – by giving the tax authorities and fiscal control bodies, while resolving a tax case, the right to disregard the effects of legal transactions which may give the taxpayer an advantage in the form of reduction of tax liability, increase of overpayment or refund of tax – violates the principle of citizens’ trust in the state and the created law resulting from Article 2 of the Constitution of the Republic of Poland and violates the principle of freedom of economic activity expressed in the freedom to arrange one’s civil law relations, i.e. Article 22 of the Constitution of the Republic of Poland. Article 24b of the Tax Ordinance had the following ... Read more