Poland vs A Pharma S.A., August 2024, Supreme Administrative Court, Case No II FSK 1381/21

Posted on | By Courts of Poland | No comments
Category: Business Restructuring, Non-Recognition and Recharacterisation, Valuation - DCF and CUT/CUPs | Tag: , , , , , , , , , ,
« | »

The business activity of A Pharma 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 to examine the compliance of the terms of these transactions with the terms that would have been agreed between hypothetical independent entities, as the transactions in question were in fact concluded precisely between independent entities. (SKA companies were not CIT taxpayers in 2012, so they did not meet the definition of a “domestic entity” referred to in the aforementioned provision, and therefore a transaction between “related entities” cannot be said to have taken place).

Moreover, the institution of “re-characterisation” of a controlled transaction into a proper transaction (according to the authority),could only be applied to transactions taking place after 1 January 2019, pursuant to Article 11e, Section 4 of the A.l.t.p. introduced (from that date).

On appeal, the Administrative Court decided predominantly in favor of A Pharma S.A. and remanded the case back to the tax authorities.

An appeal was then filed by the tax authorities with the Supreme Administrative Court.

Judgment

The Administrative Court dismissed the appeal of the tax authorities and upheld the decision of the Administrative Court.

Click here for English Translation

Click here for other translation

Related Guidelines

TPG2022 Chapter IX paragraph 9.35Business restructurings often lead MNE groups to implement global business models that are hardly if ever found between independent enterprises, taking advantage of the very fact that they are MNE groups and that they can work in an integrated fashion. For instance, MNE groups may implement global supply chains or...
TPG2022 Chapter IX paragraph 9.111Another example of a possible application of the CUP method would be the case where independent parties provide manufacturing, selling or service activities comparable to the ones provided by the restructured affiliate. Given the recent development of outsourcing activities, it may be possible in some cases to find independent outsourcing...
TPG2022 Chapter IX paragraph 9.69The determination of the arm’s length compensation for a transfer of an ongoing concern does not necessarily amount to the sum of the separate valuations of each separate element that comprises the aggregate transfer. In particular, if the transfer of an ongoing concern comprises multiple contemporaneous transfers of interrelated assets,...
TPG2022 Chapter IX paragraph 9.63In addition, where the intangible being transferred as a result of the restructuring meets the criteria for being considered a hard-to value-intangible in paragraph 6.189, then the guidance in Section D.4 of Chapter VI is applicable....
TPG2022 Chapter IX paragraph 9.62Difficulties can arise in the context of business restructuring where the valuation of an intangible or rights in an intangible at the time of the transaction is highly uncertain. In these cases, the question arises as to how arm’s length pricing should be determined. The question should be resolved, both...
TPG2022 Chapter IX paragraph 9.61Where the business restructuring provides for a transfer of an intangible followed by a new arrangement whereby the transferor will continue to use the intangible transferred, the entirety of the commercial arrangement between the parties should be examined in order to accurately delineate the transaction. If an independent party were...
TPG2022 Chapter IX paragraph 9.60Also in the case where a local operation disposes of the legal ownership of its intangibles to a foreign associated enterprise and continues to use the intangibles further to the disposal, but does so in a different legal capacity (e.g. as a licensee), the conditions of the transfer should be...
TPG2022 Chapter IX paragraph 9.56The determination of the arm’s length price for a transfer of intangibles or rights in intangibles should be conducted in accordance with the guidance in Section D. 1 of Chapter VI. It will be affected by a number of factors among which are the amount, duration and riskiness of the...
TPG2022 Chapter IX paragraph 9.55Transfers of intangibles or rights in intangibles raise difficult questions both as to the identification of the intangibles transferred and as to their valuation. Identification can be difficult because not all valuable intangibles are legally protected and registered and not all valuable intangibles are recognised or recorded for accounting purposes....
TPG2022 Chapter IX paragraph 9.11For transfer pricing purposes, the aim of the analysis is to determine whether, under Article 9 of the OECD Model Tax Convention, conditions have been made or imposed in transactions comprising a business restructuring that differ from those that would be made or imposed between independent enterprises; and, if so,...

Supplemental Guidance

Leave a Reply

Your email address will not be published. Required fields are marked *

Copyright 2026 TPcases