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. z o.o. be obliged to disclose the event related to the free-of-charge consideration received in a simplified CIT/TP report, both for the year in which the guarantee is granted and for subsequent tax years during which the guarantee is in effect.
In A. Sp. z o.o.’s opinion, the company was not obliged to prepare transfer pricing documentation in connection with the gratuitous service received. And if the tax authority’s decision was contrary to the Company’s position, documentation should be prepared only for the tax year in which the guarantees was entered.
The tax authorities disagreed with the company, and a complaint was filed by A. Sp. Z o.o. with the Administrative Court.
In March 2019 the Administrative Court dismissed the complaint of A. Sp. z o.o. and sided with the tax authorities.
An appeal was then filed by the company with the Supreme Administrative Court.
Judgement of the Supreme Administrative Court
The court dismissed the appeal and upheld the decision of the Administrative Court.