Poland vs “Cans Corp”, September 2019, Provincial Administrative Court i Szczecin, Case no SA/Sz155/19

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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 an upward trend and in none of the years 2009-2012 this industry recorded a downward trend, reaching in the audited year 2012

In the case of three selected domestic entrepreneurs selected for analysis profitability based on EBIT from 8.52 % to 13.13%, and in the case of companies operating on markets in Central and Eastern European countries – the interquartile range determined on the basis of the EBIT ratio: upper quartile 10.30%, median: 8.69%, lower quartile 7.74%.

The above circumstances allowed the authority of first instance to state that the the Polish manufacturing site had underestimated revenues obtained from the sale of goods to related entities

Thus, in the opinion of the Court, it became necessary to determine the Party’s income.

The above conclusions – regarding the lack of application by the Party in transactions with related entities of market prices of goods sold – the authority derived from the conducted comparative analysis of entities dealing with identical activities of the Party (i.e. the production of food packaging).

The tax authorities subjected this analysis to the entities selected by it that have no connections with other entities, selected in terms of criteria such as: area of ​​activity, PKW codes, turnover, period of activity, and then (due to the fact that the above typing criteria allowed to obtain a comparative base consisting of only three units) extended them by a geographical criterion, then is other Central […] countries, obtaining a database of six entities in total.

Profitability based on the EBIT ratio was compared in this group (according to the formula: operating profit (operating loss / operating income x 100%). obtaining a database of six entities in total.

Profitability based on the EBIT ratio was compared in this group (according to the formula: operating profit (operating loss / operating income x 100%). obtaining a database of six entities in total. Profitability based on the EBIT ratio was compared in this group (according to the formula: operating profit (operating loss / operating income x 100%).

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Poland 2019

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