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 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 particular, the analysis of comparable transactions (CUP’s).
In the Court’s opinion, the authorities have illegally equated the fact of the loss achieved by the applicant with the data resulting from the general financial ratios for the entire activity of the applicant in 2013. The economic rationality of the transaction should be assessed, in the opinion of the Court, through the prism of the benefit that a specific entity may obtain from the transaction and not in relation to general financial ratios of the compared entities covering the entirety of their activity for a given year.
For as long as the tax authority does not prove that the difference in price conditions was only for the purpose of tax avoidance and did not result from economic conditions, the abovementioned Article 11 cannot be applied (cf. glossary to the judgment of the Supreme Court of 22 April 1999, Case No III RN 184/98, OSP 2000, No 5, p. 264).
Poland vs C group August 2020