Poland vs “H. LVAS Sp. z oo”, September 2022, Administrative Court, Case No I SA / Go 234/22

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“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.


“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 7 February 2018, II FSK 3644/15). The court notes that the company – as is evident from the content of the decision of the appellate authority – did not present documentation that would detail the provisions of the agreement with regard to the specific services provided to the company and to be settled by the disputed invoice. It was stated that, as it was not clear from the evidence which specific services were subject to billing, to what extent and in what amount their value was determined, this prevented the tax authority from examining whether they had been valued with the market price (k.14 of the DIAS decision). At the same time, the authorities did not deny that the services had been provided.
Therefore, in this situation – in the opinion of the Court – it was wrong for the authorities to exclude the disputed expenses in their entirety from the tax deductible costs. The provisions of Art. 9a of the CIT Act impose on the taxpayer the burden of proof in the material sense, understood as the obligation to indicate specific information proving that transactions concluded by the taxpayer with related parties, resulting in payment to such parties, are of a market nature. The tax documentation, the elements of which are specified in Article 9a of the Corporate Income Tax Act, is the basic source of evidence containing information making it possible to analyse the essence of economic activities and to assess them, indicating whether the remuneration in a transaction concluded between related entities was set at a market level, i.e. does not differ from the terms and conditions that would be set between independent entities. The consequence of questioning by the tax authority of the correctness of tax documentation, which the taxpayer was obliged to keep pursuant to Article 9a of the CIT Act, is not, therefore, the automatic exclusion from tax deductible costs of the expenditure incurred by the taxpayer as payment for the performance of an intangible service, but the undermining of the presumption that the price actually paid for that service is a market price (cf. the judgment of the WSA in Łódź of 17 September 2020, I SA/Łd 160/20).”

“However, by excluding the expense from tax deductible costs due to the lack of documentation and failing to undertake an assessment, the authorities misinterpreted Article 15(1) in conjunction with Article 9a and Article 11 of the CIT Act and § 22a of the Transfer Pricing Ordinance and – as already determined by the NSA in its judgment of 16 March 2022, case file No. II FSK 1643/19 – breached Article 122, Article 187 § 1 and Article 191 of the Tax Ordinance by failing to pursue the substantive truth.”

“…The relevant calculations presented by the company and referred to in the justification of the aforementioned judgment may therefore – in the NSA’s view – constitute the starting point for considerations concerning the application of the institution of assessing the income of related parties.
At the same time, the authority should bear in mind that in the context of the case in question, it is obliged to apply the legal norms provided for in Article 122, Article 180, Article 187 § 1 and also Article 191 of the Tax Ordinance.”

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