Poland vs “I VAT Sp. z o.o.”, February 2025, Supreme Administrative Court, Case No I FSK 2452/21

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Category: Benchmark, Range and Median, Royalty and License Payments, Transfer Pricing Methods, VAT and Customs Valuation | Tag: , , , ,
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“I VAT Sp. z o.o.” is a distributor of ERP software and is part of a multinational group. Under a group licence agreement, it paid monthly fees for software licences in such a way as to maintain a certain arm’s length target operating margin. To achieve this, corrective invoices were issued to adjust previous licence payments. If the operating margin fell below the target, it received compensatory payments, and if the margin was higher, it was charged additional fees.

The tax authority partially accepted the monthly licence fees and certain corrective invoices. However, the tax authority concluded that the compensation payments received constituted payment for services subject to VAT.

“I VAT Sp. z o.o.” appealed to the Administrative Court, challenging, inter alia, the VAT aspect of the assessment, arguing that the compensation payments were not related to a specific service provided by it. In September 2021 the Administrative Court found that the authority’s conclusion about treating the compensation payments as VAT-remuneration was incorrect but upheld other aspects of the assessment.

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

Judgment

The Supreme Administrative Court dismissed the appeal and upheld the decision of the Administrative Court.

 

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