TPcases

Database of Transfer Pricing Case Laws

Poland vs Lender S.A, October 2013, Supreme Administrative Court, Case No II FSK 2297/11 – Wyrok NSA

Posted on October 10, 2013 | By Courts of Poland | No comments

Category: Financial Transactions | Tag: Comparable to a Bank Loan, Interest rate, Internal comparables, Intra-group loan, Loan, Unrelated party

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At issue in this case is the choice of method for determening interest rates on an intra group loan – More precisely whether or not internal comparables existed that were in fact independent.

It is also discussed whether a intra group loan is comparable to a bank loan or not.

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Related Guidelines

TPG2022 Chapter X paragraph 10.99The application of the cost of funds approach requires consideration of the options realistically available to the borrower. On prevailing facts and circumstances, a borrowing MNE would not enter into a transaction priced under the cost of funds approach if it could obtain the funding under better conditions by entering...

TPG2022 Chapter X paragraph 10.95Whereas it is unlikely that an MNE group’s average interest rate paid on its external debt meets the comparability requirements to be considered as an internal CUP, it may be possible to identify potential comparable loans within the borrower’s or its MNE group’s financing with an independent lender as the...

TPG2022 Chapter X paragraph 10.94When considering issues of comparability, the possibility of internal CUPs should not be overlooked....

TPG2022 Chapter X paragraph 10.93Arm’s length interest rates can also be based on the return of realistic alternative transactions with comparable economic characteristics. Depending on the facts and circumstances, realistic alternatives to intra-group loans could be, for instance, bond issuances, loans which are uncontrolled transactions, deposits, convertible debentures, commercial papers, etc. In the evaluation...

TPG2022 Chapter X paragraph 10.92In the search for comparability data, a comparable is not necessarily restricted to a stand-alone entity. In examining commercial loans, where the potentially comparable borrower is a member of an MNE group and has borrowed from an independent lender, provided all other economically relevant conditions are sufficiently similar, a loan...

TPG2022 Chapter X paragraph 10.91The arm’s length interest rate for a tested loan can be benchmarked against publicly available data for other borrowers with the same credit rating for loans with sufficiently similar terms and conditions and other comparability factors. With the extent of competition often present within lending markets, it might be expected...

TPG2022 Chapter X paragraph 10.90The widespread existence of markets for borrowing and lending money and the frequency of such transactions between independent borrowers and lenders, coupled with the widespread availability of information and analysis of loan markets may make it easier to apply the CUP method to financial transactions than may be the case...

TPG2022 Chapter X paragraph 10.89Once the actual transaction has been accurately delineated, arm’s length interest rates can be sought based on consideration of the credit rating of the borrower or the rating of the specific issuance taking into account all of the terms and conditions of the loan and comparability factors....

TPG2022 Chapter X paragraph 10.88The following paragraphs present different approaches to pricing intra-group loans. As in any other transfer pricing situation, the selection of the most appropriate method should be consistent with the actual transaction as accurately delineated, in particular, through a functional analysis (see Chapter II)....

TPG2022 Chapter X paragraph 10.65Information is readily available in many lending markets on the different rates of interest charged for differently rated enterprises and such information may usefully contribute to performing comparability analyses. Financing transactions that the borrowing MNE or another MNE within the group has with external lenders may also be reliable comparables...

Supplemental Guidance

Spain vs McDonald’s, March 2017, Spanish Tribunal Supremo, Case no 961-2017A Spanish subsidiary of McDonald's received loans from a group entity domiciled in Ireland at interest rates between 3.45% and 6.02%. The Spanish tax authority challenged the rates, arguing the Irish lender lacked substance and funds of its own, and benchmarked the arm's length rate against comparable external bank loans....

Portugal vs “Caixa… S.A.”, February 2024, Tribunal Central Administrativo Sul, Case No 866/12.1 BELRSA Portuguese bank received a transfer pricing assessment after granting an interest-free loan to a subsidiary without charging arm's length interest. The tax authority applied the CUP method and imputed a market interest rate. The Tribunal Central Administrativo Sul dismissed the taxpayer's appeal in February 2024, upholding the adjustment and...

Poland vs L S.A, June 2019, Supreme Administrative Court, Case No. II FSK 1808/17 – Wyrok NSAA Polish subsidiary of a German group deducted significant interest on an intra-company loan, prompting a tax authority adjustment to the interest rate and increased taxable income. The Administrative Court rejected the company's complaint, and Poland's Supreme Administrative Court dismissed the subsequent appeal in June 2019, confirming that the arm's...

Poland vs “Shopping Centre Developer sp.k.”, June 2022, Supreme Administrative Court, Case No II FSK 3050/19A Polish company received three intra-group loans with a 9% interest rate. Tax authorities reduced the rate to 3.667%, raising taxable income. The Administrative Court sided with the taxpayer, finding the arm's length analysis flawed. Poland's Supreme Administrative Court upheld that decision in June 2022, dismissing the tax authority's appeal...

Poland vs “Shopping Centre Developer sp.k.”, May 2019, Administrative Court, Case No III SA/Wa 1777/18A Polish company received three intra-group loans in 2013 at a 9% interest rate. The tax authority, referencing 66 comparable transactions and National Bank of Poland data, determined the arm's length rate was 3.667% and issued an assessment reducing interest expenses. The Administrative Court in 2019 found in favour of...

Poland vs D. Sp. z oo, April 2022, Administrative Court, Case No I SA/Bd 128/22A Polish company deducted interest on intra-group loans and management fee expenses for FY 2015, with both arrangements involving a related Delaware entity. The tax authority denied the deductions, finding the loan structure artificial and the management fees insufficiently substantiated. The Polish Administrative Court upheld the authority's assessment in April...

Poland vs “W.W.P.H. sp. z o. o”, January 2024, Administrative Court, Case No I SA/Bd 614/23A Polish company was denied deductions for intra-group loan interest and management fees following a tax authority audit, which deemed the loan economically irrational and the services unsubstantiated. The Administrative Court ruled in favour of the taxpayer in January 2024, finding that Polish arm's length rules provided no legal basis...

Poland vs “N. sp. z o.o.”, January 2024, Administrative Court, Case No I SA/Lu 584/23A Polish real estate company paid interest on a loan from a related Romanian entity and sought favourable tax treatment. The tax authority denied the request, finding the Romanian lender lacked its own funds and passed interest income to a Malta-based group company, making it the true beneficial owner. Poland's...

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Poland vs Lender S.A, October 2013, Supreme Administrative Court, Case No II FSK 2297/11 – Wyrok NSA

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