The dispute arose after P. sp. z o.o. corrected its 2015 tax return, lowering its declared revenue based on a revised transfer pricing margin (from 8.5% to 6.5%) used in intra-group transactions. The company applied the “cost plus” method, arguing that the 6.5% margin reflected the group’s internal policy applied EU-wide since 1 January 2015. The correction resulted in a claimed overpayment of PLN 142,043.
The tax authority, however, rejected the correction, arguing that the margin change was not due to an accounting error but was a retrospective transfer pricing adjustment unsupported by arm’s length analysis. They conducted a new comparability analysis and concluded that a 9.35% margin should apply. They adjusted the taxpayer’s revenue and costs accordingly, disallowing certain “pass-through” costs (e.g. medicine purchases, investigator remuneration, travel expenses) from the cost base and issued a revised tax assessment.
An appeal was filed and the Administrative Court later set aside the tax assessment, finding that the tax authorities had failed to properly evaluate the evidence. In particular, the court held that the authorities ignored the taxpayer’s detailed objections and alternative comparability analyses, failed to justify their rejection of those analyses, and accepted the official transfer pricing study uncritically. The court emphasized that the authorities did not verify whether the 6.5% margin used by the taxpayer matched intra-group practices across EU entities, nor did they address the taxpayer’s claims that their treatment of pass-through costs was aligned with group-wide and third-party practices. The Court considered these procedural deficiencies sufficient to annul the decision without addressing substantive transfer pricing provisions.
The tax authorities appealed this judgment, arguing that the Administrative Court failed to explain its reasoning adequately and wrongly found procedural violations.
Judgment
The Supreme Administrative Court rejected the tax authorities appeal, ruling that the Administrative Court had provided sufficient reasoning and correctly identified that the tax authorities violated procedural principles such as legality, objective truth, completeness of evidence, and proper assessment of evidence under the Tax Ordinance.
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