A public medical university “W” had submitted a request for a written interpretation (binding ruling) to the tax authorities asking whether it was considered a related entity under the Polish arm’s length provisions to a public health care institution it had established.
The tax authorities replied in the affirmative.
Not satisfied with the ruling, an appeal was filed with the Regional Court, which rejected the binding ruling and concluded that the parties were not related.
The tax authorities then appealed to the Supreme Administrative Court.
Judgment of the Supreme Administrative Court.
The Supreme Administrative Court ruled in favor of the tax authorities and overturned the decision of the Regional Court.
Excerpt
“It is not possible to agree with the assertion of the Court of First Instance that it is possible to assume a priori that the funds received under the agreement by the SPZOZ do not constitute a typical remuneration, established under market conditions, for making the infrastructure available for teaching activities, but a specific financing of the activities (covering of costs) that the university performs with the use of the therapeutic entity created by it. Also, the establishment in the u.d.l. “strictly”, according to the WSA in Warsaw, defined rules related to the adaptation and provision of infrastructure by a teaching hospital for the purposes of teaching activities of a medical university, in conjunction with the financing of these activities by universities, cannot result in the recognition of the accuracy of the thesis that this makes them incomparable to market transactions. As indicated above with regard to the contracting of services, apart from the obligation related to the adaptation and provision by the teaching hospital of the infrastructure for the teaching activities of the medical university, there are no rigid, specific rules, and potentially comparable market may be transactions between medical universities other than W. and the therapeutic entities created by them.
4.5 Given the specific nature of medical market services, it would be desirable to exempt transactions between medical universities and the medical entities they create from the transfer pricing rules. This has been the case since 24 June 2020 as a result of the amendment of Article 11b of the u.p.d.o.p. Pursuant to the newly amended provision in this article, i.e. point 3, the provisions of the chapter on transfer pricing shall not apply to transactions between a medical university within the meaning of Article 2(1)(13) of the Act of 15 April 2011 on medical activity and a medical entity referred to in Article 6(6) of that Act (i.e. between a forming entity and a medical entity).
As aptly pointed out in the grounds of the cassation appeal, since the newly introduced provision excludes transactions between the entities indicated therein from the obligation to apply the transfer pricing provisions, it should be assumed that, until the date of its introduction, in accordance with the will of the legislator, universities as forming entities and established medical entities were subject to such obligation as related entities within the meaning of Art. 11(4) of the u.p.d.o.p. in the wording in force until 31 December 2018 and Article 11a(1)(4) of the u.p.d.o.p. in the wording in force from 1 January 2019.
4.6 In view of the above, the Supreme Administrative Court, pursuant to Article 188 in conjunction with Article 151 of the A.P.S.A., repealed the appealed judgment and dismissed the complaint, as the merits of the case had been sufficiently clarified.”
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