Tag: Timing of adjustment

TPG2022 Chapter VIII paragraph 8.37

In the case of development CCAs, variations between a participant’s proportionate share of the overall contributions and that participant’s proportionate share of the overall expected benefits may occur in a particular year. If that CCA is otherwise acceptable and carried out faithfully, having regard to the recommendations of Section E, tax administrations should generally refrain from making an adjustment based on the results of a single fiscal year. Consideration should be given to whether each participant’s proportionate share of the overall contributions is consistent with the participant’s proportionate share of the overall expected benefits from the arrangement over a period of years (see paragraphs 3.75-3.79). Separate balancing payments might be made for pre-existing contributions and for current contributions, respectively. Alternatively, it might be more reliable or administrable to make an overall balancing payment relating to pre-existing contributions and current contributions collectively. See Example 4 in the Annex to this chapter ... Read more

TPG2022 Chapter VIII paragraph 8.36

Balancing payments may also be required by tax administrations where the value of a participant’s proportionate contributions of property or services at the time the contribution was made has been incorrectly determined, or where the participants’ proportionate expected benefits have been incorrectly assessed, e.g. where the allocation key when fixed or adjusted for changed circumstances was not adequately reflective of proportionate expected benefits. Normally the adjustment would be made by a balancing payment from one or more participants to another being made or imputed for the period in question ... Read more
Poland vs K. sp. z o.o., January 2020, Supreme Administrative Court, Case No II FSK 191/19 - Wyrok

Poland vs K. sp. z o.o., January 2020, Supreme Administrative Court, Case No II FSK 191/19 – Wyrok

K. sp. z o.o. is a Polish company belonging to an international group. The main activity of K is local sale of goods purchased from a intra group supplier. K is best characterized as a limited risk distributor and as such should achieve an certain predetermined level of profitability as a result of its activities. In order to achieve the determined level of profitability, the group had established that, if the operating margin actually achieved by the distributor during a given period is less or more than the assumed level of profit, it will be adjusted. The year-end adjustment will not be directly related to the prices of goods purchased from the intra-group supplier and will be made after the end of each financial year. The Administrative Court decided that the year-end adjustment is not sufficiently linked to obtaining, maintaining or securing the company’s income. Hence the adjustment cannot be recognized as a deductible cost within the meaning of Article 15 ... Read more
Poland vs YEA s.a. z o.o., December 2019, Administrative Court, Case No SA/Po 800/19 - Wyrok

Poland vs YEA s.a. z o.o., December 2019, Administrative Court, Case No SA/Po 800/19 – Wyrok

A Polish subsidiary performed manufacturing on a limited risk basis (a so-called contract manufacturer) on behalf of the group parent and should be remunerated based on the functions performed. During the year, sales of products are made at constant registration prices based on the standard cost. It is only after the end of the year and the summary of costs and revenues of operations that the applicant is able to determine her own profit level to a fixed level at the level of operating profit. In view of the above, the parties apply a mechanism for determining profitability, including the correction of mutual settlements. The necessary adjustment of profitability to a certain level can take place only after an annual summary of costs and revenues of operations, with detailed data on the applicant’s actual profitability only available at the end of the year or even afterwards. Given that the operating result obtained by the applicant is subject to verification and ... Read more

TPG2017 Chapter VIII paragraph 8.37

In the case of development CCAs, variations between a participant’s proportionate share of the overall contributions and that participant’s proportionate share of the overall expected benefits may occur in a particular year. If that CCA is otherwise acceptable and carried out faithfully, having regard to the recommendations of Section E, tax administrations should generally refrain from making an adjustment based on the results of a single fiscal year. Consideration should be given to whether each participant’s proportionate share of the overall contributions is consistent with the participant’s proportionate share of the overall expected benefits from the arrangement over a period of years (see paragraphs 3.75-3.79). Separate balancing payments might be made for pre-existing contributions and for current contributions, respectively. Alternatively, it might be more reliable or administrable to make an overall balancing payment relating to pre-existing contributions and current contributions collectively. See Example 4 in the Annex to this chapter ... Read more

TPG2017 Chapter VIII paragraph 8.36

Balancing payments may also be required by tax administrations where the value of a participant’s proportionate contributions of property or services at the time the contribution was made has been incorrectly determined, or where the participants’ proportionate expected benefits have been incorrectly assessed, e.g. where the allocation key when fixed or adjusted for changed circumstances was not adequately reflective of proportionate expected benefits. Normally the adjustment would be made by a balancing payment from one or more participants to another being made or imputed for the period in question ... Read more