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The obligation to document transfer prices does not apply to limited companies

This conclusion is based on the decision of the Provincial Administrative Court in Warsaw dated 17 May 2017 (III SA/Wa 1480/16).

This conclusion is based on the decision of the Provincial Administrative Court in Warsaw dated 17 May 2017 (III SA/Wa 1480/16).

The Court of First Instance therefore disagreed with the position of the tax authority presented in an individual interpretation that such an obligation was imposed on the shareholders of the companies carrying out...

This conclusion is based on the decision of the Provincial Administrative Court in Warsaw dated 17 May 2017 (III SA/Wa 1480/16). The Court of First Instance therefore disagreed with the position of the tax authority presented in an individual interpretation that such an obligation was imposed on the shareholders of the companies conducting the transaction.

The case concerned transactions between two limited companies in which the same person was a limited partnership. The companies carried out transactions with each other, the value of which exceeded the amount of the transfer pricing documentation.

In a request for an individual interpretation, the consultant asked whether both companies were related and (if a positive response) whether they had to draw up transfer pricing documentation. The applicant indicated that both companies are not linked in its assessment and that there is no obligation to produce documentation, i.e. neither companies nor their partners have such an obligation.

The limited partnership argued that the tax payers of the PIT are only the partners of the limited partnership, and the company itself is transparent (not a taxpayer) and therefore is not required to draw up documentation. In the opinion of the consultant, the documentation obligation does not apply to shareholders either, as they do not carry out transactions, as these are carried out by the company.

The documentation obligation applies to taxable persons engaged in transactions. The limited partnership does the transaction, but is not a taxpayer, and its associates are taxpayers, but they do not carry out the transaction.

The tax authority disagreed with the position set out in the proposal. He considered that since a limited company is not a PIT taxpayer, the obligation to record transfer pricing is incumbent on its shareholders, who are PIT taxpayers for the income it generates.

The body’s arguments were not accepted by the court, which, referring to the non-disputed literal wording of the rules, stated that: ‘In the case of commercial transactions between a non-taxable limited company and its related other limited company, there would therefore be no need to draw up appropriate documentation.’

The court’s position concerns the legal condition applicable to 31 December 2016

Author:

Paweł Kula From 2016 related to Russell Bedford Poland. Graduated from law school. Tax Advisor No. 12969. He specializes in excise duties and transfer pricing records. Author of tax-related articles published on industry websites.

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