Poland vs CP Corp, September 2016, Supreme Administrative Court, Case No. II FSK 2299/14

Category: Beneficial Owner, Financial Transactions, Tax Treaty Interpretation | Tag: , , , , ,
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A Polish company were planning to enter into a inter-group cash pooling agreement. The cash pooling operation were to be managed by a foreign bank, which would open a group account as a basic account for Norwegien parent company, the pool leader.

The question was whether the taxation of interest payments made from the Polish company to the pool leader will apply art. 21 par. 3 of the Corporate Income Tax Act, as a result of which interest should be exempt from withholding tax, and if not – whether the taxation of the interest will apply art. 11 of the tax treaty between Norway and Poland.

In this judgement the Court stated that the cash pool leader cannot be regarded as the owner of all receivables paid to the group account, because it is not entitled to dispose of the interest in its sole discretion.

The judgement in this case is aligned with prior rulings of 11 June 2015, file ref. No. II FSK 1518/13, and of 2 March 2016, file ref. No. II FSK 3666/13.

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Poland Cash Pool 2016-09-16 II FSK 2299-14





Related Guidelines

  1. TPG2022 Chapter X paragraph 10.146It is expected that all cash pool participants will be better off than in the absence of the cash pool arrangement. Under prevailing facts and circumstances that could imply, for instance, that all cash pool participants would benefit from enhanced interest rates applicable...
  2. TPG2022 Chapter X paragraph 10.131Where accurate delineation of the actual transactions determines that a cash pool leader is carrying on activities other than coordination or agency functions, the pricing of such transactions would follow the approaches included in other parts of this guidance, as appropriate....
  3. TPG2022 Chapter X paragraph 10.113In a notional cash pool, some of the benefits of combining credit and debit balances of several accounts are achieved without any physical transfer of balances between the participating members’ accounts although the bank will usually require cross-guarantees from pool participants to enable...
  4. TPG2022 Chapter X paragraph 10.122Another key consideration in analysing intra-group funding arrangements which might be described as cash pooling are situations where members of an MNE group maintain debit and credit positions which, rather than functioning as part of a short-term liquidity arrangement, become more long term....
  5. TPG2022 Chapter X paragraph 10.134M sets up an intra-group cash pooling arrangement with an unrelated bank. Legal arrangements are put in place for all participants which allow transfers to or from M’s cash concentration account to meet a specified target balance for each pool participant....
  6. TPG2022 Chapter X paragraph 10.144Eventually, the remuneration of the cash pool members will depend upon the specific facts and circumstances and the functions, assets and risks of each of the pool members. Therefore, this guidance does not intend to provide a prescriptive approach for allocating the cash...
  7. TPG2022 Chapter X paragraph 10.125Before any attempt is made to determine the remuneration of the cash pool leader and participants, it is central to the transfer pricing analysis to identify and examine under Chapter I guidance the economically significant risks associated to the cash pooling arrangement. These...
  8. TPG2022 Chapter X paragraph 10.128As with many types of financial transactions, different intent and understanding can be ascribed to the labels or descriptions attached to particular transactions. Each case must be considered on its own facts and circumstances and in each case accurate delineation of the actual...
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Related Case Law

  1. Poland vs Cash Pool Corp, Warsaw Administrative Court, Case no II-FSK-1518-13In a request for a binding ruling, a Polish Company indicated that it was joining an inter-group Cash Pooling Agreement (“Agreement”) in which the leader was based in Luxembourg. Under the Agreement, the pool leader acts as a regional financial center and consolidates...
  2. Switzerland vs DK Bank, May 2015, Federal Supreme Court, Case No BGE 141 II 447)The Federal Supreme Court denied the refund of withholding taxes claimed by a Danish bank on the basis of the double tax treaty between Denmark and Switzerland due to the lack of beneficial ownership. The Danish bank entered into total return swap agreements...
  3. Switzerland vs. A GmbH, 7 Dec. 2016, Administrative Court, Case No. SB.2016.00008The distinction between cash pool receivables and long-term loans. A GmbH is a group company of the global A-group. The A Group also includes company F Ltd, which is responsible for the global treasury and cash pooling of the A Group. In 2008,...
  4. Switzerland vs Swisscargo AG, Oct 2014, Federal Supreme Court, Case No 4A_138/2014Zero balancing/physical cash pooling involves a physical transfer of money from the accounts of individual group companies to the accounts of the group’s cash pooling company and risks can be considerable. Group companies participating ind the cash pool may loose there funds. Loans...