“S.” sp. z o.o. had filed a requested a written interpretation (binding ruling) with the tax authorities. The company had asked the following question: when calculating the income ratio to which the tax rate referred to in Article 24d(1) of the A.P.C. may be applied, can the transfer pricing regulations be applied accordingly (mutatis mutandis) by applying the profit split method – residual analysis (the method listed in § 13(3)(2) of the Ordinance). The request was dismissed by the tax authorities, stating that it could not assess the position presented in the application, as this would go beyond the framework of the individual interpretation proceedings defined by the legislator. An appeal was filed by “S” sp. z o.o. with the regional court and the court ruled in favour of the company. An appeal was then filed by the tax authorities with the the Supreme Administrative Court. Judgement of the Supreme Administrative Court. The Court dismissed the appeal of the tax authorities and upheld the decision of the regional court. According to the Supreme Administrative Court, “S.” sp. z o.o. had a right to obtain reliable information as to how – in the actual state of affairs/future event pertaining to it – the tax authority interprets the tax regulations applicable to it, which may affect the correctness of its settlement, and in the case of determining the tax base. Excerpt “According to the Supreme Administrative Court, both the actual state of affairs/future event described by the applicant in its application and the question contained in the application were in fact a question about the validity of the subsumption of the actual state of affairs/future event presented in the application under the relevant provisions of tax law. Moreover, the applicant’s request did not concern the interpretation of provisions other than those of tax law. The court of first instance correctly assessed that the analysis of the application and the applicant’s position indicates that its primary objective is to obtain an answer to the question whether, in the factual state/future event presented in the application, the income ratio to which the tax rate referred to in Article 24d(1) of the Corporate Income Tax Act of 15 February 1992 (Journal of Laws of 2020, item 1406, as amended); hereinafter: the “p.d.o.p.” may be – when calculating the income ratio to which the tax rate referred to in Article 24d(1) of the Corporate Income Tax Act of 15 February 1992 (Journal of Laws of 2020, item 1406, as amended); hereinafter: the “p.d.o.p.” – applied accordingly (mutatis mutandis) the transfer pricing regulations by applying the profit split method – split analysis, according to the method listed in § 13(3)(2) of the Regulation of the Minister of Finance of 21 December 2018 on transfer pricing for corporate income tax (Journal of Laws of 2018, item 259 as amended); hereinafter: ‘the Regulation’. Since the company, in presenting its own legal assessment of the above-mentioned factual state/future event, stated that the provisions of Article 24d(3)-(8) of the u.p.d.o.p.. do not explicitly specify the method by which income from intellectual property referred to in Article 30ca para. 2(3) of the u.p.d.o.p.. (should be: Article 24d(2)(8) of the u.p.d.o.p.. – note of the court), according to it, the most appropriate method is the residual profit split method, in which the separation of income streams (from development and design activities) would take place in two stages appropriate for this method. However, this company’s own legal assessment of the presented facts/future event should have been subject to the assessment of the interpreting authority, since both the provisions of the p.d.o.p, as well as the aforementioned implementing regulation issued pursuant to Article 11j(1)(1)(2) of the u.p.d.o.p.. constitute provisions of tax law, within the meaning of Article 3(2) of the A.p.l. This provision stipulates that whenever provisions of the tax law are referred to in the Act – it is understood as the provisions of tax acts, provisions of agreements on avoidance of double taxation ratified by the Republic of Poland and other international agreements on tax issues ratified by the Republic of Poland, as well as provisions of executive acts issued on the basis of tax acts. Undoubtedly, therefore, the company requested an individual interpretation of the provisions of tax law, i.e. the provision of Article 24d(2)(8) of the VAT Act and the provisions of the implementing act to the VAT Act, i.e. the aforementioned regulation. Moreover, what is important in the case, the applicant, when describing the facts/future event, directly classified its activity as research and development activity, and its aim was to confirm whether it is possible to adopt, mutatis mutandis, for the calculation of the income ratio to which the tax rate referred to in Article 24d(1) of the A.P.C. may be applied. – transfer pricing regulations by applying the profit split method – split analysis, according to the method listed in § 13(3)(2) of the aforementioned regulation.” Click here for English translation Click here for other translation ...

R. Sp. z o.o. had requested a binding ruling/interpretation regarding tax deduction for the price paid to a related entity under restructuring. The request was denied by the tax authorities, as the question – according to the authorities – could only be answered under an Advance Pricing Agreement. R. Sp. z.o.o brought the issue before the Administrative Court, where a decision in favour of R. Sp. z.o.o. was issued. An appeal was then filed by the tax authorities. Judgement of the Supreme Administrative Court The Court dismissed the appeal of the tax authorities. The tax authorities could not refuse to issue a binding ruling/interpretation on whether or not a price paid to a related party under restructuring was tax deductible. According to the Court such a question could not only be dispelled by the issuance of an Advance Pricing Agreement. Click here for English Translation Click here for other translation ...

The company is a producer of household chemicals and belongs to the R. B. (“the Group”), which is active in the manufacture and sale of consumer products in the home, health and hygiene products industry. The Company has entered into supply agreements for the goods it produces with Group companies. On the basis of the agreements, the Applicant sells goods produced by it to entities of the Group indicated by R. A. h. Companies and to R.B. [E.] B.V. The remuneration of the Polish company was determined based on a target margin – and if the profits were below or above the target margin, an invoice was issued subtracting or adding income to arrive at the target income. The tax authorities held that the quarterly “Transfer Pricing-adjustment” was not a transfer in regards of VAT. The company then filed a request for a individual interpretation (binding ruling), which was rejected by the authorities. A complaint was filed by the company to the Court of first instance, where the decision of the tax authorities was set aside. The tax authorities then filed an appeal to the Supreme Administrative Court. The tax authorities requested that the appealed decision be reversed in its entirety, that the Company’s complaint be examined and dismissed, or alternatively, in the event that the merits of the case are not sufficiently clarified, hthat the appealed decision be reversed in its entirety and the case be referred back to the Court of First Instance for re-examination. Judgement of the Supreme Administrative Court The Court decided in favour of the tax payer. “In the Company’s view, the issue requiring interpretation referred only to the question of the moment of making the correction, and not to the correctness of the adopted model for correcting income. Therefore, the Court of First Instance rightly pointed out that the prerequisites referred to in Article 165a of the Tax Code relating to the lack of possibility to institute proceedings were not exhausted in the case because the phrase “proceedings may not be instigated” used in Article 165a § 1 of the Tax Code should be referred to the C In view of this, the allegation of a violation of Article 145 § 1 (1) (c) of P.p.s.a. in conjunction with Article 165a § 1 and in conjunction with Article 14h and 14b § 1 of the Code of Civil Procedure should be deemed unjustified. ” … As already indicated above, the mechanism of “profitability” adjustment is in the case under consideration an assumption of factual nature and as such does not require the interpretation authority to confirm the correctness of its application by the Company.” ” Click here for English Translation Click here for other translation ...

R. Sp. z o.o. had requested a binding ruling/interpretation regarding tax deduction for the price paid to a related entity under restructuring. The request was denied by the tax authorities, as the question – according to the authorities – could only be answered under an Advance Pricing Agreement. R. Sp. z.o.o brought the issue before the Administrative Court Judgement of the Administrative Court The Court decided in favour of R. Sp. z.o.o. According to the Court, the tax authorities could not refuse to issue a binding ruling/interpretation on whether or not a price paid to a related party under restructuring was tax deductible. Click here for English Translation Click here for other translation ...