At issue in this case was whether a deposit in a cash pool constituted a loan. According to the company, cash transfers made as part of cash pooling cannot be considered a loan agreement because they do not contain elements that are material to the content of such contracts. In 2018 the provincial court issued a decision stating that a cash pool deposit constituted the granting of a loan irrespective of lacking written contracts. This decision was then appealed to the Supreme Administrative Court by the company. From the decision of the Supreme Administrative Court From an economic point of view, the financial system presented in the application involves the granting of loans because, as a result of financing the negative balance shown by the contractual participant by a surplus of funds accumulated by other participants, the participant is not obliged to pay interest to the bank for his debit an invoice that would have arisen if the shortcoming had not been covered by another contracting party. In place of debt debit crediting, which appears on the account maintained by a given participant, such crediting is carried out under a cash pooling agreement with the funds not of the bank, but of other or other participants of the agreement, who showed a positive balance and who thereby also financed the negative balance of other participants. In the light of the above, it should be considered that the actual purpose of the cash pooling agreement is to provide cash between entities of the group and to obtain benefits in the form of interest by these entities. Therefore, it is a type of loans granted between entities participating in this system. The form of carrying out the cash pooling agreement is irrelevant, since its purpose is to provide cash between entities from the group and to obtain benefits in the form of interest by these entities. It is widely accepted that a cash pooling agreement is a form of effective financial management, used by entities belonging to one capital group or entities affiliated economically in any other way. It amounts to concentrating cash from individual accounts of individual entities on a joint group account and managing the amount accumulated in this way, using economies of scale . This allows offsetting the temporary surpluses shown by one of the entities with temporary shortages in other entities. Thanks to this, the costs of crediting the activities of the group’s entities are minimized by crediting with the use of the group’s own funds. As part of the cash pooling agreement, participants indicate an entity organizing cash pooling and managing the system, the so-called Pool Leader ( agent ), which can be a specialized bank, as well as a unit from a group. The system manager under the agreement provides financial resources for all system participants to cover negative balances, and in the event of positive balances on participants’ accounts, funds are credited to his account (see K. Szymaniak, Cash pooling and insufficient capitalization and transfer pricing documentation obligation) in the light of NSA judgments – the beginning of a new case-law or isolated decisions, Monitor Podatkowy 2016, No. 5, p. 18). Contrary to the company’s view, the cash pooling agreement described in the application for individual interpretation meets the necessary conditions (essentialia negotii) of the loan agreement referred to in art. 16 clause 7b. Therefore, it can not reasonably be demanded that a cash pooling agreement , which should be included in unnamed contracts under Polish civil law, should fulfill all the material elements relevant to the contract named in a literally accepted manner in civil law. The lack of loan agreements prepared on the basis of the provisions of the Civil Code between participants of cash pooling does not preclude the possibility of recognizing certain transactions as meeting the definition in art. 16 clause 7b. This provision introduces its own definition of the aforementioned contract for the purposes of the provisions on so-called thin capitalization . It is also impossible to agree with the company’s arguments that in the agreement described in the application there is no obligation necessary for recognizing it as a type of loan an obligation to transfer a certain amount of money to the entity specified in the agreement , because the participants of this agreement do not know whether these funds will be used , in what amount and by which participant the other party to the transaction is not specified , there is no requirement to obtain the consent of the participant with a positive balance to transfer a specific amount of funds . On the contrary , the agreement described in the application expressly consented to the transfer of a certain amount of money to a specific entity – only by specifying the method of identifying and determining that entity . As the Court of First Instance rightly pointed out , in the same way it was indicated that there would be an agreement to commit to transfer funds to a specific entity . The other party to the transaction was determined by indicating how it was determined . Since the criteria and zeroing of balances are given , and the number of group members is constant , it is known in advance who and to what extent will be the other party to the transaction . Each of the participants in the agreement also agreed in advance to transfer the specified amount and method of funds in a positive cash balance . Therefore, the position of the Court of First Instance does not raise any objections that in the facts described in the application we are dealing with a loan agreement referred to in art. 16 clause 7b. Acknowledgment that the provisions of Art. 16 clause 1 point 60 and point 61 in connection with art. 16 clause 7. causes the applicant to be obliged to draw up the documentation referred to in art. 9a. The position of the Provincial Administrative Court in Warsaw in this ...

The Italian company J.T.G.P spa, a subsidiary in a multinational pharma group ALPHA J, had recorded operating losses for fiscal years 1997 to 2013, where, at a consolidated level, the group had showed positive results. According to the Italian tax authorities, the reason why the Italian company was still in operation was due to the fact that the group had an interest in keeping an international profile, and to that end the Italian company performed marketing activities benefiting the Group. An assessment was issued where the taxable income of the Italian company was added compensation for inter-company marketing services carried out by the Italian company on behalf of the group. The company argued that the pharmaceutical market and the governmental policy on the prices of medicines in Italy was the reason for the losses. In support of this claim the company submitted broad documentary evidence during the audit. Judgement of the regional Court The Court held in favor of the taxpayer. According to the Court, the company had demonstrated that the reasons for the losses were not the result of improper transfer pricing policies, but rather local market conditions – drug prices, etc. Furthermore, the court found that no conclusive evidence had been provided by the tax authorities to support the existence of “hidden” marketing services performed by the Italian company to the benefit of the group. Excerpt “The existence of losses has been demonstrated by the taxpayer where the type of products marketed and the specificity of the Italian pharmaceutical market, which is stationary as a result of the forced reduction in the prices of reimbursable drugs and the regulation of price increases for C-range products and the difficulty of competing with larger groups, have been highlighted. In addition, the company does not operate in the field of generic products but deals exclusively with general practitioners and specialists and distributes its products through a network of pharmaceutical wholesalers who, in turn, serve pharmacies throughout the country and is subject to government policies regarding the pricing of pharmaceutical products. In any event, it should be noted that, from a statutory point of view, the company had achieved positive results in 2013 and in subsequent years in terms of net income, as shown by the financial statements for the years ended 31 December 2013, 31 December 2014, 31 December 2015 and 31 December 2016 on file, nor did the Office prove that the services had resulted in an advantage for the group, having limited itself to presumptions.“ Click here for English translation Click here for other translation ...