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Cash-pooling: a loan subject to transfer pricing documentation in Poland | News Flash

11 Oct 2016

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Cash-pooling: a loan subject to transfer pricing documentation | News Flash

As follows from recent verdicts of Polish courts regarding cash-pooling agreements, compensation of short-term surpluses shown by entities with shortages reported by other entities from the same group is treated as a loan. As a consequence of this approach, where certain thresholds defined by income tax regulations are exceeded, related parties will be obligated to prepare transfer pricing documentation for these transactions.

Recently, cash-pooling has been subject to analysis conducted by the Supreme Administrative Court. For instance, in the verdict of July 13th,2016 the court concluded that a cash-pooling agreement constitutes a loan meeting the requirements of Article 16 section 7b of the CIT Act. This judgment confirmed the standpoint presented in a different ruling where after analyzing a cash-pooling agreement that assumed a daily transfer of funds from source accounts of participants to a consolidating account and/or vice versa, the court concluded that every agreement in which the lender is obligated to transfer ownership of a specified amount of funds to the borrower, and the borrower is obligated to return the said amount and pay interest, constitutes a loan agreement (ruling of September 30th, 2015).

As regards the transfer pricing obligations, in the ruling of August 3rd,2016 the Supreme Administrative Court confirmed that settlements within a cash-pooling arrangement may be treated as a form of a loan and, thus, should be regarded as transactions subject to transfer pricing documentation requirements (case no. II FSK 880/16).

What’s more, starting from January 1st, 2017 liquidity-management agreements – including cash-pooling agreements – will be listed in the regulations as types of agreements that are subject to transfer pricing documentation requirements.

In view of the above, in case of an audit performed in relation to an entity that is a party to a cash-pooling agreement, it is highly probable that the tax controllers will request transfer pricing documentation for this transaction.

Should you have any questions related to the issue discussed here, please do not hesitate to contact us.

If you have any question, please, feel free to contact us. We will be pleased to help you!

 

Contact:

Agata Nieżychowska

Tax Director, Accace Poland

Agata.Niezychowska@accace.com

+48 512237171


This may also interest you:
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  • Reverse – Charge on supplies of sensitive goods in Poland

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