In the individual tax interpretations, dated 12 April 2018. (No. 0111-KDIB1-1.4010.75. 2018.1.SG), of 15 September 2017. (No. 0114-KDIP2-2.4010.112.2017.2.AZ) and of 21 June 2018. (No. 0111-KDIB2-1.4010.101.2018.1.EN), the Director of the National Tax Information indicated the need to prepare transfer pricing documentation for the payment of remuneration by the company to a member of the management board.
An analogous position was also taken by the Administrative Court in Szczecin in the judgment of 15 December 2017. (ref. I SA/Sz 902/17).
The payment of remuneration until 31 December 2018 is considered a single type of event, whereas in the wording in force from 1 January 2019 it is considered a controlled transaction.
Pursuant to Article 11a(1)(6) of the current CIT Act, a controlled transaction means a transaction identified on the basis of the actual behaviour of the parties to an economic activity (…).
In the context of introducing the definition of a controlled transaction into the currently binding provisions, in the justification to the Act of 23 October 2018 on changing the personal income tax act, the corporate income tax act, the tax ordinance act and some other acts (Sejm Paper No. 2860 part I of 25 September 2018) it was explained that “The introduction of a relatively broad definition of a controlled transaction is intended to cover also issues which may not be considered as transactions in the common understanding of the word (…)”.
Thus, the payment of remuneration should be identified as a controlled transaction of a homogeneous nature other than a commodity, financial or service transaction with a documentation threshold of PLN 2 million.
The individual interpretation of 12 April 2018 further states that “personal relationships also include functional relationships which, unlike family relationships, are taken into account in both domestic and international relations. What is important, such relationships should take into account the actual participation in management or control. Such a role may, depending on the situation, be attributed not only to the members of the company’s management or supervisory board, but also, for example, to the Chief Financial Officer or Sales Director”.
Additionally, the Administrative Court in Szczecin in the judgment of 15 December 2017, I SA/Sz 902/17, pointed out that failure to conduct business activity by a functionary does not result in the lack of a documentation obligation.
The court in its ruling explained that “In a situation where the other party to a transaction or other event taking place with an entity meeting the conditions of Article 9a(1) and 9a(1)(d) of the corporate income tax act, remains a natural person who is not an entrepreneur, the provisions of the income tax act, do not exempt the taxpayers in such a situation from the obligation to prepare transfer pricing documentation in accordance with the aforementioned Article 9a(1) and (1d) “.