On 24 January 2018 The Voivodship Administrative Court in Bialystok issued the following verdict I S/Bk 1832/17, where several important issues concerning tax documentation were addressed, including the issue of comparative analyses for surety transactions.

The judgment in question concerned a company which, in the years 2012-2014, granted sureties for repayment of liabilities under loan agreements concluded between a bank and an affiliated entity with the company. The surety transactions for the years 2012-2013 were carried out without remuneration, whereas in 2014 the court stated that the remuneration was significantly underestimated. The essence of the dispute in this respect boiled down to the correct determination of the amount of the company’s income from the guarantee of repayment of liabilities of the affiliated entity towards banks.

In the court’s opinion, the assessment of the value of the surety by the tax authority was carried out in accordance with the regulations, according to the uncontrolled comparative price method. The tax authorities applied to 12 entities dealing with professional granting of bank loan guarantees to provide information on the amount of commissions and fees used in 2014 when granting guarantees to entrepreneurs. It resulted from the information obtained that only 2 entities from the abovementioned 12 entities granted sureties on terms similar to those resulting from sureties agreements between the company and its affiliated entity. It was pointed out that in the present case only information from financial institutions on guarantees of unlimited duration could be used as a reliable and reliable source of comparison.

With regard to the company’s allegations that the assessment was based on overly general data which did not take account of comparable transactions between unrelated parties and which did not always take into account the individual financial situation of the entities, their ratings or the securities accepted, the court pointed out that, in its view, the adopted method of a comparable uncontrolled price was justified by the circumstances of the case. It aims to establish the tax base in a close to real terms and is based on sound and reasonable reasoning and assumptions. This is evidenced by the fact that the average commission charged by banks in 2014 in connection with the granting of credit guarantees on terms and conditions similar in time and value to those granted by the company to the affiliated entity has been taken into account. It was stressed that the tax authorities took into account the lowest commission applied by banks and therefore the adoption of such and not other comparable values of commissions cannot be considered to be detrimental to the company.

In the court’s opinion, the tax authorities have gathered extensive evidence (information on from 12 financial institutions dealing with professional guarantees) correctly established the facts of the case. They then evaluated the material freely, in line with their life experience, and presented a logical basis for their conclusions.

In the ICT opinion, the rationale for the two-stakeholder sample is insufficient in terms of the trend of salaries in the market. It would be appropriate to build a more numerous sample on the basis of additional offers received from banks or on the basis of a database containing the market remuneration of the industry.

Author: Paweł Rosiński ? Tax consultant