On 24 May 2021 The Director of the National Fiscal Information issued an individual interpretation (0111-KDIB2-1.4010.48.2021.1.MK) to determine whether the transfer pricing rules set forth in the Corporate Income Tax Act apply in connection with the acquisition by the Applicant of shares in its share capital vested in a shareholder without consideration in order to redeem them.

In the facts described above, the Applicant will acquire its own shares for the purpose of their voluntary redemption in accordance with the provisions of the Commercial Companies Code. Accordingly, the company’s governing bodies will adopt a resolution to redeem the shares and then the company will enter into an agreement with its shareholder to acquire its own shares without consideration in order to redeem them voluntarily.

The applicant is planning a merger with another company through the acquisition of a single-member company, which will be the acquiring company.

The market value of the shares held by the shareholder in the Company’s share capital does not exceed PLN 2,000,000.

The first disputed issue was whether the event described above would refer to related entities within the meaning of transfer pricing regulations.

In the tax authority’s opinion, the applicant and the partner are related entities in accordance with Art. 11a.1.4 of the Corporate Income Tax Act, i.e. through an actual ability of a natural person to influence key business decisions made by a legal person. Therefore, due to the existing relationship between the shareholder and the Company, it should be indicated that both entities are related entities within the meaning of the aforementioned regulation.

In the opinion of the tax authorities, a redemption of shares, regardless of its nature (voluntary or compulsory), falls within the notion of a “transaction” and should be subject to tax documentation if the documentation threshold specified in the regulations is exceeded, obliging the Company to prepare transfer pricing documentation.

At the same time in this case the documentation obligation will not occur due to the fact that the market value of the shares M. is entitled to in the share capital of the Company does not exceed the amount of PLN 2,000,000.00.


Author: Beata Rawa ? Transfer Pricing Manager