On 17 July this year. The Director of National Treasury Information issued an individual interpretation, ref. 0111-KIDIB1-1-4010.153.2020.5.ŚS in the scope of determining whether an in-kind contribution of an organized part of the enterprise to a limited partnership (hereinafter referred to as SPK) is subject to the obligation to prepare local transfer pricing documentation referred to in the corporate income tax.
The applicant being a limited liability company is a partner of a limited partnership and acts as a general partner in it. SPK also has two partners being limited partners – natural persons. As of 1 January 2019, one of the limited partners made a contribution in kind to SPK, an organized part of the enterprise (hereinafter referred to as ZCP). The applicant did not suffer a tax loss in 2019, and also did not benefit from the exemptions referred to in Article 6 of the Corporate Income Tax Act (hereinafter referred to as UCIT) and Article 17(34) and (34a) of UCIT. The limited partners of SPK, in which the applicant is a general partner, and the entity making the in-kind contribution of ZCP – limited partner, did not incur a tax loss in 2019 and the entities did not benefit from the exemptions referred to in Article 21(1)(63a) and (63b) of the Personal Income Tax Act.
In connection with the above facts the applicant asked, among others, whether the contribution of ZCP to SPK is subject to the obligation to prepare local transfer pricing documentation?
The Director of National Tax Information confirmed that the in-kind contribution is exempted from the documentation obligation if the conditions for the so-called national exemption resulting from art. 11n point 1 of UCIT are met.
A contrario, as the so called “other transaction” listed in art. 11k sec. 2 point 4 of uCIT, the in-kind contribution of ZCP is included in the definition of a controlled transaction and thus is subject to the documentation obligation. At this point it should be emphasized that the introduction of a relatively broad definition of a controlled transaction into the transfer pricing regulations was aimed at covering also issues that may not be considered as transactions in the common understanding of the word, such as, among others, restructurings, cost sharing agreements (CCA), partnership agreements, cooperation agreements, liquidity management agreements or just a contribution in kind.
Author: Paweł Rosiński – Tax Advisor