On 12 February 2020 Director of National Treasury Information issued an individual interpretation (ref. 0111-KDIB1-2.4010.547.2019.1.AK) concerning the Coordinator’s obligation to prepare transfer pricing documentation in connection with participation in the actual cash pooling system.
The applicant is a Polish tax resident, who joined the financial liquidity management system offered by the Bank with its registered office in Poland, the so-called real cash pooling service. The applicant is the Coordinator for whom the Bank will open/open bank accounts.
The cash pooling service consists in the management by the Bank of physical cash flows between current accounts of the customers of this service, i.e. the Applicant and other entities belonging to the Applicant’s capital group or related in any other way (jointly: “Participants”). The service is performed on the basis of the Agreement for maintaining the Cash Management Structure for the Account Group, which was concluded between the Bank and the Participants, specifying its material provisions.
The Director of National Treasury Information pointed out that Article 11c and Article 11k(1) of the CIT Act do not exclude the obligation to document transactions between related parties made within the framework of cash pooling. Therefore, such documentation should contain information which will be necessary to assess that the taxpayer participating in such an agreement obtains higher benefits (e.g. in the form of lower costs) than if he invested and borrowed funds from entities unrelated to him. At the same time, such documentation should show the equivalent nature of such an agreement.
As a result, it should be stated that in the situation presented in the application, the prerequisites resulting from art. 11k sec. 1 of the CIT Act will be fulfilled, and therefore the Applicant will be obliged to prepare tax documentation if the prerequisite for exceeding the annual value of concluded transactions referred to in art. 11k sec. 2 of the CIT Act is fulfilled and the conditions excluding the obligation to prepare it referred to in art. 11n of the CIT Act are not fulfilled.
To sum up, the Coordinator will be obliged to prepare the tax documentation referred to in art. 11k section 1 of the CIT Act, if the condition concerning exceeding the annual value of concluded transactions referred to in art. 11k section 2 of the CIT Act is fulfilled and the conditions excluding the obligation to prepare it referred to in art. 11n of the CIT Act are not fulfilled.
This documentation should cover the cash flows and the amount of interest paid. Therefore, all settlements between Participants are subject to the documentation obligations referred to in Article 11k(1) in connection with Article 11a of the CIT Act.
Author: Anna Michalak – Tax Assistant