On 22 September 2020. The Director of National Treasury Information issued an individual interpretation (ref. 0111-KDIB1-2.4010.250.2020.1.AW) to determine whether the Company is required to prepare transfer pricing documentation for a guarantee transaction concluded several years earlier.
In the described facts, the Company conducts business activity in the territory of Poland within the scope of comprehensive management of shopping centres, including, among others, lease of commercial space. For many years now, the Company has been leasing the commercial hall space from the owner. It conducts business activity in the leased hall. In addition, the Company leases an office building in which, among others, the Company’s registered office is located.
In order to secure the payment of rent to the owner of the shop floor as well as the payment of rent for the lease of the office building, the Company has provided a guarantee from a related party. The Company pays annual remuneration to the related party. The guarantee agreement itself was concluded in 2004.
The guarantee amount under the guarantees received exceeds the value of PLN 10,000,000.00, while the annual remuneration does not exceed the amount of PLN 2,000,000.00. In 2019, there was no change in the provisions of the guarantee agreement, but only the payment of the annual remuneration for the guarantee to an affiliated entity.
Pursuant to Art. 11k.2 of the Corporate Income Tax Act, in the case of a financial transaction the threshold obliging taxpayers to prepare transfer pricing documentation was set at PLN 10,000,000.00. Additionally, pursuant to Article 11l(1), the value of the controlled transaction referred to in Article 11k(2) in the case of a surety or guarantee corresponds to the guarantee amount.
In the opinion of the tax authority, if a transaction, even one concluded in previous years, is implemented (continued) in 2019 and subsequent years, the taxpayer will be obliged to prepare transfer pricing documentation.
It should be noted that the above position is reflected in the publication: TPR Transfer Pricing Information – questions and answers, September 2020, MF.
In response to question 8 (Should the TPR Information also include transactions which were concluded in earlier years and are continued in 2019 (e.g. a loan issued in 2018)? and repaid in 2019)?) The Ministry of Finance indicated that the TPR Information should show all controlled transactions (including continued transactions) covered by the obligation to prepare local transfer pricing documentation (if they are not exempted from this obligation under Article 11n(2-9) of the Act) and the so-called “domestic transactions”, i.e. transactions (also continued transactions) exempted from the documentation obligation under Article 11n(1) of the Act.
Author: Beata Rawa – Transfer Pricing Manager