On August 17 this year. The Director of National Treasury Information issued an individual interpretation (ref. 0111-KDIB1-2.4010.166.2020.2.AK) to determine whether the event consisting of adopting resolutions on the obligation of the sole shareholder to make additional payments and the implementation of these payments constitutes a controlled transaction subject to the obligation to prepare transfer pricing documentation.
The applicant is a limited liability company, Polish tax resident. The sole shareholder of the company being the Applicant is a private joint-stock company under Finnish law.
The articles of association provide for the obligation of the partners to make additional payments within the limits of a numerically determined amount in relation to the share.
According to art. 177 of the Code of Commercial Companies, shareholders may be obliged under the shareholders’ resolution to make additional payments in each financial year in proportion to the amount of shares held, in the amount not exceeding 10,000 times the value in relation to each share held on the date of the resolution on making the additional payments.
In 2019 the shareholder adopted two resolutions on the obligation to make additional payments.
In light of the above, a doubt arose as to whether the above event would constitute a premise obliging the taxpayer to prepare transfer pricing documentation.
The justification indicates that the institution of additional payments is something indirect between the payment for shares in the share capital and an ordinary loan, defined in the doctrine as an internal, concerning only the partners, compulsory loan taken by the company to the partners. The surcharges serve to increase the company’s assets in order to increase its efficiency. The surcharges are, therefore, a special legal institution for all shareholders to ensure that the shareholders are required to pay these benefits in proportion to their shareholding.
The Director of the National Revenue Information Office also pointed out that the controlled transaction will be the payment of subsidies to a capital company as an “activity” of economic nature. Moreover, in the light of the comments in the doctrine indicating that the surcharges serve to subsidize the company and are defined as a kind of benefit lying in the middle between the loan and the contribution, with the possibility of their interest rate, they should be qualified as financial transactions.
It should be mentioned that in the described case art. 11n pt. 3 of the UCIT will not apply either. This provision excludes from the obligation to prepare transfer pricing documentation transactions which do not constitute income or deductible cost.
Subsidies are tax-neutral only if they are made in accordance with the provisions of the Commercial Companies Code. In the described case, the justification for making the surcharges and calculation of their amount results from the Company’s agreement.
In conclusion, making the additional payments to the company is subject to the obligation to prepare transfer pricing documentation after exceeding the documentation threshold of 10 million PLN for financial transactions.
It should be noted that this is another interpretation broadening the definition of “transaction”. In view of the above, it is recommended that taxpayers remain vigilant during the analysis of events taking place in the companies in the light of applicable transfer pricing regulations and the adopted positions of tax authorities.


Author: Beata Rawa – Transfer Pricing Manager