On 23 September 2019. The Head of the National Treasury Administration issued an amended individual interpretation, ref. no. DPP7.8222.236.2018.GFQV, concerning the obligation to prepare transfer pricing documentation in the situation of voluntary redemption of shares without remuneration within the scope of the Personal Income Tax Act (hereinafter: UPIT).

The interpretation in question concerned the future state of affairs.

In the future events described above, redemption will be carried out in accordance with the provisions of the Act of 15 September 2000. Commercial Companies Code. In particular, the redemption will be made without remuneration with the consent of the Shareholder by way of purchase of shares by a Subsidiary (voluntary redemption). The planned redemption of shares held by the Shareholder in the Subsidiary will be carried out without reducing the Subsidiary’s share capital.

Starting with the analysis of the above issue, it should be determined whether the voluntary redemption of shares without remuneration constitutes a “transaction” referred to in Art. 25a par. 1 of the PIT Act. The language interpretation does not highlight all doubts related to the scope of the term “transaction”, because it is limited to commercial contracts and other operations whose consequence is the purchase or sale of goods and services. However, it should be noted that not only goods and services, but also all goods and rights having an economic value, including securities, are subject to economic trade. Consequently, any legal transaction resulting in a transfer of ownership of goods should be regarded as a transaction.

As indicated in exemplary judgments (e.g. judgments of the Supreme Administrative Court: of 8 March 2016, case ref. II FSK 4000/13, of 30 September 2015, case ref. II FSK 3137/14, of 17 December 2014, case ref. II FSK 2849/12, of 15 January 2013, case ref. II FSK 1052/11). The term “transaction” is synonymous with the term “contract”.

According to the Head of the CAS, redemption of shares, regardless of their nature, falls within the notion of “transaction” and should be subject to tax documentation if the value of such transaction exceeds materiality thresholds. The necessity to prepare such documentation is indirectly indicated by the regulation’s objective of ensuring tax transparency of relations between related entities.

Author: Beata Rawa ? senior tax consultant