On 29.03.2021 The Director of the National Tax Information issued an individual interpretation (0114-KDIP2-2.4010.29.2021.1.RK) regarding the determination of the possibility of exemption from the obligation to prepare transfer pricing documentation.

The applicant is a general partner and shareholder in Company Y. Through natural persons who are shareholders and members of the management board of the Applicant – the Company constitutes a related entity of Company Y.

The Applicant took up a series of shares in the increased capital of Partnership Y. The capital increase and the Company’s contribution is in the form of a cash contribution and has been allocated in part to the share capital and in part to the supplementary capital.

The Applicant and Company Y incurred a loss for 2019 and therefore the transactions/events between the Applicant and Company Y cannot benefit from the exemption from the obligation to prepare transfer pricing documentation under Article 11n(1) of the AIT.

In the taxpayer’s opinion, an equity transaction is subject to documentation only if it involves a contribution-in-kind of certain assets, receipt of in-kind assets. Taking up shares for cash is not considered a contribution-in-kind.

In the opinion of the tax authorities, “transactions” should be understood as any legal actions resulting in the transfer of ownership of goods, which affect the taxpayer’s income (loss) within the meaning of the income tax laws.

Consequently, a capital increase will fall within the notion of a “transaction” and should be subject to preparation of transfer pricing documentation provided that the documentation thresholds specified in Article 11k.2 of the Corporate Income Tax Act are exceeded.

Thus, the taxpayer’s position was considered incorrect.

We would like to remind you that tax consultations on the definition of a controlled transaction are in progress.

The aim of the interpretation is to clarify what should be understood by the notion of controlled transaction due to identified interpretation difficulties with respect to its individual elements.


Author: Beata Rawa – Transfer Pricing Manager