Changes of 17 June 2013 introduced to the Minister of Finance Decree on transfer pricing – part5: Restructurings and other options realistically available to the parties

Below we quote section 5 par 23a of the Polish transfer pricing decree regarding business restructuring:

5. Tax controllers examine the right to remuneration for restructuring of the related party and the amount of the remuneration for the related party taking into consideration options realistically available to the entities participating in the restructurings.

How the options realistically available are to be considered by the tax administration?

The OECD Guidelines on Transfer Pricing indicate that the consideration in the transaction between related companies may be adjusted by reference to the profits that could have been obtained in an alternative structure, because independent parties would have chosen such a transaction offered by the related party, only if there were no other more attractive options available.

If an independent entity would have seen that another alternative is clearly more attractive, it would have agreed to this transaction and not to the transaction offered by the related party.

In accordance with the arm’s length principle the evaluation should be done from the point of view of each, separate entity and from the group perspective; the fact that the restructurings is justified from the group perspective, e.g. synergy benefits appear on the group level does not mean that such benefits appear from the perspective of each separate company.

Taxpayer should review their agreements, circumstances and surrounding to the transaction, further conduct and documentation to see if there are no alternative options that are clearly more attractive. This will help taxpayers to reduce the risk that their income is adjusted according to the more attractive option.

Source: Prepared at Tax Advisory Company TCA Advisers Ltd , Konstancin-Jeziorna