Poland: Cash-pooling arrangements are loans, transfer pricing documentation rules apply

Poland: Cash-pooling arrangements are loans

The Supreme Administrative Court in Poland in an August 2016 decision examined cash-pooling arrangements, and concluded that a cash-pooling arrangement constituted a loan meeting the requirements of certain provisions of the corporate income tax law (specifically, Article 16 section 7b).

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The high court's judgment effectively affirmed its position from a September 2015 case when—after analyzing a cash-pooling agreement that assumed a daily transfer of funds from source accounts of participants to a consolidating account and/or vice versa, as well as an appropriate settlement of interest depending on the balance—the court concluded that every agreement in which the lender is obligated to transfer ownership of a specified amount of funds to the borrower, and the borrower is obligated to return the amount and pay interest, even if obligations of the parties to the agreement are implicit, constitutes a loan agreement. 

In its August 2016 judgment, the Supreme Administrative Court affirmed its prior treatment relating to cash-pooling agreements. Accordingly, settlements within a cash-pooling arrangement may be treated as a form of a loan. 

KPMG observation

This treatment of cash-pooling arrangements as loans has been confirmed in certain decisions issued by Voivodship Administrative Courts, although not consistently. With the recent Supreme Administrative Court's judgment, tax professionals believe it seems unlikely that the lower courts would issue judgments classifying a cash-pooling agreement as different from a loan agreement. 

Additionally, in new transfer pricing provisions that will be effective 1 January 2017, liquidity-management agreements—i.e., among others, cash-pooling agreements—are explicitly mentioned as types of agreements that are subject to transfer pricing documentation requirements. In situations when a transfer pricing audit is performed in relation to an entity that is a party to a cash-pooling agreement, taxpayers need to consider completing the appropriate tax documentation for such a transaction. If the taxpayers enter into or continue to participate in such arrangements in 2017 and beyond, they need to weigh the importance of preparing appropriate documentation, including, for larger taxpayers, a benchmarking analysis verifying the arm’s length nature of prices applied in such transactions.


Read an August 2016 report [PDF 366 KB] prepared by the KPMG member firm in Poland: Cash-pooling to be treated as a loan subject to the transfer pricing documentation regime

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