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).
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.
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
© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.