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Poland Clarifies Dividend Payments Not Controlled Transactions for Transfer Pricing Documentation Purposes — Orbitax Tax News & Alerts

Poland's Ministry of Finance has published its response to Interpellation No. 9368 from parliament on the need for transfer pricing documentation for dividend payments to related parties. The interpellation was made because the definition of controlled transactions for transfer pricing purposes is "ambiguous and covers a broad range of economic events". Given the ambiguity, two questions were put forward:

  1. Is a dividend payment to a related company subject to documentation requirements if exceeding the documentation threshold?
  2. If the answer to the first question is yes, is the threshold PLN 10 million, i.e., the threshold for financial transactions?

In the response, the Ministry of Finance addresses whether a payment of dividends can be considered a controlled transaction, noting that a controlled transaction means economic activities identified on the basis of the actual behavior of the parties, including the attribution of income to a permanent establishment, the terms of which have been established or imposed as a result of relations (related party influence). In this respect, the response clarifies the meaning of economic activity, including that the economic nature of the activity should, as a rule, be equated with a gainful (profit-seeking) activity.

Given that the payment of dividends is for the remuneration for capital and the consequence of economic activity, and not an economic activity itself, it does not fall within the definition of a controlled transaction and therefore is not subject to the obligation to prepare transfer pricing documentation.