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Cash-pooling and the obligation to prepare transfer pricing documentation


In a judgment of 7 July 2016 (case ref. no. II FSK 993/16), the Supreme Administrative Court confirmed its position presented before that a cash-pooling agreement and the relations between its participants are covered by the provisions of Article 9a.1 of the CIT Act, imposing on entities an obligation to prepare transfer pricing documentation.

The essence of the dispute was in fact whether the so called zero-balancing cash-pooling agreement concluded by the company, meaning the arrangement where there are actual transfers of cash funds between bank accounts of the participants and the settlement account of the pool leader, is a form of a loan agreement concluded among individual participants of the cash-pooling agreement. The company’s position was that the obligation to prepare transfer pricing documentation, pursuant to the provisions applicable as of 1 January 2015, will exist only with respect to the remuneration due to the pool leader for cash management services provided to the company under the subject agreement (provided that a relevant threshold has been exceeded). According to the company, there will be obligation to prepare transfer pricing documentation in relation to the pool leader and other participants of the arrangement in connection with the transfers executed for the purpose of cash-pooling settlements within the arrangement.

The Minister of Finance did not agree with the position presented by the company, contrary to the Regional Administrative Court, which found the appeal lodged by the company against the binding ruling issued to be reasonable.

The Supreme Administrative Court did not agree with that finding, pointing to the position established in its case law, which is in opposition to the standpoint presented by lower instance courts and says that since the actual objective of the cash-pooling agreement is for the group members to make funds available to one another and derive benefits in the form of interest, it is a kind of loans granted to one another by entities participating in the system. One cannot conclude only based on specific characteristics of cash-pooling that the latter cannot be regarded as a loan agreement (vide: judgment of the Supreme Administrative Court of 30 September 2015, case ref. no.: II FSK 3137/13). Consequently, the related entities participating in cash-pooling may be obligated to prepare the tax documentation in order to show the arm’s length nature of the terms of co-operation adopted by the parties, including the conditions which underlie determination of remuneration due to the agreement participant which is at the same time the pool leader. Such conditions should reflect those agreed in comparable circumstances by independent entities.

It is also worth noting here that cash-pooling agreements – as agreements under which their participants grant loans to one another – are covered by the regulations on the so called thin capitalization, which was confirmed, inter alia, by the Supreme Administrative Court in its decision of 30 September 2015 (case ref. no. II FSK 2033/14). Pursuant to Article 16.7b of the CIT Act, a loan, referred to in paragraph 1.60 and 1.61 and in Article 15c, shall mean any agreement in which the lender agrees to transfer to the borrower a specified amount of money, and the borrower agrees to return the same amount of money. This provision implements its own definition of a loan that is wider than a definition laid down in the civil code. And thus since the essence of cash-pooling – especially zero-balancing cash-pooling – is to transfer the funds among its participants, with simultaneous necessity to return the same and therefore obtain a specific benefit in the form of interest, then regardless of the fact that no loan agreements have been concluded among the participants of the arrangement, such cash-pooling satisfies the definition given in Article 16.7b of the CIT Act.


The decision is final and unappealable.