MF explains how to understand a controlled transaction
The notion of a "controlled transaction" includes transactions meeting the prerequisites of Art. 11a. 1.6 of the CIT Act (Art. 23m. 1.6 of the PIT Act), regardless of whether they are carried out on terms consistent with the arm's length principle or on terms inconsistent with the arm's length principle, according to a general interpretation by the Minister of Finance (No DCT1.8203.4.2020).
At the end of last year, the Minister of Finance decided to issue a general interpretation in which he would clarify the definition of a controlled transaction. All in order to eliminate the arising discrepancies.
– One of the MF’s comments is that the assessment of whether an activity constitutes a controlled transaction should be made individually for each case, taking into account its specifics. The outcome of such assessment may be different from the perspective of each party (participant). Therefore, it is not necessary for an action to be uniformly considered as a controlled transaction by both/all participants in a given action. Moreover, certain actions should be assessed separately from the perspective of each participant in such actions. For example, the payment of profit by a company that is not a legal entity to its shareholders and the receipt by a shareholder of a company that is not a legal entity of a corresponding portion of the profit of that company does not constitute a controlled transaction. Importantly, and as the Minister points out, actions of an economic nature should be identified on the basis of the actual conduct of the parties – points out Łukasz Kupryjańczyk, tax adviser, partner at Thedy & Partners.
It also follows from the MF’s document that the existence of links does not in itself determine the existence of a controlled transaction. The terms of the economic activity are to be established or imposed as a result of the links.