The profitability adjustment has no effect on VAT
The transfer of compensatory payments up to the established level of profitability is not subject to tax on goods and services.
This is the result of the individual interpretation of the director of the National Tax Information (0111-KDIB3-1.4012.748.2020.1.ASY) issued on October 27, 2020.
The applicant produces various types of fasteners (mainly screws) at the request of entities related to the group. Materials and semi-finished products necessary for the production of finished products are purchased by the applicant from unrelated entities. After the end of production, the ownership of finished products is transferred to related entities. The remuneration due to the applicant for the sale of finished goods to entities from the group is calculated on the basis of the total costs incurred in connection with the production of these goods, increased by the profit margin. The applicant, on the basis of contracts concluded with entities from the group, has a guaranteed profitability at a fixed level, within the range specified in the comparative data analyzes prepared by independent entities and corresponding to the legal regulations on transfer pricing. At the end of a given period, the profitability of the group’s related entities is verified. If it is within a certain range, then they are not …
Source Archiwum.pl (paid access to the full article)
- Writing of 27 October 2020 Director of the National Tax Information 0111-KDIB3-1.4012.748.2020.1.ASY
- How to deal with adjustments of deductions in case of retrospective rebates or transfer pricing adjustments
- Remember … VAT Expert Group on Transfer Pricing Adjustments – Paper/Opinion issued on April 18, 2018
An extract out of the case:
At the same time, the correction of mutual settlements consisting in the equalization of a specific level of profitability will not be associated with a mutual activity. Equalization of profitability to the level of profitability established between the Company and the Group entities will not entail any benefits from the other entity. Thus, it will not constitute remuneration for the service within the meaning of the Act and will not be taxable under Art. 5 sec. 1 point 1 of the Act in connection with Art. 8 sec. 1 of the act. The profitability adjustment will also not constitute remuneration for the supply of goods within the meaning of Art. 7 sec. 1 of the VAT Act.