Innovative debt analysis for enhanced tax security in the telecommunications sector

MDDP provided strategic advisory support to the Polish subsidiary of a global telecommunications group, conducting a comprehensive debt analysis to ensure compliance with the arm’s length principle. The company was undertaking a significant investment in a state-of-the-the-art fibre-optic network, where a key challenge lay in substantiating the arm’s length nature of the financial arrangements.

Our team delivered a pioneering financial assessment that extended beyond standard interest rate comparisons. We applied an advanced methodology encompassing the borrower’s overall financial standing, debt servicing capacity, and the broader financial strategy within the group. Leveraging specialist databases, we benchmarked the company against industry peers, ensuring full alignment with market conditions and best practices.

With financial transactions among related entities under intensified scrutiny from tax authorities and administrative courts, our approach addressed the growing emphasis on holistic assessments of intercompany financing. Recognising that a focus on interest rates alone does not guarantee full tax security, MDDP implemented an innovative solution—a proprietary Debt Risk Calculator. This bespoke tool, based on a set of calculated financial indicators, facilitated the preliminary evaluation of financial transactions and significantly mitigated tax risks.

Through our strategic guidance, the company secured a robust justification for the arm’s length nature of its financing, strengthening its tax position and minimising the risk of disputes with tax authorities. This case exemplifies MDDP’s ability to navigate complex financial transactions with cutting-edge analytical tools, reinforcing our reputation as a leader in international tax advisory.

The project was led by Magdalena Marciniak (TP), in collaboration with Jakub Patalas (TP).