Effective defence of transfer pricing adjustments in a tax dispute

MDDP successfully provided advisory services to one of Poland’s largest manufacturers, the owner of a globally recognised brand, in a landmark tax dispute concerning transfer pricing adjustments in cross-border transactions with related entities.

The dispute, which unfolded within the framework of customs, tax inspection, and tax proceedings, centred on a multimillion-dollar corporate income tax liability for the 2017 fiscal year. This complex case presented significant challenges on both domestic and international fronts. The Polish tax administration initially refused to accept transfer pricing adjustments as a deductible expense, which posed a serious threat to the client’s approach to intra-group transactions across over 40 global markets. The rejection of this standard mechanism had the potential to create ripple effects not only for MDDP’s client but also for other international businesses operating within this regulatory environment.

In response, MDDP’s team of experts devised a comprehensive, multi-layered defence strategy combining robust economic and legal arguments with established international transfer pricing standards. The firm’s support spanned every phase of the proceedings – from addressing the inspection results and the decision from the first-instance authority, to preparing an appeal and representing the client throughout the subsequent court proceedings.

A pivotal element in the successful resolution of this case was MDDP’s ability to demonstrate that the tax authority’s interpretation of the law unfairly discriminated between domestic and foreign entities, breaching EU principles governing the free movement of capital. This critical legal argument, combined with a well-structured defence, led to the successful conclusion of the proceedings at the formal stage.

As a result of MDDP’s expert intervention, the client was able to avoid an additional tax liability of nearly PLN 6.5 million. Beyond the immediate financial impact, this victory has far-reaching implications, establishing a precedent for future cases involving intra-group transactions. The case represents a landmark moment for businesses in international structures that engage in transfer pricing adjustments, reinforcing the importance of ensuring tax compliance across diverse jurisdictions.

MDDP’s strategic intervention is likely to influence future decisions by tax authorities and could significantly shape judicial rulings on similar matters. The case underscores MDDP’s capability in handling high-profile, complex disputes, with a clear understanding of both the intricacies of global business operations and the relevant local and international tax frameworks governing transfer pricing.

The project was led by Magdalena Marciniak (TP), in collaboration with Agnieszka Krzyżaniak (TP), with procedural support from Jakub Warnieło (VAT).