To document a loan, or not, that is the question!

Financial transactions are among the most frequently documented transactions taxpayers make with related parties. In fact, they accounted for over 40% of the reported transactions according to the TPR-C forms filed for 2019.

Due to the discrepancies following the interpretation of the CIT Act in terms of determining the value of transactions for loans or credits, it may be challenging to correctly define documentation obligation for transfer pricing purposes.

Which transaction value should serve as the basis?

Article 11l.1.1 of the CIT Act states that the value of a controlled transaction in the case of financial transactions corresponds to the value of capital. Additionally, in Article 11l.2.2 the lawmaker defined that the value of the controlled transaction results from contracts or other documents. Therefore, the question is: when verifying the documentation obligation, you should take into account the value of the loan resulting from the contract or the amount corresponding to the capital value for a given tax year?

Questions and answers on TPR – published by the Ministry of Finance in October 2021 – may have been helpful in this matter. You could read there that in the case of loans and credits, the transaction value is the capital value, determined for a given transaction of a homogeneous nature, where the capital value is understood as the highest amount of capital made available in the reporting period. Furthermore, the value of the loan or credit transaction does not include interest, margins, commissions and other payments related to the granting of financing. The Ministry of Finance’s reply to a parliamentary question no. 29105 in February 2022 shared this view.

Importantly, the publication was only informative. As such, it did not provide explanations or interpretations of the regulations, so the taxpayer could still face problems with deciding about which transaction threshold is appropriate.

Clearer at last?

On 11 July 2022, the Director of National Fiscal Information (KIS) issued an individual ruling (reference number: 0111-KDIB1-1.4010.19.2022.1.JD) which is in line with the approach presented in the aforementioned publication of the Ministry of Finance regarding the determination of the transaction value in the case of loans and credits. The authority agreed that the capital value constituting the transaction value in the case of loans or credits should be understood as the highest amount of capital made available in the reporting period: resulting from a contract or other documents like a loan repayment schedule or a bank statement.

In the interpretation, the authority also highlighted that in the definition of a controlled transaction, the lawmaker refers to the actual behavior of the parties and these are identical to activities based on justified premises. The Director argued that the entrepreneur makes a loan or a credit agreement to obtain financing – not to make a contract as such.


It is a positive development that the Ministry of Finance’s position on the determination of the value of loan or credit transactions has been confirmed in the individual interpretation by the Director of KIS. It matters because the value of a transaction should reflect its economic nature in a given year. At the same time, a good solution on the part of the lawmaker would be to clarify the matter in the regulations to avoid the need for further explanations or interpretations.

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