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Definition of a controlled transaction


The term controlled transaction, as defined in Art 11a(1)(6) of the Corporate Income Tax Act (and Art. 23m (1)(6) of the Personal Income Tax Act), poses many interpretational difficulties for taxpayers.

The statutory definition of controlled transactions has them as “identified on the basis of the actual conduct of the parties to activities of an economic nature, including the attribution of income to a foreign permanent establishment, the terms of which have been established or imposed as a result of the relationship”. Many difficulties are encountered by taxpayers both in classifying the relevant events as transactions and in verifying all the entities with which they engage in transactions that should be considered controlled transactions.

In order to dispel the doubts, the guidance provided in the Minister of Finance's public ruling on the definition of a controlled transaction dated December 29, 2021 can be used (No. DCT1.8203.4.2020). The interpretation provides a detailed discussion of the three components of the definition of a controlled transaction, viz:

  • - the occurrence of actions of an economic nature,
  • - the identification of activities on the basis of the actual conduct of the parties,
  • - the setting or imposition of conditions as a result of the relationship.

The economic nature of activities is defined on the basis of the basic characteristics constituting an economic activity: profit-making purpose, having an organised structure, carrying out activities continuously and being independent (autonomous).

Within the framework of the description of activities of an economic nature, the Ministry of Finance points out that the basic feature of such activities is the intention to make a profit - even if such an intention is not ultimately fulfilled. 

The Minister of Finance also indicates that operating within an organised structure implies that controlled transactions are not exclusively those that are continuous or repetitive (e.g. seasonal). Transactions of a non-recurring nature, such as the sale of a business or an organised part of a business, the making of a contribution in kind or an increase in share capital by shareholders are also business activities that may be subject to the obligation to prepare tax documentation.

At the same time, the ruling highlights that the mere obligation to provide a service - e.g. the conclusion of a preliminary agreement - does not constitute a transaction, as it is not definitive in nature.

The Minister of Finance also dispels taxpayers' doubts regarding the recognition of dividend payments as economic activities on transfer-pricing grounds. The ruling clearly indicates that the payment of dividends does not satisfy the conditions for an economic activity and, therefore, the obligations under the transfer-pricing regulations do not apply to it.

The actual conduct of the parties, on the basis of which actions of an economic nature are to be identified, is a widespread concept that can mean both acts and omissions of the parties. What is important is their actual nature, i.e. the existence of legitimate economic reasons, so that the actions are not artificial or apparent.

Establishing or imposing the terms of a transaction as a result of a relationship is not exclusively about situations where interrelated parties determine the terms of the transaction they are undertaking. An important area often overlooked by companies when identifying documentation obligations is where a transaction between unrelated parties (e.g. a company and its counterparty) is conducted on the terms agreed as part of the group’s parent company’s central negotiations with suppliers or customers. The entity setting the terms need not be a participant in the transaction. If the relationship has influenced the terms of the transaction, it will be treated by the authorities as a controlled transaction, and the fact that the direct counterparties are unrelated entities will then be irrelevant. It is therefore important, from the companies’ point of view, to pay attention to transactions in the setting of the terms of which their parent companies were involved, and to examine them in the same way as transactions with related parties.


Should you have any queries or doubts regarding the identification of a controlled transaction, do not hesitate to contact our experts.


Joanna Morgaś, Tax Consultant, ATA Tax Sp. z o.o.

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