Poland vs Bedding Textiles: CASE SUMMARY
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Poland vs Bedding Textiles: CASE SUMMARY
Case Information
- Court: Provincial Administrative Court in Łódź
- Case No: I SA/Łd 592/24
- Applicant: N Sp. z o.o.
- Defendant: Director of the Tax Administration Chamber in Łódź
- Judgment Date: 21 November 2024
- Download the FULL JUDGMENT
Judgment Summary
The case involves a dispute between N Sp. z o.o. (“the Company”), a Polish textile manufacturer, and the Director of the Tax Administration Chamber in Łódź regarding corporate income tax liabilities for the year 2020. Following a tax audit initiated in February 2023, the first-instance authority concluded that the Company had incorrectly calculated its taxable income, leading to understated costs and revenues. Key issues included transfer pricing adjustments, improper recognition of depreciation expenses, and overstatement of deductible costs related to certain leases.
The Director’s decision, issued on 26 June 2024, adjusted the tax liability from PLN 646,605 to PLN 645,212 while maintaining an additional penalty of PLN 113,320 for unreported income. The Company appealed to the Provincial Administrative Court in Łódź, alleging substantive and procedural errors, including improper application of transfer pricing rules and unjustified rejection of cost documentation.
The court upheld the Director’s decision, finding that the authorities had adequately examined the evidence and correctly applied tax regulations. The court noted the Company’s failure to substantiate certain expenses and found that the transfer pricing analysis conducted by the tax authorities was consistent with OECD guidelines. However, the court acknowledged partial merit in the Company’s arguments, specifically in the potential recognition of certain costs if properly documented. The judgment underscores the importance of meticulous documentation and adherence to transfer pricing rules for MNEs.
