Ruling description

As the WSA in Wrocław ruled in its decision of January 15, 2014 (case ref. I SA/Wr 1977/13), with respect to a donation made by a member of a PGK in favor of another company that belongs to the same group, the donating party may include in its tax-deductible costs the value of the expenditures actually incurred in respect of the donated object only.

The case related to an insurance company that created  a PGK together with its subsidiary. In view of the fact that both companies planned to run business operations using the same trademark, the insurance company intended to make a donation in favor of its subsidiary in the form of the relevant part of the rights in the said trademark. In these circumstances, the insurance company filed for a tax ruling in order to confirm that the subsidiary will recognize revenues at the market value of the received rights, while the insurance company will recognize tax-deductible costs at the same amount. Tax authorities shared the view of the taxpayer with respect to the issue of assessing the revenues of the subsidiary, but with respect to the insurance company – they found that it was only the value of the expenditures actually incurred by the insurance company in respect of the object of the donation, which had not been earlier taken into account for tax purposes, that could be recognized as the tax-deductible costs. The court shared the view expressed by the tax authorities.

In the view of the WSA, the legislator clearly and exhaustively specified what tax benefits may be expected by companies making up PGKs. However, they do not include the rule directly admitting recognition of the market value of the donated object as the tax-deductible costs. The court also stressed that neither the specific provisions in force nor the general structure of the tax regime applicable to PGKs support the view on adoption of the rule of symmetrical recognition of revenues and tax- deductible costs in connection with the transfers made between members of a PGK. Hence, there is no general rule either according to which a donation made between members of a PGK should be neutral in view of its inclusion in the tax-deductible costs of the donating party of the same value that the entity to which the donation was made recognizes as taxable revenues.

Additionally, the court noted that, even though the tax law (Art. 16 sec. 1 item 14 of the CIT Act) does in fact render it possible, as an exception to the general rules precluding deduction of donations, to include the value of the donations within the PGK in the tax-deductible costs of the donating party, none of its special provisions specifies precisely the manner of determination of the value of these costs. Moreover, none of the special provisions relied on by the taxpayer – neither Art. 18 sec. 1b, not Art. 18 sec. 1k of the CIT Act – refers directly to this issue. In the view of the court, the said provisions, which enable the determination of the tax-deductible costs  with respect to an in-kind donation at the amount of the market value of its object, relate solely to donations for the purposes set out in the Act on Public Benefits and Voluntary Service, i.e. they do not apply to the PGK.

As a result, if none of the general rules relating to PGKs or any of the special provisions justifies the determination of the value of the donation within a PGK at the market level, then – in the view of the court – its value, for the purpose of specifying the tax-deductible costs, should – pursuant to the general rule of the tax law – be determined at the amount of the costs actually incurred to make or purchase the donated object that were not earlier included under the tax-deductible costs for other reasons.


In the business practice, it has been generally accepted that a donation within a PGK should be totally neutral,  as the beneficiary and the benefactor recognize, respectively, the revenue subject to taxation and the tax-deductible costs at the identical value, and their tax result is subject to consolidation due to the functioning of the group. This stance was based, particularly in the earlier period, in the practice of certain tax authorities that deduced the neutrality of donations within a PGK from, inter alia, the general assumptions of the PGK tax regime (see, e.g. the tax ruling of the Director of Tax Chamber in Bydgoszcz dated January 17, 2013, case ref. ITPB3/423-649/12/DK or the tax ruling of the Director of Tax Chamber in Warsaw dated June 13, 2013, case ref. IPPB5/423-272/12-4/AM). These arguments were also supported by certain courts (see, e.g. the decision of  the WSA in Gdańsk dated April 9, 2013, case ref. I SA/Gd 258/13). Donations of this type also constituted the key factor in various restructuring transactions carried out using a PGK, including those involving the sale of assets by a subsidiary, donation of the amounts obtained in this respect in favor of the dominating company and the sale by that company of the shares in the subsidiary. Certain transactions required – as is the case in the matter under analysis – that a donation of the rights in trademarks be made within the PGK.

Nevertheless, in view of the existing doubts, it was recommended in our practice to obtain tax rulings confirming the tax neutrality of donations made between members of a PGK before this type of transaction is carried out. A conservative attitude to the issue of the tax-deductible costs with respect to donations within a PGK was also justified by tax rulings unfavorable to taxpayers that have recently been issued (see, e.g. tax ruling of the Director of Tax Chamber in Poznań dated July 2, 2013, case ref. ILPB3/423-154/13-7/AO).

The aforementioned decision of the WSA in Wrocław confirms the need for a careful analysis of the risk related to donations within a PGK. The implementation of such actions at present would definitely require a prior tax ruling that, in light of the aforementioned decision, may turn out to be adverse. Moreover, in the event of a potential complaint to the court, due to the lack of an established direction that the WSA decisions are following and the prevailing decisions of the NSA in this respect, it is hardly possible to unequivocally envisage the result of a dispute with the tax authorities. Nevertheless, the decision of the WSA in Wrocław still does not exclude the possibility of carrying out restructuring operations based on the PGK  if the same are appropriately planned. Moreover, neither does the said decision exclude the attractiveness of PGKs, which have not been covered by the recently introduced changes in the tax law that are aimed at limiting the possibility of restructurings with favorable tax implications.