The hidden tax cost of group guarantees

Documentation thresholds

Polish tax authorities generally consider the provision of an intragroup guarantee, including a gratuitous guarantee, to be a controlled transaction. The documentation threshold for financial transactions, including guarantees, is PLN 10 million.

For this purpose, the transaction value is generally determined by reference to the guaranteed amount, rather than the amount actually utilised. The tax authorities therefore consider the amount specified in the guarantee agreement to be decisive, even if the guarantee is ultimately only partially used.

Special attention is also required where several entities are jointly and severally liable under a guarantee. According to the Polish Ministry of Finance’s October 2025 TPR-C Information Guide, the transaction value for each guarantor corresponds to the full guaranteed amount.

Example: If five guarantors are jointly and severally liable for a EUR 20 million guarantee, the transaction value for each guarantor is EUR 20 million, rather than EUR 4 million.

Free guarantees

A company providing a guarantee free of charge to a related party may face a transfer pricing adjustment. If the tax authority determines that independent parties acting on an arm’s-length basis would have agreed on remuneration, it may increase the guarantor’s taxable income by the amount of such remuneration.

A transfer pricing adjustment may also result in an additional tax liability of 10% of the underreported income. Where the taxpayer fails to provide required transfer pricing documentation, this rate may increase to 20%.

Mutual guarantees

Particular attention should be paid to free-of-charge mutual guarantees. If the value of the guarantee received differs from the value of the guarantee provided, the difference may constitute income from a partially gratuitous benefit.

The Polish Supreme Administrative Court noted that providing a guarantee is not economically neutral, as the guarantor assumes the risk of the debtor’s default. However, where the guarantee received constitutes an equivalent reciprocal benefit, no gratuitous benefit should arise.

Example: If Company A guarantees EUR 5 million of Company B’s obligations, while Company B guarantees EUR 3 million of Company A’s obligations, Company B may recognise income corresponding to the EUR 2 million difference.

Conclusion

To mitigate tax risks, groups with entities operating in Poland should:

• Properly report guarantees in TPR-C and prepare transfer pricing documentation where required, taking into account the guaranteed amount rather than the amount actually utilised.

• Assess whether a free-of-charge guarantee should be remunerated on arm’s-length terms, and consider the potential consequences of a transfer pricing adjustment.

• For mutual guarantees, verify that the guarantees provided and received are equivalent in value and terms to avoid potential taxation of a partially gratuitous benefit.

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Konrad Gańczarczyk is experienced in ongoing tax advisory services to companies operating in the real estate, construction, and IT sectors.