Intragroup guarantees: How to mitigate tax risks

While this strategy may be beneficial from the perspective of enhancing a company’s borrowing capacity, it should first be analysed from the perspective of transfer pricing regulations and taxation of free of charge benefits. This can help mitigate the risk of group companies being exposed to significant tax consequences.

Transfer Pricing Documentation Requirements

Polish tax authorities have consistently taken the view that the provision of an intragroup guarantee, even on a gratuitous basis, falls within the definition of a controlled transaction. Consequently, when providing or receiving such a guarantee, the parties should consider whether the applicable documentation threshold has been exceeded.

Under Polish transfer pricing regulations, the documentation threshold for financial transactions – which includes the provision of guarantees – is PLN 10 million. In other words, as a general rule, only guarantee transactions exceeding PLN 10 million are subject to transfer pricing documentation requirements.

However, the method of determining the value of such transactions, for the purpose of establishing whether any transfer pricing documentation obligations arise, often raises many questions. Under Polish transfer pricing regulations, the value of a guarantee transaction is determined based on the guaranteed amount. However, the actual amount of the guarantee ultimately utilised may not exceed the statutory threshold. It should nevertheless be noted that the Polish tax authorities take the position that the decisive factor is the guaranteed amount specified in the agreement, rather than the amount of the guarantee actually utilised. 

Another frequently encountered issue concerns the determination of the transaction value where more than one entity is jointly and severally liable under a guarantee agreement.

According to information provided in the TPR-C Information Guide issued by the Polish Ministry of Finance (October 2025), for each entity assuming joint and several liability under a guarantee agreement, the transaction value will correspond to the full guaranteed amount.

Example: If the guaranteed amount is EUR 20 million and five guarantors participate in the transaction and are jointly and severally liable, it would be incorrect to divide the guaranteed amount by the number of guarantors when determining the transaction value. The transaction value attributable to each guarantor would here be EUR 20 million and would therefore exceed the documentation threshold applicable to financial transactions.

Free of Charge Guarantees

Where a company provides a guarantee free of charge to a related party, it may be exposed to an adjustment of its taxable income by the tax authority.

According to the Polish CIT Act, if the tax authority determines that, under comparable circumstances, unrelated parties acting in accordance with economic rationality would have entered into a different transaction or performed a different action, the tax authority may, for the purposes of applying the transfer pricing regulations, determine the terms and conditions of the transaction that would have been agreed between unrelated parties and, consequently, adjust the taxpayer’s taxable income.

Accordingly, if the tax authority determines that, had the transaction been entered into on arm’s-length terms, the guarantor would have been entitled to remuneration, the tax authority may increase the guarantor’s taxable income by the amount of such remuneration.

Furthermore, when issuing a decision on a transfer pricing adjustment, the tax authority also applies the provisions of the Polish Tax Ordinance Act concerning an additional tax liability. In such circumstances, the additional tax liability amounts to 10% of the underreported taxable income. However, if the taxpayer has failed to provide the tax authority with transfer pricing documentation, the rate applicable to the additional tax liability increases to 20% of the underreported taxable income.

Free of Charge Mutual Guarantees 

When providing mutual guarantees, particular attention should be paid to the amount of the guarantee received by each company and the amount of the guarantee provided by that company to other group entities. If the amounts of the mutual guarantees are not equivalent and the guarantees are provided free of charge, there may be a tax risk that taxable income will arise from a gratuitous or partially gratuitous benefit.

The Polish Supreme Administrative Court (NSA) noted that providing a guarantee is not economically neutral. As a result of providing a guarantee, the guarantor assumes the risk that the debtor will fail to fulfil its obligations towards the creditor. This risk can be quantified, i.e. assigned a value corresponding to the price that, under normal market conditions, the entity obtaining the security would have to pay to the provider of such security.

The NSA nevertheless pointed out that where obtaining a guarantee entails an obligation to provide a reciprocal and equivalent benefit to the entity providing the guarantee, no income from a gratuitous benefit arises. In order for the benefits to be considered equivalent, the entity receiving the benefit should provide an analogous benefit to the entity from which it receives the benefit. As the NSA stated in the above judgment:

“It should therefore be pointed out that the difference between the amount of the guarantee received and the value of the guarantee provided constitutes income for the Company arising from a partially gratuitous benefit (...).”

Example: Consequently, if Company A provides Company B with a guarantee of EUR 5 million, while Company B provides Company A with a guarantee of EUR 3 million, Company B may recognise income from a partially gratuitous benefit corresponding to the difference between the value of the guarantees provided, i.e. EUR 2 million.

Summary 

In summary, capital groups with at least some entities operating in Poland may take the following steps to minimise tax risk:

• Properly report TPR-C information and, where required, prepare transfer pricing documentation. Please note that the documentation threshold is calculated based on the guarantee amount rather than the amount of the guarantee actually utilised.

• Be aware that providing a guarantee free of charge may expose the guarantor to a transfer pricing adjustment by the tax authorities. This may result in an upward adjustment of taxable income and an obligation to pay additional tax. If the company has failed to prepare the required transfer pricing documentation, the tax rate applicable to the additional tax liability will be doubled.

• Pay attention to whether the guarantee received and the guarantee provided are equivalent in value and terms, where mutual guarantees are provided free of charge, Otherwise, the company receiving the guarantee may be exposed to a tax liability arising from a partially gratuitous benefit.

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Konrad has experience in ongoing tax advisory services to companies operating in the real estate, construction, and IT sectors.