Trademark Transfers & TP: Recharacterization & Licensing

Poland vs. K.P., adjudicated on October 3, 2023, scrutinized the legitimacy of license fee expenses and the application of transfer pricing provisions. On December 2013, K.P., a Polish company (the Parent or Licensee or Taxpayer) engaged in retail sales of computers, peripheral equipment, and software, transferred valuable trademarks (the IP Asset) with its subsidiary (the Subsidiary or Licensor) in exchange for shares (i.e., contribution in kind). Subsequently, the Parent incurred license fees for using these trademarks. In the view of the tax authorities, the Parent reported a lower income than what would have been expected in the absence of ...