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Exit fee is a fee for transferring assets, functions or risks between related entities. It can be understood as remuneration for the transfer of important functions, assets or risks. It is paid during business restructuring, either once or periodically. On 30 January 2025 there has been issued important interpretation of the Director of the Polish National Revenue Information in respect of exit fee and tax consequences.
The extensive analysis of the problem and recommendations related therewith, particularly for clients with international shareholding structure, can be found in detailed article prepared by our lawyers:
The Polish Tax Authority explained the tax consequences of the transaction the result of which was an increase in the applicant’s production capacity, as well as the planned acquisition of further economic benefits in the long term, including an increase in the potential to generate revenues.
The “exit fee” costs incurred by the applicant were aimed at the proper settlement of the transaction, under which the applicant acquired additional production functions in the production segment, thanks to which its production potential increased, thus translating into the possibility of generating increased revenues. The remuneration was incurred in order to, among other things, increase production capacity, further obtain economic benefits in the long term and increase the potential to generate revenues, and consequently – the remuneration in the form of the “exit fee” was incurred by the applicant in order to obtain revenue.
The applicant in the case indicated that the value of the “exit fee” remuneration for the transfer of the production function was determined on the basis of an external analysis prepared by an independent entity, in accordance with generally applied valuation standards. Therefore, it could be considered that the “exit fee” remuneration was consistent with the market price condition specified in Article 11c of the Polish CIT Act.
It was resolved that due to:
– the impossibility of linking the remuneration to specific manufactured products or revenues generated from their sale (or even determining in what exact period(s) the revenue will arise), and
– the impossibility of assigning the remuneration to separately acquired fixed assets constituting the production line taken over from the seller,
the expenditure for the remuneration should be classified as indirect costs related both to generating revenues in the future and the general functioning of the company, including maintaining and securing the source of revenues by increasing the production potential of the applicant.