Consortium agreements and transfer pricing

Consortium agreements are a popular form of cooperation between entrepreneurs, enabling the implementation of joint undertakings, in particular in the area of public procurement. Although a consortium agreement is an unnamed contract and has not been comprehensively regulated by law, its admissibility derives from the civil-law principle of freedom of contract set out in Article 353¹ of the Act of 23 April 1964 – the Civil Code (consolidated text: Journal of Laws of 2025, item 1071):

“Parties entering into a contract may arrange their legal relationship at their discretion, provided that its content or purpose does not contravene the nature of the relationship, the law, or the principles of social coexistence.”

The parties to such an agreement retain separate legal and tax status, and their cooperation is based on a common economic objective and joint and several liability towards the contracting authority. Increasingly, however, questions arise in practice as to the tax consequences of such arrangements, particularly in the context of obligations arising from transfer pricing regulations.

This article attempts to answer questions concerning documentation thresholds, the method of determining the value of a controlled transaction, and the possibility of applying exemptions from the obligation to prepare transfer pricing documentation.

On 27 January 2025, the Director of the National Tax Information (Krajowa Informacja Skarbowa, KIS) issued an individual tax ruling (ref. 0111-KDIB1-1.4010.623.2024.1.MF) addressing documentation obligations in the context of a consortium agreement concluded between related parties. The facts concerned two companies – N sp. z o.o. (Leader) and O sp. z o.o. (Partner) – Polish tax residents and related entities within the meaning of Article 11a of the CIT Act. The purpose of the arrangement was to jointly bid for a public contract and perform it. The parties specified the scope of their services and liabilities, and the Leader was obliged to represent the consortium and handle settlements with the contracting authority, transferring to the Partner the remuneration due to it without adding any margin.

The tax authority concluded that a consortium agreement concluded between related parties constitutes a controlled transaction within the meaning of transfer pricing regulations. Although a consortium is not a goods, services, or financial transaction, it meets the definition of an economic transaction whose terms may be shaped as a result of existing relationships. Under Article 11k of the CIT Act, transactions other than goods, services, and financial transactions are subject to documentation requirements if their value exceeds PLN 2 million, which – in the authority’s view – also applies to consortium arrangements.

The Director of KIS did not share the applicants’ position that the value of the controlled transaction should be determined solely based on the Leader’s remuneration. Pursuant to Article 11l(2) of the CIT Act, the value of a controlled transaction should be determined on the basis of accounting documents such as invoices or contracts, and in their absence – on the basis of actual payments made. This means that when determining the transaction value, all financial flows between related parties within the consortium should be taken into account, including transferred remuneration, settlements of shared costs, and any remuneration for administrative activities.

In response to the question of whether the exemption from documentation obligations provided for in Article 11n(3) of the CIT Act could apply, the authority indicated that this provision does not apply to the transaction at issue. This exemption concerns only transactions that do not affect the level of revenues or tax-deductible costs, which is not the case in a consortium, where the parties’ performances are reciprocal and generate tax effects on both sides.

As regards whether income arises for the Partner or the Leader upon the transfer of remuneration, the Director of KIS concluded that this activity does not give rise to an obligation to recognise taxable income within the meaning of Article 12(1)(2) of the CIT Act. The transfer of funds is made in performance of contractual obligations and does not result in the creation of a gratuitous benefit for either party. The Partner receives remuneration as payment for the performed part of the contract, while the Leader, acting as the entity settling the consortium’s accounts, does not obtain any economic benefit.

The authority did not, however, address the arm’s-length nature of the remuneration charged by the Leader for administrative activities, indicating that this issue – as it concerns the assessment of arm’s-length conditions – cannot be the subject of an individual tax ruling under Article 14b § 2a of the Tax Ordinance.

In light of the above, participation in a consortium does not release related parties from documentation obligations arising under transfer pricing regulations. Regardless of the fact that a consortium agreement is not a classic goods, services, or financial transaction, its implementation may trigger an obligation to prepare local transfer pricing documentation if the total value of settlements exceeds the statutory threshold. Entrepreneurs should therefore monitor all internal settlements within the consortium in order to correctly determine the value of controlled transactions and mitigate tax risk.

An important complement to the above considerations is the individual tax ruling issued by the Director of KIS on 14 November 2025 (ref. 0111-KDIB1-3.4010.539.2025.MBD), concerning company X sp. z o.o., acting as the leader of a consortium in the forestry services sector. The other consortium members were two entities related by persons – sole proprietorships owned by the company’s shareholders. The consortium was formed to jointly participate in open tenders organised by the State Forests (Lasy Państwowe).

Within the cooperation, the leader issued invoices to the contracting authority, while the other consortium members invoiced company X for the work performed, with prices resulting directly from the bill of quantities forming an integral part of the tender agreement. The total value of settlements between related parties exceeded PLN 2 million per year. The applicant argued that in such a situation, no documentation obligation arises because the prices were determined in an open tender procedure.

The Director of KIS did not agree. He indicated that the exemption under Article 11n(6) of the CIT Act applies only to the relationship between the contractor and the contracting authority, and does not cover internal settlements between consortium members. A consortium agreement is not concluded under the Public Procurement Law but constitutes a separate civil-law relationship between related parties.

Consequently, the authority found that services provided by consortium members to the leader constitute controlled service transactions which, once the PLN 2 million threshold is exceeded, are subject to the obligation to prepare local transfer pricing documentation and to reporting in the TPR information return.

This ruling confirms a restrictive approach by tax authorities to the application of documentation exemptions in the case of consortia. Even if the undertaking is implemented entirely as part of a public procurement contract and the prices have been “market-verified” in the tender procedure, internal settlements between related consortium members remain separate controlled transactions. They are subject to the full transfer pricing regime, including the obligation to demonstrate their arm’s-length nature in local transfer pricing documentation.

As a result, it should be assumed that a consortium does not constitute a “neutral zone” from a transfer pricing perspective. On the contrary, consortium structures—especially those formed by entities related by capital or personal links—should be treated as an area of increased tax risk, requiring particular diligence in identifying controlled transactions, determining their value, and documenting the arm’s-length nature of the cooperation terms.

Therefore, related parties participating in consortia should perform a reliable classification of all internal settlements, identifying elements affecting revenues and costs, and ensuring that the terms of cooperation comply with the arm’s-length principle. Timely preparation of documentation and correct TPR reporting is not only a fulfilment of statutory obligations, but also an important tool for mitigating tax risk in the event of a tax audit.

If you are a party to a consortium agreement and need support in properly documenting the transactions, please contact us.