Taxes and Transfer Pricing
In the standard trade model, the seller is a European company (in our case a Polish one) and a hybrid one (an American or other foreign entity). In such a model, transfer prices are important, at which the Polish entity purchases goods for sale in the online store. Pursuant to the Double Taxation Avoidance Agreement between Poland and the United States, connections between Polish and American entities are determined not only by adopting the capital criterion (i.e., based on the share of one company in the capital of the other) but also on the basis of more sophisticated criteria. To determine that there is an obligation to document and settle transfer prices in transactions between a Polish entity and an American entity, only a factual relationship may lead, e.g., if – and we assume this – the American entity will be the basic supplier of the Polish entity.
When assuming that profits will be transferred from a Polish company to an American company, the high rate of dividend tax in capital companies should be taken into account. In the case of a holding company (an option with a capital connection between companies), 100% exemption from this tax is possible, but the basic condition is that the entity to which the profits are transferred is based in the European Union or European Economic Area. It is therefore worth considering the possibility of linking the profit of a Polish company with another European entity.
INCOTERMS – Which Clause is Best for a Foreign Seller
If the parties implement INCOTERMS rules into the contract, then in the case of a transport contract, for example from China to Poland, it is worth paying attention not only to general clauses, but above all to maritime clauses. Below are the most important clauses regarding risk liability and costs.
Both in relation to sea transport and combined transport (using several types of transport), the INCOTERMS rule is that the risk is transferred to the buyer upon delivery of the goods to the carrier (Free Carrier [FCA] clause). Free Alongside Ship (FAS) and Free on Board (FOB) clauses apply specifically to sea transport. The FAS clause assumes that the seller is obliged to place the sold goods around the side of the ship on which the transport will take place. The FOB clause assumes that the risk of loss of the goods passes to the buyer only when loaded onto the ship, while the buyer is responsible for the selection of the carrier, insurance costs, and the risk of loss of the goods after they are loaded onto the ship.
Similarly, the settlement of costs will largely depend on the negotiating position of the parties. In this case, INCOTERMS offer two general clauses – Carriage Paid To (CPT) and Carriage and Insurance Paid to (CIP) – and two maritime clauses – Cost and Freight (CFR) and Cost, Insurance and Freight (CIF). When the CPT clause is incorporated into the contract, the seller bears the transport costs, but does not bear the insurance costs.
Seller’s Obligations to the European Consumer; The Issue of the Pricing Algorithm
The most important areas of European consumer law that may potentially be of interest to entities selling in the E.U. are the issues of its obligations at the pre-contractual stage, at the stage of concluding a contract with the consumer, and when the consumer exercises the rights granted by the Directives. Taking into account that, in the basic case, sales will be conducted via the internet, regulations regarding distance sales within an organized sales system will be crucial for the entrepreneur.
At the stage of pre-contractual obligations, it is necessary to provide the consumer with full information regarding the ordered goods and their price. The entrepreneur should also provide contingent costs that do not have to, but may, be charged to the consumer purchasing the good or service. If the price has been individually adjusted to the consumer based on a decision-making algorithm, the consumer should also be informed about it.
When it comes to contractual obligations, it should be emphasized that online sales have detailed regulations in this respect in Art. 8 of Directive 2011/83/EU. These include: the obligation to inform the consumer about the need to pay for the ordered goods and the accepted methods of payment, and the obligation to provide the consumer with information about the concluded contract on a durable medium (e.g., email is commonly recognized as such).
There also applies the entrepreneur’s information obligation in the event the consumer withdraws from the contract, which is a key right under E.U. consumer regulations. For 14 days from the delivery of the goods (and not from their sale), the consumer may withdraw from the contract without giving a reason. The Directive also allows Member States to extend this period to 30 days in their national regulations.
Liability for Goods Toward the Consumer
In terms of liability for goods toward consumers, Directive 2019/771 forms the basis of European regulations. The basic issue under the Directive is the issue of assessing the conformity of the goods with the contract. According to the regulations, the entrepreneur is liable for defects in the goods existing at the time of delivery of the goods and revealed within two years of their delivery, although Member States may extend this period (the Polish legislator has not decided on this).
As can be seen, online trade from retailer to consumer in the European Union with goods imported, for example, from Asia, is an interdisciplinary problem. Maintaining a balance between the legality and profitability of a commercial transaction is a complex issue and depends on the appropriate creation of the legal status of the seller.
