Hidden dividend risk should be assessed together with related-party transactions and transfer pricing. The key question is whether the company would pay the same price, on the same terms, to an independent party and whether it has evidence of economic benefit.
What is hidden dividend risk?
Hidden dividend risk exists when a payment to a shareholder or related party is presented as a cost but economically resembles profit distribution. The tax authority may challenge deductibility if the price is not arm's length or the company cannot demonstrate business benefit.
Typical transactions to review
- rent paid to a shareholder or shareholder-owned entity,
- management or advisory fees,
- trademark or know-how charges,
- loans and guarantee fees,
- use of assets previously held by the company or owner.
Numerical example: rent paid to shareholder
| Item | Amount |
|---|---|
| Market rent | PLN 18,000 |
| Rent paid to shareholder | PLN 25,000 |
| Monthly excess | PLN 7,000 |
| Annual excess | PLN 84,000 |
| Potential annual CIT exposure at 19% | PLN 15,960 |
What documentation is needed?
The company should retain the contract, market benchmarking, evidence of service performance, business rationale, approval trail and tax treatment. A one-page agreement and invoice are rarely enough.
Audit and tax authority perspective
The auditor checks related-party identification, disclosure and whether transactions have commercial substance. The tax authority may use KSeF and JPK data to identify recurring shareholder transactions and compare them with transfer-pricing disclosures.
Frequently asked questions
Related-party transactions with shareholders?
JMFC can review shareholder transactions from an audit, accounting and tax-risk perspective before they become a tax audit issue.