New transfer pricing obligations for transactions where the beneficial owner is located in a tax haven

In 2022, for the first time, taxpayers and companies that are not legal persons will face the obligation, introduced as of 1 January 2021, to prepare transfer pricing documentation if the beneficial owner in a transaction is an entity with its place of residence, registered office or management in a country or territory applying harmful tax competition (so-called tax haven). Notably, this obligation applies not only to transactions with related entities but to all the transactions conducted by the entity, so also to transactions with unrelated entities.

Earlier regulations provided for the need to document direct transactions with entities from tax havens, whereas changes introduced in the wording of Article 11o of the CIT Act from 2021 also introduced this obligation for such indirect transactions. Currently, when examining transfer pricing obligations for transactions with entities from tax havens, attention, therefore, should be paid not only to whether we directly carry out transactions with entities from tax havens as our counterparties, but also indirectly – whether the tax haven entity is not the beneficial owner of the payment made by us to our counterparty.

The CIT Act provides for a presumption that the beneficial owner in a transaction is a tax haven entity if our counterparty has settled accounts with a tax haven entity in a given year.

Simultaneously taxpayers and companies which are not legal persons are required to exercise due diligence in determining whether the beneficial owner in the transaction is the tax haven entity.

All cost transactions of which the beneficial owner is an entity from a tax haven with a value exceeding PLN 500,000.00 (materiality threshold) are subject to mandatory documentation.

To avoid such an eventuality, one may obtain information from his counterparties, e.g. in the form of issued statements, that:

  • the entity from the tax haven is not the beneficial owner of the transaction or
  • they have not made settlements with entities from tax havens in a given tax year.

Please note that at the moment there is no information about the extension of the deadlines for the preparation of transfer pricing documentation, thus it may be assumed that the transfer pricing documentation for 2021 should be prepared earlier than for 2020 – before the end of the 9th month after the end of the tax year.

Therefore, we encourage you to verify your settlements with counterparties for 2021 now, in order to identify the occurrence of a possible obligation for indirect tax haven transactions and the possibility of obtaining statements from counterparties.

If you would like to discuss details, please contact us:

Katarzyna Chajęcka
Tax Manager

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