The Polish Order introduces changes to transfer pricing

The draft Polish Governance Act introduces further changes to transfer pricing (TP):

  • New penal fiscal sanctions
    • failure to prepare local transfer pricing documentation, preparation of transfer pricing documentation not in line with actual background, failure to submit information on transfer pricing (so-called TPR form), or submitting information that does not correspond with the local transfer pricing documentation or with the actual background will be subject to fine up to 720 daily rates (maximum PLN 27M);
    • late preparation of local transfer pricing documentation and late submission of transfer pricing information will be subject to a fine up to 240 daily rates (maximum PLN 9M);
    • tax liability will rest on persons dealing with economic matters, in particular with financial matters of the taxpayer, e.g. members of the management board, chief accountants, persons designated by these persons to fulfill financial / tax function;
  • Definition of related parties
    • the concept of a company without legal personality has been replaced by the concept of a company that is not a legal person, defined in the PIT and CIT Acts;
    • replacing the word “partners” in the plural by “partner” (of a partnership) in the singular means that parties are related if there is a connection between the partnership and each of the partners separately;
    • introducing related parties consequences, regardless of the numbers of shares, between joint-stock partnership and a limited partnership and general partner;
    • in a situation where a share in the profits of a company would not exceed the statutory threshold, and at the same time the share in the loss of the would be set at a level exceeding the threshold of 25%, the condition of exerting significant impact would be satisfied;
  • Local transfer pricing documentation
    • extending the deadlines for preparation of local TP documentation until the end of the 10th month after the end of the given tax year;
    • clarifying the method of determining the value of a controlled transaction in the case of a deposit agreement, insurance contracts, or reinsurance contracts, as well as transactions involving the conclusion of a company agreement that is not a legal person;
    • exemption from the preparation of local documentation of related transactions between foreign establishments located in Poland, whose parent companies are related entities, as well as between a foreign establishment of a non-resident related entity located in Poland and a related entity being tax resident in Poland, provided that all revenues and tax-deductible costs resulting from the controlled transaction are settled for tax purposes in Poland;
    • exemptions from the obligation to prepare local transfer pricing documentation for controlled transactions covered by the safe harbor mechanism for loans, credits, bonds, and transactions related to so-called clean re-invoicing;
  • Statement on the preparation of transfer pricing documentation
    • liquidation of statement on preparation of transfer pricing documentation as a separate document and transferring it, after modifications, to the transfer pricing information – TPR-C form;
  • Information on transfer pricing
    • extending the deadline for submitting information on transfer pricing (TPR form) by the end of the 11th month after the end of the tax year of the entity (related and other than related in the scope of transactions other than controlled for the purposes of transactions with tax havens);
    • exclusion of the possibility of signing information by a proxy, with exception of one holding a procuration acting in accordance with the principles of representation and proxy who is an attorney, legal advisor, tax advisor, or statutory auditor;
    • resignation from the obligation to appoint a partner of the company who is not a legal person, who is obliged to submit information on transfer prices for the company;
  • Transfer pricing adjustments
    • confirmation of the possibility of making transfer pricing adjustment “in minus” also in a situation where the taxpayer received an accounting document from a related entity confirming that the related entity has made a transfer pricing adjustment;
  • Safe harbor mechanism for financial transactions
    • the tax year is to be the period in which the condition of the possibility of using the safe harbor institution is examined;
    • each time the loan agreement is changed, the agreement of (loan or bond should be in accordance with the terms of the financial safe harbor in terms of interest;
    • checking compliance with the safe harbor conditions at each change of the loan agreement;
  • A simplified form of documentation
    • local documentation of transfer pricing may not include a benchmarking or compliance analysis, apart from the existing facilitation, also in the case of controlled transactions concluded by related entities that are micro or small entrepreneurs and transactions other than controlled transactions concluded with the so-called tax havens (direct transactions) or in which the beneficial owner of the contractor is a resident of the tax havens (indirect transactions), subject to the documentation obligation; these new features apply to documentation prepared for the tax year starting after 1 January 2021;
  • Extension of the deadline for submitting transfer pricing documentation at the request of the tax authority
    • extension of the deadline from 7 to 14 days for the submission of local transfer pricing documentation by the taxpayer at the request of the tax authority;
    • introduction of the tax authority’s right to request the taxpayer (other than a microenterprise) to prepare and submit local transfer pricing documentation within 30 days in relation to indicated controlled transactions, for which the taxpayer was exempt from the documentation obligation due to the use of the safe harbor financial mechanism, in case that the tax authority indicates the circumstances proving the likelihood of lowering the value of the controlled transaction or failure to meet the conditions for using the mechanism.

Piotr Szeliga
Tax Manager, Tax Adviser, Attorney-at-law

Łukasz Komorowski
Senior Tax Consultant

Agata Bienia
Tax Consultant

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