Transfer pricing – proposed changes to tax haven transactions

The rules on indirect tax haven transactions have significantly expanded as of 2021. Due to their huge administrative burden, the legislator proposes their amendment.

What is also important is that taxpayers will have the possibility to apply the new regime to transactions and in consequence, Transfer Pricing obligations, for 2021. According to our initial analysis complying with the new rules may result in less effort than fulfilling TP obligations under the 2021 Transfer Pricing regime.

Below is a summary of the most important amendments:

  • Increase of documentary thresholds
    • for direct tax haven transactions – from PLN 100k to PLN 200k;
    • for indirect tax haven goods and financial transactions – from PLN 500k to PLN 2,5M.

The thresholds for other types of transactions are about to remain unchanged.

  • Limitation of obligations towards domestic transactions

Due to regular lack of access to required information, the identification of beneficial owner or settlements with tax haven may be very burdensome for tax emitter, which is why the draft proposes in case of a domestic transaction whereby a paying entity and a recipient are subject to domestic jurisdiction, the documentation obligation for indirect tax haven transactions will only be incumbent on the recipient. That is because this entity has better knowledge of whether or not it is in fact, BO of the given receivable.

Please note that this simplification does not apply to receivables paid to foreign entities.

  • Abolishing the presumption of residence of the beneficial owner in a tax haven

The provisions on the documentation of indirect tax haven transactions in the existing wording provide for a presumption of residency of the beneficial owner in a tax haven if the other party to the transaction settles with the tax haven entity during the given year.

The draft proposes to remove a presumption and exclude the TP obligation if the recipient of the receivable arising from a controlled transaction or a transaction other than a controlled transaction does not make any settlements in the tax year or financial year related to the receivable received or is not related to a tax haven entity.

Meeting the conditions for the exemption relating to settlements or relationships with the tax haven entity will be recognized, inter alia, if they are confirmed with a statement issue recipient of receivable.

It should be emphasised that the final shape of the proposed legislation is still likely to change.

Contact our tax experts:

Katarzyna Chajęcka
Tax Manager

Dominik Piłat
Tax Consultant

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