The announced facilitation for taxpayers will unfortunately not enter into force. In the latest version of the draft law on the settlement of disputes concerning double taxation and the conclusion of prior price agreements, there is no information about the simplified APA procedure.
APA, from Advance Price Arrangement, are prior price agreements, i.e. the so-called price fixing in advance.
It is an agreement between the taxpayer and the tax administration, concluded in principle for the future in which first undertakes to apply the adopted method to the covered transactions in return by obtaining a guarantee that its transfer prices will not be contested by the tax authorities.
This agreement also makes it possible to circumvent the limits set out in Article 15e Corporate Income Tax Act on the purchase of intangible services from a related party. The primary objective of these agreements is therefore to prevent disputes between taxpayers and tax authorities concerning the application of transaction prices.
They therefore serve to reduce the tax risk to transactions. They can also eliminate the risk of international double taxation, as the Polish legislation recognises not only unilateral agreements, i.e.
between the taxpayer and the national tax administration, but also bilateral and multilateral, also concluded with the involvement of the tax administrations of foreign countries competent for associated entities.
It is not known what caused that the solutions so expected by taxpayers and tax advisers were omitted. Perhaps this is due to the lack of time to refine them. The directive was adopted in 2017, and work on the new law was not officially undertaken until this year
The draft Act on the resolution of double-taxation disputes and the conclusion of advance pricing agreements is intended to implement Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union (Official Journal of the European Union L (2017), No. 265, p. 1).
The draft would remove provisions concerning, among other matters, the procedure for obtaining APAs from the Tax Ordinance and transfer them to the new act. The initial draft proposed a simplified APA procedure.
The simplification would have reduced the documentary requirements for applications concerning selected types of controlled transactions with a limited risk of tax-base erosion, such as low-value-adding services. Simplified advance pricing agreements were to be unilateral.
The handling of the ordinary APA procedure in its present form causes a lot of problems for taxpayers through a high level of formalisation, high costs, in principle 1% the value of the transaction covered by the agreement, but not less than 5,000 PLN and not more than 200,000 PLN, and – long waiting time, in extreme cases reaching even 18 months. Since the subject matter of the application cannot be transactions which were completed before the date of its submission, and transactions in progress if, on the date of the application, tax proceedings, tax checks, customs and tax checks or proceedings before an administrative court, the waiting period for the decision of the head of the National Tax Administration is often too long for taxpayers to initiate proceedings in the APA case.
Following the announcement of the project, which was to implement the simplified APA procedure, at the beginning 2018 The popularity of these proposals increased significantly, especially as those relating to the ordinary APA procedure were to be converted into a simplified procedure and the facilitations were already to cover expenditure incurred in 2018 What attracted taxpayers was a decisive reduction in its expenditure to around 20,000 PLN, reduction of response time to three months and simplification of the procedure.
It is not known what caused that the solutions so expected by taxpayers and tax advisers were omitted. Perhaps this is due to the lack of time to refine them. The directive was adopted in 2017, and work on the new bill was not officially undertaken until this year.
The introduction of simplifications was not conducive to the numerous concerns raised during the consultation of the draft amendment, which also included other tax changes, including the double taxation dispute resolution procedures.
However, it is not known what should be done in this case with the requests of the operators who submitted them, hoping to introduce a simplified APA procedure soon.
Instead, taxpayers were offered another institutional solution, i.e. a programme of cooperation between the tax and the biggest taxpayers with revenues above 50,000,000 EUR.
After a preliminary audit of the accounts and ensuring full transparency for the National Tax Administration towards taxpayers, for example, the anti-tax avoidance clause would not be applied, it would not be disputed whether the transfer pricing method adopted would be allowed to deduct the total costs of intangible services.
This is an attractive alternative to the APA for taxpayers.