We summarise changes in transfer pricing and discuss those that will come into force in the near future.
1 January 2019
The Act amending the Act on Income Tax on Individuals enters into force, the Act on Corporate Income Tax, the Act - Tax Ordinance and certain other laws amending transfer pricing legislation; the amendments introduced include:
- • the extension of the list of methods for assessing transfer pricing – in cases where it is not possible to use transaction methods and transaction profit methods, another method, most appropriate for the transaction, has been allowed;
- • enable the taxable person to make adjustments to transfer prices by modifying the amount of revenues obtained or the costs incurred to obtain revenue, if certain conditions are met;
- changes in the definition of capital links of entities – the level of the capital commitment threshold is not only understood as having a minimum share in the capital of another entity 25%, but this amount is also applicable to other instruments determining ownership dependency;
- a new way of determining the documentation obligation: local tax documentation shall be drawn up for a transaction the value of which, less the tax on goods and services, exceeds: 10,000,000 PLN (for commodity and financial transactions) or 2,000,000 PLN (for service transactions and other than those mentioned above); Master File group documentation should be submitted by related entities if they belong to a group of connected entities for which consolidated financial statements are drawn up and whose consolidated revenues exceed the amount of the previous financial year 200,000,000 PLN or its equivalent;
- changes in the scope of information and data that should include local documentation and group documentation (Master File);
- change the time limits for drawing up the tax documentation: for local documentation – to the end 9 one month after the end of the tax year, for group documentation — 12 one month after the end of the financial year;
- changes in penalties resulting from non-compliance with the obligation to draw up tax records (e.g. repealing the sanctioning tax rate – 50%);
- transitional provisions of the Act amending the Personal Income Tax Act, the Corporate Income Tax Act, the Act - Tax Ordinance and certain other laws give the possibility for the taxpayer to choose which rules are to apply to transactions carried out In 2018 (i.e. whether the provisions in force in years 2017 – 2018, whether the provisions in force from 2019).
1 January 2019
The following implementing regulations have entered into force:
- • Regulation of the Minister of Finance dated 21 December 2018 on transfer prices for personal income tax;
- • Regulation of the Minister of Finance dated 21 December 2018 on corporate income tax transfer pricing;
- • Regulation of the Minister of Finance dated 21 December 2018 on transfer pricing documentation for personal income tax;
- • Regulation of the Minister of Finance dated 21 December 2018 on corporate tax transfer pricing documentation;
- • Regulation of the Minister of Finance dated 21 December 2018 on transfer pricing information on personal income tax;
- • Regulation of the Minister of Finance dated 21 December 2018 on transfer pricing information on corporate income tax;
- • Regulation of the Minister of Finance dated 21 December 2018 on how and how to eliminate double taxation in the event of the adjustment of the profits of related entities in the field of personal income tax;
- • Regulation of the Minister of Finance dated 21 December 2018 on how and how to eliminate double taxation in the event of the adjustment of corporate income tax profits of related parties.
- 30 April 2019
Part of the provisions of the Act amending the Law on the Exchange of Tax Information with other States and certain other laws entered into force; changes made to reporting by country reporting, including:
- • change the definition of a group of entities;
- • the change in the threshold amount of consolidated revenue, currently being the amounts – 3,250,000,000 PLN and 750,000,000 EUR;
- • the introduction of a calculation method for the abovementioned threshold amount where the financial year covers a period other than 12 months – then the threshold amount of consolidated income is set at 1/12 for each month of the financial year started;
- • new deadline for notification of CBC-P, i.e. 3 months from the end of the financial year of the group of entities.
- 29 November 2019
The provisions of the Double Taxation Dispute Settlement Act and the conclusion of prior price agreements entered into force. With regard to previous price agreements, the above Act introduces the following solutions:
- the provisions concerning the so-called prior price agreements (APA) previously contained in the Act were transferred to the above law Tax Ordinance. The possibility of submitting an application for an APA by a foreign investor planning to invest in Poland was provided;
- the legal basis for implementation by the National Tax Administration – the Programme of Co-operation, i.e. a new form of voluntary cooperation between KAS and taxpayers, based on mutual trust and transparency. The program will be addressed to the largest and reliable companies, i.e. with revenue above 50,000,000 EUR and those whose organisation of internal tax supervision ensures proper implementation of tax obligations (including corporate governance, internal control, audit, risk management). For the companies covered by the scheme, tax issues will be explained on an ongoing basis by the KAS;
- possibility to exclude the limit from Article 15e Corporate Income Tax Act will only take place in so far as a prior price agreement (APA) or tax agreement is concluded. The scope covered by the APA will be extended to the period from the beginning of the year in which the application was submitted – now only the application is made. It will be important to submit a request to 31 December 2019, as only such applications will be subject to transitional provisions which indicate that the exclusion of cost reductions from Article 15e The CIT Act will also cover the year preceding the year of application (now the year of receipt of the decision);
- The verification of the use of the APA is to take place in principle as part of the verification activities carried out by the Head of the KAS (with reservations, inter alia, regarding the possibility of tax checks in case of reasonable suspicions of non-compliance with the APA conditions). Notwithstanding this, the obligation to report annually on the implementation of the agreements obtained is still in force
Author: Michał Zdanowski
Tax consultant At Russell Bedford Poland Graduated from the Faculty of Law and Administration at the University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Studies at the University of Warsaw. During his studies he gained experience in law and tax law firms. Since September 2011 is associated with the law firm Russell Bedford Poland. It specialises in documenting transactions between related parties.