COVID-19 has become a global problem not only from a medical point of view but also from an economic point of view. It will certainly be a factor of economic collapse, but it can also lead to an extension of the deadlines set by the relevant rules. This also applies to time limits set by tax law, including those related to transfer pricing.
At this point, the legislator decided to extend only one the time limit for documenting transactions between related parties. Under Article 31z Draft Act amending the Act on Special Solutions for Prevention, Prevention and Combating COVID-19, other infectious diseases and the resulting crisis situations and some other laws, we can read that: “it extends to the day 30 September 2020 time limit for submission of transfer pricing information referred to under Article 23zf(1) Act dated 26 July 1991 on income tax on individuals and Article 11t(1) Act dated 15 February 1992 on corporation tax for entities whose tax year started after the date 31 December 2018, and finished before day 31 December 2019”.
The only thing we can be sure of is that COVID-19 it will even more interfere with our economy and, perhaps, in existing trade patterns between related parties
So far, the deadline for submitting transfer pricing information for 2019 will be compared for all taxpayers by the end of September (now, in accordance with the above mentioned provisions of the Corporate Income Tax Act and the Personal Income Tax Act, they are required to provide transfer pricing information to the end of ninth one month after the end of the tax year).
Optimisticly, it can be assumed that this will be sufficient, but since the extension concerns the deadline for the submission of information, why was it not, by analogy, the deadline for the submission of a declaration of drawing up local tax documentation (and, therefore, the tax documentation itself)?
What if the September deadline is not sufficient, will it be further extended?
Time limits, however COVID-19 may also affect transactions between related parties. It is possible to imagine a scenario in which the price of a particular transaction concluded some time ago between related parties (at a proven market level) must be corrected because one the entities are doing worse for the cause of the virus. Would such circumstances be sufficient justification for tax authorities to change prices?
Or in multilateral transactions – some of the entities for reasons arising COVID-19 does not participate in the transaction (assuming, as previously, that the transaction was concluded some time ago, the price is at market level).
In the above example, there is not only a change in the value of the transaction, but also a change in the function of the individual entities that assume the functions performed in the transaction by other entities that are absent at the moment.
How detailed will the entities have to document the above-mentioned changes COVID-19 For future tax checks?
At this point, in the absence of a view of the imminent end of the pandemic, it is difficult to give a clear answer to these questions. The only thing we can be sure of is that COVID-19 it will even more interfere in our economy and, perhaps, in existing trade patterns between related parties.
Author: Michał Zdanowski, tax consultant At Russell Bedford Poland.
Graduated from the Faculty of Law and Administration of the University of Warsaw, graduate of the Postgraduate Tax and Tax Study of the University of Warsaw. During his studies he gained experience in law and tax law firms. Since September 2013 is associated with the law firm Russell Bedford Poland. It specialises in documenting transactions between related parties.