Date 1 December this year the facilitation of transfer pricing has entered into force, which, given the forthcoming deadline for drawing up documentation and meeting information obligations, may be relevant to many taxpayers.
Simplification Act dated 28 November 2020 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Flat-rate Income Tax Act on certain revenues generated by individuals and certain other laws (Journal of Laws, item 2123), has been published 30 November 2020
The amendment also provides for an extension of the right to benefit from the exemption for so-called domestic transactions
In order to mitigate the effects of the crisis, the Ministry of Finance has decided to introduce solutions concerning:
- simplifying the rules for signing the transfer pricing documentation,
- reduction of obligations when documenting transfer price adjustments,
- the extension of the circle of entities entitled to benefit from the exemption of so-called domestic transactions.
Statement of transfer pricing documentation
first and the main amendment concerns the possibility of signing a statement of the drawing up of local transfer pricing documentation and the marketability of the recorded transactions by:
- a natural person, in the case of a related entity that is a natural person,
- a person authorised by a foreign entrepreneur to represent him in the branch – in the case of a related foreign entrepreneur holding a branch in the territory of the Republic of Poland,
- person entitled to represent — for other related parties
- – Whereas it is still not permissible to make a statement by a proxy.
Let us remind you that, under the provisions in force so far, the statement had to be signed by the entire board of directors. Therefore, the facilitation is particularly important for companies with a multi-stakeholder board consisting of persons from different countries and it is difficult and time-consuming to collect signatures of all board members.
The amendment also concerns statements made in relation to transfer pricing records made for transactions carried out in 2019
Adjustment of transfer prices
The next amendment concerns the absence of an obligation to have a transfer pricing adjustment statement by the related party, if the tax year to which the adjustment relates or the moment of its implementation is attributable to the period during which there was an outbreak or an epidemic in Poland in relation to the COVID-19.
To date, the obligation to confirm the adjustment of transfer prices in the annual tax return for the tax year concerned resulted from the Article 11e CIT Act.
Exemption of so-called domestic transactions
The amendment also provides for an extension of the right to benefit from the exemption for so-called domestic transactions.
National transactions so far in which at least one party showed a tax loss from the source of revenue in which the transaction was settled could not benefit from a documentary exemption.
According to the amendment, even in the event of a loss being incurred by a party to the transaction, the transaction will be able to benefit from a document exemption, provided that the entity showing the tax loss has received a total revenue lower by at least one year.
50% the total revenue obtained in the same period immediately preceding that year.
However, let us remember that this change concerns transactions carried out only in tax years starting after the date 31 December 2019, in which the whole territory of the Republic of Poland was affected by an outbreak or epidemic declared in connection with COVID-19. Therefore, this facilitation can only be applied to the implementation of documentation obligations in the year 2021.