In 2020 taxable persons carrying out transactions with related parties first once they submitted a comprehensive report on these transactions, including information on the types of transactions, the values used by taxpayers in the pricing methods. Most taxpayers have received the introduction of this new obligation as quite burdensome. At the end of June 2021 The Ministry of Finance has published preliminary statistics, which give a picture of what data has been sent from taxpayers to ministries.
The data provided show that during the year 2019 submitted 16,188 transfer pricing information for legal persons (TPR-C), of which 4.8% the documents submitted had to be corrected (770 corrections made by taxpayers). It should be noted that the number of forms that need to be improved over time may be increased and the reasons for possible growth should be sought in direct action of the authorities (number of checks and checking activities are likely to increase), as well as in the process of developing practices through the publication of explanations from the Transfer Pricing Forum.
The strongest position of financial transactions
In the total number of transactions reported in TPR-C, the largest share was financial transactions (more than 40%). Production transactions were less frequently reported (11%), distribution transactions (6%) and transactions related to the provision and use of intellectual value (2%).
These statistics show a trend in financial transactions, namely that the predominance of such transactions is expected to make them the main control facility of tax authorities and thus constitute the main criterion for ranking into risk groups.
Safe harpour in report
Among transactions reported in 2019, transactions benefiting from simplification of safe harpour have a small share including:
low value services in number 550 the transactions which have become permanent 1.2% total reported transactions;
Financial transactions in number 158, which is less than 1% (0.3%) total reported transactions.
Financial transactions benefiting from simplification represent a surprisingly low percentage (0.3%) all reported transactions. This is probably due to taxpayers' reluctance to benefit from simplification, which requires a fairly restrictive conditions and requires them to report on MDRs.
The transactions with the highest total value (except domestic transactions) have been demonstrated in 2019 with Switzerland (5,513,698.14), Germany (2,952,278.92) and the Netherlands (2,535,351.82). For Switzerland and the Netherlands, financial transactions were dominant. In the case of Germany, the transactions spread evenly between financial and other transactions. Among the countries with which controlled transactions of the highest total value have been demonstrated were:
- France (1,882,963.34),
- Italy (1,807,883.75),
- United Kingdom (1,803,743),
- USA (1,450,307.14),
- Czech Republic (1,367,576.33),
Spain (1,312,209.45).
Transactions with tax havens
The Ministry also reported the total value of reported transactions with tax havens, which amounted to 140,218,020,000 PLN. Most of them are transactions with entities in Panama (70,215,400,000 PLN) and Hong Kong (50,757,200,000 PLN), which together include 86.27% Paradise transactions. The value of the above mentioned transactions is some kind of proof that the transfer of Polish capital to countries considered tax havens, despite the efforts made by the Ministry, is still a real problem.
Reporting obligations for the MF and the taxpayer
The action taken by the Ministry of Finance continues to aim to ensure that transfer pricing information is transmitted increasingly efficiently, as demonstrated by the changes proposed in "Polish Deal”. The modification considered would concern simplification of the introduction of a single electronic document integrating documentation and TPR information, which would ultimately facilitate the efficiency of verification of the correctness of the data shown in the local transfer pricing documentation.
From the point of view of the MF, changes in reporting obligations have been made on the basis of data on 2019, have a positive effect, particularly for transfer pricing control purposes. Comfortable and fast access to information can facilitate, among others, risk assessment and the selection of control entities.
From the point of view of taxpayers, reporting obligations are increasingly burdensome, and the level of detail and causistic nature of TPR forms in many cases does not adhere to actual events that occur in groups of affiliated entities.
For this reason, in many cases it is necessary to prepare written additional information which is necessary to present the actual course of transactions and processes with taxpayers.
However, given how useful this tool is from the point of view of the MF and the KAS, it is expected that the need for a detailed transfer pricing report will already be permanently included in the catalogue of annual reporting obligations for taxpayers.