Below we will present the most important changes in transfer prices from 1 January 2022 Their entry into force from the beginning 2022 means that the whole year 2021 document and report on “old” rules.
Polish Deal, who entered into force already 1 January 2022, brought significant changes to the transfer pricing rules. Its amendments are mostly beneficial for taxpayers (e.g. extended deadlines for drawing up and submitting documentation, a larger scope of exclusions from the documentation obligation and new cases excluding the need for benchmarking or conformity analysis), but some of the changes may complicate the preparation of documentation or hinder the proper identification of obligations.
Concept of tax year, investment agreement
The concept of a tax year is now a uniform term used to designate the reference period in transfer pricing legislation (instead of the current term of the financial year).
The statutory definition of the tax year is defined under Article 11 Act Tax Ordinance according to which the tax year is a calendar year, unless the tax law provides otherwise. According to Article 3(1)(9) dd.
1 Act on 29 September 1994 the accounting year is the calendar year or other period 12 subsequent complete calendar months, also applicable for tax purposes. Therefore, the concept of a tax year refers to the provisions of tax law and the concept of a financial year refers to the provisions of balance sheet law.
The concept of the tax year was introduced because the transfer pricing rules also apply to non-taxable entities PIT and CIT.
The term ‘investment agreement’ is another new definition that has been included under Article 20zs section 1 Tax Ordinance. This concept did not work in the current legal order, but the essence of its introduction is to enable taxpayers conducting investments to determine the effects of their activities even before it started.
The conclusion of such an agreement in the form of an agreement between the tax authorities and the taxpayer (investor) is to ensure protection of the tax consequences of the activity. The subject matter of the agreement will be planned/implemented investments in the territory of Poland, with a value of at least 100,000,000 PLN.
Changes in links and non-legal persons
The CIT Act introduces a new concept of ‘a company without legal personality’ in place of the existing concept of ‘a company without legal person’ (Article 11a(1)(4) point (c) CIT Act, respectively Article 23m(1)(4) point (c) PIT Act).
The changes introduced are intended to organise the rules on the formation of links between the partners and between the company and the partner. The link arises between such a company and each of the partners separately but not among the partners.
In the case of public and partnership companies, such a relationship is applicable to each of the shareholders, while in the case of limited and limited-activity companies, the relationship arises between the associate and the company.
The possible link between the limited partnership and the company should be examined on the basis of a condition of significant impact. It was also clarified that the condition of having a significant impact would also be met in the event of participation in a company's loss exceeding 25% (similar to profit participation).
Transfer price adjustments
The Amending Act also amends the rules for documenting the adjustment of transfer prices according to which it was allowed to hold at the time of the correction: a statement by a related entity or an accounting proof. Until the end of December 2021 the condition allowing an in-minor correction of the taxable person was to have a statement from the related party and to demonstrate that the related entity included a correction of transfer prices in the annual tax return for the tax year to which the correction relates.
In the new legislation, these requirements have been relaxed: the accounting evidence is any document which provides a basis for making a record in the accounts. The need to confirm the adjustment of transfer prices in the annual tax return for the tax year concerned by the adjustment was also removed.
Safe harpour – low value added services
It is certainly a novelty for taxpayers to change the preferences of a given benefit to be classified as a safe harp – according to the new rules for these benefits, the taxpayer will not be required to draw up local documentation (until the end of the 2021 The preference is to exclude the obligation to have a benchmarking analysis and to limit the possibility for tax authorities to estimate).
From 1 January 2022 The method of applying preferences to transactions covered by the so-called Safe Harbour regulations has also been modified.
In the case of low added value services, the essential conditions for qualifying the service to this category have not changed, but new conditions have emerged which these services should fulfil in order to benefit from the safe Harbour.
No further resale of purchased services by the customer was introduced, which to the end 2021 it did not concern the sale of services acquired in its own name but to another related entity.
According to the current requirements of the low value-added service, a low value-added service must not be reflected between related parties, except for a transaction whereby only expenditure incurred to an unconnected entity is cleared (exemption for refactures on the basis of Article 11n(10) CIT Act/Article 23z(10) the PIT Act referred to below).
In the case of Safe Harbour for financial transactions (including loans, guarantees), the modified preference also includes an exemption from the obligation to draw up local documentation, under the conditions to date and it was further clarified that from 1 January 2022 the date of conclusion of the loan agreement shall also be considered the date of amendment of the loan agreement where that change concerns interest rates.
Clean restocking transactions exempt from documentary obligation
Transactions are so-called clean reflection under the new rules will constitute another category of transactions exempted from the documentation obligation. Unfortunately, there is already a lot of confusion with regard to the changes in low value added services.
In addition, the legislator reserves that many elements of the local transfer pricing documentation will have to be prepared by the customer who wants to benefit from a safe Harbour in this respect (calculation containing, inter alia, a description of the transaction, including analysis of functions, risks and assets).
Therefore, despite the lack of the obligation to draw up full transfer pricing documentation, the recipient will need to be informed of the fulfilment of the conditions of the simplified solution.
At the same time, the clearing requirement was introduced immediately after payment of claims to an unrelated entity. This requirement may raise significant doubts, e.g. whether this means that payment must necessarily take place on the same day, whether it is acceptable 7-the day-to-day payment deadline.
Another condition of controversy is the lack of a link between the settlement of a low value added service and another controlled transaction. This requirement will also cause practical difficulties as taxpayers require a very transparent method of billing and in many cases it will be necessary to implement a clear allocation of invoices. However, the legislator allows for the possibility of clearing the restocked benefits using the allocation key.
Author: Leszek Dutkiewicz, partner Russell Bedford Poland. Associated with the company from 2011. Director of RBP office in Katowice. In years 2008 – 2011 worked for leading consulting companies (Ernst&Young, KPMG, BDO) providing tax advisory services.
He specializes in tax and economic law, primarily in international tax law, tax proceedings, VAT and transaction prices. Author of a publication on tax, civil and international law issues. Lecturer in tax law training. He has legal education, in 2008 graduated from the Faculty of Law and Administration of the Jagiellonian University.