The obligation to draw up tax records for transactions with a related entity is well known to many corporate tax payers. The provisions of the Corporate Income Tax Act (i.e.
Journal of Laws of 2014, item 851) (hereinafter referred to as the CIT Act) and the Regulation of the Minister of Finance of 10 September 2009 on how and how corporate income is determined by estimation and how and how to eliminate double corporate taxation in the event of adjustment of profits of related entities (Journal of Laws of 2009, item 1268 as amended) (hereinafter referred to as: the Regulation) shall specify who and in what cases is required to document.
In most cases, when the criterion is met by the entity, the transfer pricing documentation will be required.
However, I would like to draw attention to the provision laid down in section 1 section 4 the implementing regulation on transfer pricing. According to this paragraph, ‘the provisions of the Regulation shall not apply to transactions in which the price or method of determining the price of the object of such transaction is derived from laws and regulatory acts issued on the basis of them’.
Interpretation of this provision was given by the Minister of Finance in an individual interpretation No. IBPB-1-3/4510-315/15/PC issued 13 November 2015
In a description of the facts, the applicant stated that it was capital-linked to the municipality in such a way that the municipality had 91.9% shares in the company run by the taxpayer. Others 8.1% the capital of the company has other neighbouring municipalities. No commercial entity holding a stake in the capital of the company. The applicant has an economic activity in water collection, treatment and supply (PKD) 36.00.Z and sewage disposal and treatment (PKD) 37.00.Z.
The municipality has entrusted the Applicant with carrying out some of its own tasks in the field of cleaning and cleaning rainwater. The resources allocated to the task are set out in the Resolution of the Municipal Council. Consequently, the applicant was completely deprived of the freedom to determine the amount for the services it provides.
The value of the service provided by the Applicant corresponded to the limits justifying the obligation to complete the tax documentation.
The applicant indicated that according to section 1 section 4 Regulations transactions for which the transaction price is derived from the normative acts of a local government entity are not subject to documentation.
Director of the Tax Chamber in Katowice in an individual interpretation dated 13 November 2015 considered that the applicant’s position was correct and that he was not obliged to draw up the tax documentation of the transaction with the related entity.
Day 30 March 2016 The Director of the Tax Chamber in Katowice issued an interpretation of individual provisions of tax law concerning similar facts (IBPB-1-3-4510-67/16/MO).
The applicant indicated that it is performing a service commissioned by the municipality concerning the construction of a public benefit facility. The task commissioned was also defined as the municipality's own task financed from the municipality's budget, and the amount for its implementation was allocated by order of the City President.
In this case, the Director of the Tax Chamber in Katowice also felt that the position of Applicant deserves approval.
The examples presented concern the situation of cooperation with municipalities, but the application of this provision is not limited to such transactions.
The provision should be understood to mean that where related parties do not have a real impact on the price of the transaction due to the specific determination of that price under statutory regulations, such transactions are excluded from the documentation obligation.