Start 2018 is a period during which the subject matter of transfer prices for many entrepreneurs becomes important. A thorough amendment, which introduced new rules for the preparation of tax documentation, has been formally applicable since the beginning 2017. In practice, for the majority of taxpayers who apply the tax year coincides with the calendar year, a mandatory deadline for drawing up first documentation according to the new rules passes on 31 March 2018
For this reason, we are increasingly looking at the publication of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, i.e. Transfer pricing guidelines for multinational companies and tax administrations.
This is a basic document, which has been developed and improved by the OECD for many years, which is intended to form the basis for the creation of an international system to prevent the transfer of income by related companies in international transactions.
On the basis of this document, solutions for the preparation of documents by taxpayers, rules for verifying and estimating the prices charged by taxable persons in controlled transactions are being implemented in individual countries.
The originally agreed content of the Guidelines has already been published in 1995, The latest version of this publication was made available by the OECD in July 2017.
http://www.oecd.org/tax/transfer-pricing/oecd-transfer-pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm
The solutions used in the Polish legal system were implemented on the basis of amending laws developed in 2015, based in large part on OECD work under the so-called BEPS (Base Erosion and Profit Shifting, i.e. the erosion of the tax base and the transfer of profits). The result of these works was publication in 2016 15 reports that define measures to prevent erosion of taxation and profit shifting. The most important of these measures in the context of transfer pricing are:
- • BEPS 8 – the transfer of intangible assets;
- • BEPS 9 – on risk allocation and capital engagement by related entities;
- • BEPS 10 – on high-risk transactions
- • BEPS 13 – on standards for the compilation of transfer pricing documentation and reporting standards.
The BEPS actions indicated above are reflected in the latest July Guidelines 2017. The existing Guidelines have been substantially developed and clarified, in particular in aspects such as the introduction of new rules on documentation (tricycle documentation), the use of intangible assets in groups of affiliated entities (including the new definition of intellectual property), recommendations on restructuring, recommendations on intra-group services, etc.
While the OECD Guidelines do not constitute a formal source of law, this is certainly the case one from the most important documents that we use when interpreting transfer pricing requirements, also those implemented in the Polish legal order.
Polish transfer pricing arrangements are to be governed in principle by income tax laws and applicable implementing regulations. In practice, however, these regulations are often not sufficiently precise to clearly determine the scope of the obligations on taxpayers in their economic reality.
The understanding of the underlying principles defined in OECD documents allows for a proper identification of the scope of the obligations relating directly to taxpayers and effective protection against allegations of non-market prices.
In subsequent publications, we will discuss in detail the individual aspects of the new documentation requirements and pricing rules in specific transactions in groups of related parties. We will also address group solutions, transfer pricing procedures, which are increasingly of interest to capital groups. We are constantly monitoring transfer pricing solutions prepared by the Ministry of Finance and individual interpretations and settlements issued in taxpayers' matters concerning transfer pricing.
Author:
Leszek Dutkiewicz
Partner at Russell Bedford. From 2011 related to Russell Bedford Poland. 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.