The beginning of the year brought many changes to the tax system, including transfer pricing rules. Four implementing regulations on transfer pricing documentation elements and transfer pricing information (TPR) for both PIT and CIT have been revised (changes in Journal of Laws of 2020, items 2408, 2413, 2383, 2387).
Although changes have come into force 1 January 2021 R., remember that they will cover transactions carried out in the year 2020, therefore it is worth reading them now.
Changes in transfer pricing documentation elements
The amendment provides for an extension of the scope of the elements required in the local transfer pricing documentation for transactions referred to in Article 11o(1)(1a) CIT laws and Article 23za(1)(1a) PIT Act (i.e. in the case of transactions with so-called tax havens), for economic justification of transactions, in particular:
a description of the expected economic benefits, such as the failure of the tax liability, the withdrawal or reduction of the tax liability at the time of the formation of the tax liability, the creation or recovery of the tax loss, and the formation of an overpayment or right to refund, or the overpayment or reimbursement of the tax, and
a description of the expected other, quantifiable or non-quantifiable, economic benefits such as increasing pre-tax profitability, increasing labour productivity, strengthening competitive advantage, increasing market share, increasing company, brand or product recognition and developing company or product functional characteristics.
Changes in TPR information
More changes were provided for information on transfer prices for 2020 one year. According to the Minister of Finance, the solutions introduced are intended to facilitate the filling in and submission of transfer pricing information as well as to increase the efficiency of data analysis from transfer pricing information.
The amendment shall amend, in particular:
- removing the requirement to provide a PKD code for the data subject (subject to such a requirement for the information subject);
- adding a field that gives a descriptive indication of the subject matter of the controlled transaction (only the category could be selected so far);
- allow a direct indication of the compatibility analysis as a means of carrying out transfer pricing analysis, together with an indication of the data source.
On the other hand, the revised TPR form extends the scope of the transmitted data by indicating:
- in case of the use of safe Harbour for loans (Article 11g CIT Act) – exact identification of the counterparty;
- the value of the controlled transaction per counterparty;
- in the case of financial transactions, the amounts of interest charged and paid, whereas so far only interest paid has been required to be reported;
the addition of information on the concluded partnership agreement, joint venture agreement or similar agreement by specifying the type of participation and percentage share resulting from those agreements, the value of the contributions made by the shareholder and the total value of the contributions made by all shareholders;
information on the restructuring carried out by determining the type of remuneration due for the restructuring.
Given that the amended Regulation concerns TPR information submitted for a period beginning with 1 January 2020 It is worth preparing the information necessary for the preparation of transfer pricing documentation and the completion of the revised TPR.