Last year significant changes in the scope of the obligation to prepare transfer pricing (TP) documentation in Poland were implemented. However, this is not the end of changes.
Just recently another draft amending Polish TP regulations has been published. This time, Ministry of Finance presented a completely new approach to the documentation of transactions with related entities. According to the draft, the existing TP regulations will be abolished, and in their place the CIT and PIT Acts will include separate chapters comprehensively regulating the subject of TP.
According to the Ministry of Finance, clarifying definitions and thoughtful arrangement of provisions should be a great facilitation for taxpayers, as the current provisions constitute a source of excessive administrative burden for taxpayers, in particular those operating on a relatively small scale. The goal of the project is to simplify the regulations, while on the other hand allow the tax authorities to effectively examine the TP. The proposed changes will also introduce a number of important solutions that so far have not been present in Polish legislation, which will modify the taxpayers’ obligations and will give new tools to the tax authorities.
The most important change concerns the documentation limits. Currently, taxpayers have to take into account two thresholds. First of them (the amount of EUR 2 million of revenue or costs earned or incurred last year) determines whether given taxpayer needs to analyse the value of transactions that trigger the preparation of transfer pricing documentation. Second is the materiality thresholds for single transaction, which, depending on its type, range from EUR 50 000 up to EUR 500 000. Only when both thresholds are exceeded, it is necessary to document given transactions with related entities. After changes, it will be different. The first threshold of EUR 2 million will be removed from the tax regulations, while the only limit will relate solely to the value of transactions and will amount to PLN 2 or 10 million, depending on the type of transaction.
Also the rules regarding the preparation of group documentation (so called Master file) will be modified. Currently, such obligation applies to taxpayers whose revenues or costs exceed the equivalent of EUR 20 million in the year preceding the tax year. After the changes, this obligation will apply to related entities belonging to the capital group for which consolidated financial statements are prepared and whose consolidated revenues exceeded the amount of PLN 200 million.
Additionally, according to the project, the tax authorities auditing a transaction between related parties will be allowed to determine income or loss resulting from transaction if, in their view, unrelated parties would carry out another transaction or operation. Thus, the project directly introduces the possibility of modifing the transactions or the omission of tax consequences by the tax authorities.
The draft regulations also introduce the extended deadlines for submitting a declaration on the preparation of local transfer pricing documentation and transfer pricing information. The taxpayer will be required to submit them by the end of the 9th month after the end of the tax year. Such solution is already in place, but only on temporarily basis with regard to the documentation for 2017 and 2018. In the result of the amendment it will be sanctioned officially. Moreover, also the deadline for the preparation of group transfer pricing documentation is to be longer - it will be 12 months counting from the end of the tax year.
The new regulations are to enter into force on 1 January 2019 and apply to the transactions carried out in the tax year starting after 31 December 2018.
In case you have any questions related to the above, please do not hesitate to contact our tax department directly.
Piotr Marchlewski
Tax Manager, Tax Adviser
E: pmarchlewski@asbgroup.eu
Rafał Wienconek
Senior Tax Consultant - Tax Adviser
E: rwienconek@asbgroup.eu