On 5 November 2019 the President signed legislation revising the advance pricing agreement (APA) and dispute resolution mechanism rules applicable to situations involving double taxation. APA's apply to the pricing of inter-company transactions. The new rules also allow taxpayers who obtain a positive APA or tax agreement (in Polish "porozumienie podatkowe") to deduct expenses otherwise restricted under article 15e of the CIT Act. Article 15e limits tax deductions on the purchase of various advisory services and licence fees which exceed 5% of EBITDA in a tax year.
31 December 2019 deadline for APA applications covering 2018 and 2019
The APA can be obtained in relation to costs incurred in the retrospective period 2018 and 2019 provided that taxpayers submit the APA application before 31 December 2019. In case of requests submitted later, the agreement will become effective at the beginning of the tax year in which the request has been submitted.
Taxpayers seeking to obtain an APA covering 2018 and 2019 tax years have only a few weeks left to submit the application.
Another feature of the updated regulations is that they allow foreign investors planning to establish an affiliated entity in Poland to apply for an APA. To date, APAs have only been available to Polish registered taxpayers.
The new act transfers most of the current APA rules from the Tax Ordinance to a separate act without introducing many changes. Advance Pricing Agreements will still be executed at the taxpayer’s request and the scope of the request has been made similar to the text of transfer pricing documentation.
Large taxpayers may sign a cooperation agreement with tax authorities
Taxpayers whose revenue in the preceding year exceeded €50 million may conclude an agreement with the tax office which provides them certain privileges. These privileges include:
- an exemption from the obligation to report domestic tax schemes under the mandatory disclosure rules (“MDR”);
- 50% reduction in the cost of APA applications;
- special procedures for tax audits ensuring that they will be performed solely by the Head of National Tax Administration (KAS);
- the possibility to enter into a so-called tax agreement ("porozumienie podatkowe") covering among other items, transfer pricing.
A new way to settle international tax disputes
In addition, the new law introduces revised procedures for resolving international double taxation disputes. Parties will have two years, with a potential 1-year extension, to resolve disputes arising between Poland and other EU member states on the basis of double taxation agreements/conventions. The new regulations are based on solutions proposed in the 2017/1852 EU Directive and will be added to current methods based on the Arbitration Convention and on double taxation agreements.
If you have questions, please contact one of ASB Tax specialists:
Head of Tax