A draft legislation amending the PIT and the CIT law in Poland has been published by the Polish Government Legislation Centre middle of July. The draft includes among others significant changes in the country’s transfer pricing rules. The new regulations will come into effect on 1 January 2019 according to the plans, but they were presented to public consultation before.
On 16 July 2018, the Polish Government Legislation Centre (GLC) published a draft bill to amend the PIT and CIT law in Poland. Put up on GLC’s website, the bill proposes a significant overhaul of transfer pricing regulations and its aim is to transpose into Polish law a number of measures developed by OECD as part of its BEPS project, including some simplifications to transfer pricing documentation rules.
Transfer pricing according to the new PIT and CIT law in Poland
The bill’s major proposed amendments related to transfer pricing are as follows
- In addition to those specified in the current Polish law, other transfer pricing methods and valuation techniques will be allowed in justified cases.
- Safe harbours will be introduced for transactions involving low value-adding services and loans.
- The current list of low value-adding services will be amended (shortened) to bring it in line with relevant OECD Guidelines.
- Regulations will be introduced allowing tax authorities to re-characterise controlled transactions, including their non-recognition for transfer pricing purposes.
- A clear rule will be introduced whereby a transfer pricing adjustment should be reported as income or cost for tax purposes in the period to which it relates (subject to certain conditions being met). The purpose is to eliminate divergent tax rulings from the Polish National Revenue Information Service (KIS) on the tax treatment of transfer pricing adjustments.
- Higher materiality thresholds will be introduced for transfer pricing documentation (local file) and documentation requirements will be harmonised with OECD standards.
- Taxpayers will be able to use master files prepared by other group members, including in English.
- Current reporting requirements will be modified (with PIT-TP and CIT-TP forms to be replaced by the TP-R form).
Other changes of the CIT law in Poland
In addition to the important changes to the transfer pricing regulation mentioned above, the bill proposes also a number of other significant changes to CIT law in Poland.
Among the most important of those changes are:
- Elaborated regulations disallowing adjustments to revenue/costs associated with time-barred liabilities (regardless of reason for adjustment);
- Reduced threshold for tax-deductible borrowing costs (from 30% to 20%);
- Repeal of regulations on arm’s-length creditworthiness assessment (applicable in place of general regulations authorising verification of arm’s-length terms and recharacterization or non-recognition of controlled transactions);
- Increased limit for tax-deductible purchases of intercompany intangible services (from 5% to 10%).
While the draft law provides for the amended regulations to apply to profits earned in tax years starting after 31 December 2018 (with certain exceptions), the taxpayers are allowed to use the new rules to prepare their transfer pricing documentation for 2018. The draft is currently at the public consultation stage.
If you would like to know more about the amendments to the PIT and the CIT law in Poland or about the Polish TP-regulations, please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative for Poland of WTS Global.
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