Significant changes to the transfer pricing regulations in Poland came into force from 1 January 2019. The amendments align Polish regulations with the latest OECD Guidelines following the BEPS projects.
On 14 November 2018, the country’s president signed an amendment to the Polish Tax Law that includes transfer pricing regulations in Poland. The new law effective from 1 January 2019 repeals the former rules included in Article 9a of the Polish CIT law and replaces them with the rules of Chapter 1a. This is the most complex revision of transfer pricing regulations in Poland since their introduction.
As we wrote in an earlier article about the proposed changes, the most important amendments include, among others, the possibility of using new transfer pricing methods and valuation techniques as well as the introduction of safe harbours.
Transfer pricing methods
Apart from the standard transfer pricing methods (CUP, C+, resell minus, TNMM and Profit Split) taxpayers are allowed to use other valuation techniques and methods in justified cases.
Recharacterisation or non-recognition of transactions
According to the new transfer pricing regulations in Poland, tax authorities have the power to disregard or delineate transactions that apply the principle of substance over form.
Safe harbour for low value-adding services
The OECD cost plus 5% for low value-added services has been implemented. Taxpayers are required to keep detailed calculations of the fees paid. A safe harbour for IC loans is applicable for loans up to five years if:
- total loans from the related entities do not exceed PLN 20 million (roughly EUR 4.6 million) and
- there are no warranty fees or other charges for granting a loan, and
- the interest rate is set based on the official announcements published by the Polish Ministry of Finance.
Transfer pricing adjustments
These regulations will eliminate divergent tax rulings issued by the National Fiscal Information on the tax treatment of transfer pricing adjustments. The transfer pricing adjustment should be reported as an income or cost for tax purposes in the period to which it relates, provided that the taxpayer has a statement from the related party confirming recognition for tax purposes.
Local file documentation
New materiality thresholds apply for local files to limit the documentation burden: PLN 10 million (roughly EUR 2.3 million) for transactions concerning tangible assets and financing, and PLN 2 million (roughly EUR 460,000) for services and other transactions. Domestic transactions are excluded from the local file requirement unless the counterparties are located in a special economic zone, receive tax relief or have incurred losses in a tax year. A benchmark analysis has become an obligatory element of the documentation for each transaction in a local file. The deadline for preparing the local file is nine months after the end of the tax year.
Master file documentation
Related entities consolidated using the full or proportional method are required to have a master file if the group generated consolidated revenues of more than PLN 200 million (roughly EUR 46.5 million) in the preceding financial year. The deadline for preparing the master file is 12 months after the end of the tax year. Master files will be accepted in English, however, the tax authorities may request the submission of a Polish version within 30 days.
Taxpayers can choose to prepare their local file and master file documentation for 2018 under the new system.
Formal statement on documentation
All members of the taxpayer’s management board have to submit a statement that the local file was prepared and the intercompany pricing is at arm’s length. The lack of such a statement or making a false statement will trigger a potential fiscal penal liability of a fine up to roughly PLN 21.5 million (EUR 5 million). The first submission deadline is September 2020.
Penalties for the transfer pricing assessment according to the new transfer pricing regulations in Poland
A new penalty system will replace the famous 50% tax rate (applied where there is no transfer pricing documentation). The additional tax (over 19%) can range from 10% to 30% – the latter where the transfer pricing assessment is over PLN 15 million (roughly EUR 3.5 million) and there is no documentation.
If you would like to know more about the new transfer pricing regulations in Poland, please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative of WTS Global for Poland.
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