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2018 Transfer Pricing Overview
Poland
www.accace.com | www.accace.pl
2 | 2018 Transfer Pricing Overview for Poland
Contents
Introduction 3
Applicable Legislation 4
Transactions Subject to Transfer Pricing Documentation 5
Scope of Transfer Pricing Documentation 6
The three-level concept 6
Thresholds 7
Exceptions 8
Transfer Pricing Methods 9
Deadlines 10
Country-by- Country Reporting 12
Advance Pricing Agreements 14
Penalties 15
ABOUT ACCACE 16
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INTRODUCTION
The significant tax regulations came into force as of January 2017 and introduced requirement to demonstrate that terms of cooperation and settlements between related parties were determined in line with the arm’s length principle. Moreover, during 2017 and 2018 some importance long-anticipated decree were published. Those documents implement for example:
• regulation on CIT and PIT Act information which should to be disclosed in tax documentation;
• indicates what information should be included in the information about a group of entities (Country by Country Report);
• extend deadline for taxpayers in the area of Transfer Pricing for FY 2017 and 2018.
Below we present the main information in the area of transfer pricing area in Poland.
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Applicable Legislation
▪ Corporate Income Tax Act from February 15th,1992
(Article 9a, 11);
▪ Personal Income Tax Act from July 26th, 1991 (Article 25,
25a);
▪ Tax Ordinance Act from August 29th, 1997 (Articles 20a-20r);
▪ Decree of Minister of Finance from September 10th, 2009 on corporate income through
evaluation and on manner and procedure of corporate double taxation elimination in case of
adjustment of income of related entities;
▪ Decree of Minister of Finance from September 10th, 2009 on personal income through
evaluation and on manner and procedure of corporate double taxation elimination in case of
adjustment of income of related entities;
▪ Decree of Minister of Finance from April 23rd, 2015 on determination of countries and
territories applying harmful tax competition in respect to corporate income tax;
▪ Decree of Minister of Finance from April 23rd, 2015 on determination of countries and
territories applying harmful tax competition in respect to personal income tax;
▪ Double Tax Treaties.
As an OECD Member State and an EU Member State, Poland adheres to the OECD Transfer Pricing
Guidelines, especially OECD Report on counteracting BEPS (“Base Erosion and Profit Shifting”), in
particular action 13: “Re-examine transfer pricing documentation” and to the EU Code of Conduct on
Transfer Pricing documentation for associated enterprises.
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Transactions Subject to Transfer Pricing Documentation
The capital threshold to qualify as a related party is 25%. Thus,
transactions between entities holding less than 25% shares (directly
or indirectly) will not be covered by documentation obligation.
Moreover, starting 2017 the transfer pricing rules apply also to partnerships and consortiums between
related parties.
The documentation requirement applies to:
▪ transactions having material impact on the taxpayer’s income – the materiality level depends
on the amount of the taxpayer’s revenue for the preceding tax year
▪ other events with related parties that are reflected in the taxpayer’s accounting books having
material impact on the taxpayer’s income (e.g. finance management / cash pooling, cost-
sharing agreements)
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Scope of Transfer Pricing Documentation
The three-level concept
A three-level concept of the transfer pricing documentation was
introduced. Under this concept, the taxpayer is obliged to prepare the
documentation depending on the revenues and expenses disclosed in the books for the previous
year.
Local file Represents local documentation containing details of transactions or other events between the Polish
company and other group companies disclosed in the accounting books.
The tax payer is obliged to prepare it if revenues or expenses exceed EUR 2 mln; however, if
revenues or expenses exceed EUR 10 mln, the local file has to be supplemented with a
benchmarking study (covering Polish comparable data).
The local file shall include in particular:
▪ description of the taxpayer and the transactions / other events
▪ indication of type and subject matter of the transaction / event
▪ financial data
▪ description of the income calculation method and its justification
▪ description of the competitive / business environment
▪ the source documents (i.e. contracts).
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Master file The master file contains group level information. The tax payer is obliged to prepare it if revenues or
expenses exceed EUR 20 mln.
The master file shall include the following:
▪ description of the entity preparing the documentation the organizational structure
▪ the Transfer Pricing policy
▪ description of the group’s business activity
▪ the group´s financial situation
▪ detailed information on intellectual property (including especially the group strategy on
creation, development and maintenance of intellectual property)
▪ description of any agreements concerning income taxes made between the group
components and the tax authorities in other countries (including unilateral APAs).
Country-by-country reporting (CbCR) The report on global allocation of income and tax within the group (required for groups in which the
parent company consolidating the accounts is located in Poland). This document has to be filed by
the holding company and if consolidated revenues exceed EUR 750 mln.
Thresholds
Transactions with related parties are considered as material if in the year preceding the analysed tax
year the taxpayer’s revenues exceeded the following thresholds:
Revenues / Costs in the
previous year1 Value threshold of a single transaction / event
less than EUR 2 mln exempt from the transfer pricing documentation obligation
from EUR 2 mln but not
more than EUR 20 mln
transactions and dealings materially affecting the taxpayer's
income (loss) will mean transactions and dealings of one type
totalling more than the equivalent of EUR 50 thousand plus
EUR 5 000 per every EUR 1 mln of revenue in excess of EUR
2 mln
from EUR 20 mln but not
more than EUR 100 mln
transactions and dealings materially affecting the taxpayer's
income (loss) will mean transactions and dealings of one type
totalling more than the equivalent of EUR 140,000 plus EUR
45,000 per every EUR 10 mln of revenue in excess of EUR 20
mln
1 The values expressed in EUR are converted to PLN at the average exchange rate published by the National Bank of Poland for the last working day of the tax year preceding the tax year for which the documentation is prepared.
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from EUR 100 mln
transactions and dealings materially affecting the taxpayer's
income (loss) will mean transactions and dealings of one type
totalling more than the equivalent of EUR 500,000 in a tax
year
It should be mentioned that the taxpayers obliged to prepare the TP documentation whose income/costs
exceed the equivalent of EUR 10 mln in a tax year should enclose a simplified statement on transactions
and other dealings with associated enterprises or on payments made in connection with such dealings
(directly or indirectly) domiciled / seated or the management board of which is located in the territory or
in a country applying harmful tax competition to the annual tax return.
The statements shall be prepared on special CIT-TP or PIT-TP forms and shall include detailed data
concerning the amount of individual transactions with affiliates.
The new regulation2 includes broader information obligations upon a taxpayer, connected with
intercompany transactions, including justification for prices in intercompany settlements. Above-
mentioned regulation provides for the elements of: (i) a local file, (ii) a master file, and (iii) a benchmark
study.
Exceptions
According to the actual regulations, the following categories have no obligation to prepare Transfer
Pricing documentation:
▪ taxpayers whose revenues (expenses) do not exceed EUR 2 mln in a given year
▪ taxpayers who concluded an APA relating to such transaction – they will be obliged to prepare
a simplified Transfer Pricing documentation including only:
the financial data
a detailed description of transactions
the profit/loss calculation method
▪ transactions where the price results directly from legal regulations.
2 The Decree of the Minister of Economic Development and Finance of 12 September 2017 on the detailed scope of data to be included in the TP documentation.
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Transfer Pricing Methods
Generally, the transfer pricing methods accepted by the tax
authorities are based on the OECD Guidelines. These methods
are:
▪ CUP (Comparable Uncontrolled Price Method)
▪ Resale Price Method
▪ Cost Plus
▪ TNMM (Transactional Net Margin Method)
▪ Profit Split Method
The standard methods are preferred over others. When the transfer price is determined by the tax
authorities, the CUP method is applied in the first instance.
If a taxpayer has determined the arm's length value of a transaction by applying one of the three
standard methods (CUP, Resale Price and Profit Split) and there is no doubt about the objectivity in
choosing the method, this method is also binding for the tax authorities.
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Deadlines
Referring to the new regulations3, the deadlines for preparation
TP documentation (both in PIT and CIT) extended to the end of
the ninth month after the end of the fiscal year. The new regulations
apply to:
• preparing the transfer pricing documentation (ie. local file,
benchmark and master file);
• filing the statement that the TP documentation is ready with the tax office4, and
• attaching to the tax return for the fiscal year a simplified transfer pricing statement (PIT-TP or
CIT-TP form).
The extended deadlines apply to obligations for which deadlines under the current regulations:
• expire in 2018 for transfer pricing documentation, the statement and simplified transfer pricing
statement (PIT-TP or CIT-TP form) for the previous fiscal year, i.e. 2017 if the fiscal year
corresponds to the calendar year or
• expire in 2019 for transfer pricing documentation, the statement and simplified transfer pricing
statement (PIT-TP or CIT-TP form) for the previous fiscal year, i.e. 2018 if the fiscal year
corresponds to the calendar year.
As regards taxpayers obliged to prepare transfer pricing documentation for both 2017 and 2018, the
deadlines will be extended with respect to obligations concerning both periods. Based on the new
regulations, the extended deadlines apply also to taxpayers whose fiscal year does not correspond to
the calendar year (e.g. the fiscal year of 2017 began on April 1st, 2017 and ends March 31st, 2018 or
began on July 1st, 2017 and ends on June 30th, 2018).
3 Decree of the Minister of Finance from 15 March 2018 extending the deadlines for the fulfilment of certain obligations related to transfer pricing documentation. 4 The Minister of Finance published the draft od statement: (https://www.finanse.mf.gov.pl/documents/766655/5896628/4.+Wz%C3%B3r+o%C5%9Bwiadczenia.pdf)
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In case of benchmarking study, the analysis should be updated at least once every 3 years (if the
business circumstances change in a way affecting the analysis the benchmarking analysis should be
reviewed earlier).
Moreover, according to the actual regulations, the tax authorities may request the taxpayer to
prepare documentation in respect of transactions / events even if the value does not exceed
the limits, provided that the circumstances suggest that their value could have been underreported in
order to avoid the documentation obligation. In that case, Transfer Pricing documentation should be
submitted within 30 days of the request.
Despite the above, taxpayers are still obliged to present complete Transfer Pricing documentation
within 7 days of the tax authorities’ request.
Regardless of the limits, taxpayers will be obliged to prepare documentation also for the tax year
following the year for which they were obliged to prepare the documentation.
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Country-by- Country Reporting
The CbCR obligation applies to:
▪ Polish entities, which simultaneously:
are the ultimate (dominating) entities in their
groups
are the entities consolidating financial reports
operate directly or indirectly outside of Poland
their last year’s consolidated income within and outside of Poland is over the
equivalent of EUR 750 mln
▪ entities not being the ultimate parent if there is no other entity designated to provide such
information in the group if one of the following criteria are met:
the ultimate parent entity is not obliged to file a CbCR for the reporting year in its
tax jurisdiction
the appropriate jurisdiction in which ultimate parent entity is resident for tax
purposes has not undertaken to share information about the entity group within
12 months of the end of the given reporting year
the tax jurisdiction of the ultimate parent entity suspended automatic sharing of
CbCR or failed to fulfil the obligation without notifying the dominating entity
In case the member of the group does not receive all required information about the group from the
parent company, said information is presented based on the knowledge of the party or information
obtained for this purpose (this fact should be disclosed in the CbCR file).
The CbCR file must be filed for the first time within 12 months from the end of the group’s reporting
year (for years started after December 31st, 2015).
According to the actual tax regulations members of groups of entities will be obliged to:
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▪ notify that they are the ultimate parent entity or designated entity (or a different entity obliged
to file the CbCR), or
▪ indicate the entity obliged to file CbCR together with its identity and tax residence.
The notification should be filed before the end of the group’s reporting year. The new regulation5
indicates what information should be included in the information about a group of entities.
The tax regulations provide fines for failure to fulfil the aforementioned obligations (maximum amount:
PLN 1 mln).
5 The Decree of the Minister of Economic Development and Finance of 13 June 2017 on the detailed scope of data to be included in the information about a group of entities.
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Advance Pricing Agreements
Currently, the APA is up to the Head of National Fiscal
Administration (KAS) decision, which is a confirmation of
the selection and application of a method for determining
transaction prices between related parties.
The main advantage of such decision is elimination of the risk of the tax authorities challenging the
pricing mechanism applied in the given transaction (assuming that the taxpayer complied with the
APA provisions) and protection from penal and fiscal sanctions for individuals responsible for tax
settlements.
The main changes APA regulations (which are effective from 2016) includes following issues:
▪ the APA decision is binding from the date of submitting the APA application to the KAS;
▪ APA decision may also include now cost sharing agreements
▪ APA decision included the “terms and conditions” agreed between related parties
▪ renewal of an APA decision which replaces the procedure of extension of APA validity period
(it means that the taxpayer is allowed to change/update minor APA elements)
The fee is 1% of the value of the transaction covered by the APA limited by the following:
▪ for a unilateral APA referring to domestic entities only – min. fee: PLN 5 000 (approx. EUR 1
198) and max. fee PLN 50 000 (approx. EUR 11 987)
▪ an APA referring to a foreign entity - min. PLN 20 000 (approx. EUR 4 795) and max. PLN
100 000 (EUR 23 975)
▪ a bilateral or multilateral APA - min. PLN 50 000 (approx. EUR 11 987) and max. PLN 200
000 (approx. EUR 47 951)
Renewal fees are half of the amount of the fee for the renewed APA.
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Penalties
If the taxpayer does not submit Transfer Pricing documentation
at the request of the Polish tax authorities, a 50% penalty tax rate
is applied for income assessed by these authorities.
Moreover, the taxpayer will be required to pay interest on tax arrears and fiscal penalties resulting
from personal responsibility.
However, if the taxpayer provides the required Transfer Pricing documentation on time, the penal tax
rate for income assessed can be reduced to the standard tax rate.
Disclaimer
Please note that our material has been prepared for general guidance on the matter and does not represent a customized professional advice. Furthermore, because the legislation is changing continuously, some of the information may have been modified after the material has been released and Accace does not take any responsibility and is not liable for any potential risks or damages caused by taking actions based on the information provided herein.
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