NewTransfer Pricingregulations

October 2015

www.pwc.com

PwC

Agenda

2

5. Taxpayer’s statement

4. Local file – current status vs new obligations

3. Local file -thresholds

2. Timeframes

1. Scope of the documentation

10. Our recommendations

9. Summary

8. CbCR

7. Master file

6. CIT-TP

New requirements

PwC

Tax havens/ joint venture agreements

The scope of the transfer pricing requirementsdepends on revenue /costs of the taxpayer

3

CbCR> EUR 750 M

5

Local File1

> EUR 2 M

CIT-TP> EUR 10 M

3

Transfer pricing documentation requirements

2 Taxpayer’s statement

4

Master File> EUR 20 M

> EUR 20/50 k

PwC

Timeframes

2015 2016 2017 2018Transfer pricing documentation requirements:

03.2018

Local File

CbCR

Master File

Taxpayer’s statement

CIT-TP

4

Submission*Date of commencement

1

2

3

4

5

Required actions

01.01.2016 01.01.2017

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1

3

2

4

*assuming that fiscal year 2017 = calendar year 2017 and submission of upon the request of the tax authorities, within 7 days from the notification.

1 4

PwC

Local fileThresholds

5

Documentation thresholds• Thresholds to be applied depend on revenue / costs of the company

Exeptions:(i) tax havens (>EUR 20,000)(ii) joint venture agreements (> EUR 50,000).

• Taxpayer’s revenue / costs > EUR 2M – the local file is required for a subsequent tax year

The tax authorities may ask to prepare documentation for any intercompany transaction of value below the thresholds (deadline - 30 days)

50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 185

230 275

320 365

410 455

500

-

100

200

300

400

500

600

5

1

3

2

4

Th

resh

old

s (

EU

R i

n t

ho

usa

nd

s)

Taxpayer’s revenue / costs [EUR in millions]

PwC

Local file – current status vs new obligations

6

5

1

3

2

4

Selection of the TP method

Benchmarking study

Financial data

Organizational and capital structure

Restructuring

Market analysis

Taxpayer’s description

Taxpayer’s additional documents

Current regulations

Functional analysis

Description of the TP method

Costs, terms of payment

Strategy, expected benefits, other factors

New regulations

(value)

(simplified)

PwC

Personal liability under the Penal Fiscal Code

Need to supervisethe preparation of TP documentation

Need to verify thecompleteness of TP documentation

Need to plan

Taxpayer’s statement

7

Taxpayers are obliged to submit a statement confirming that the transfer pricing documentation was prepared. The statement must be filed to the tax authorities by the date of filling the annual tax return.

In practice it means:

5

1

3

2

4

PwC

CIT-TP (1/2)

8

An additional transfer pricing report to be submitted together with the annual tax return.

G.F.E.D.C.

Functional

profile and

industry

Information on

foreign related

entities

Intercompany

transactions….

Identification of

the relations

between

companies

Restructuring

… including:

• Sales/ production/ rent/

leasing / services

• Transactions concerning

assets (including

intangibles)

• Financial transactions

• Financial information

• CCA

5

1

3

2

4

PwC

CIT-TP (2/2)

9

…quick glance…

5

1

3

2

4

PwC

1 2 3 4 5 6

Company overview

Group’s structure

TP Policy Business overview IP

Group’s

FS

7

Agreements /APA

Master File

10

Description of the

transfer pricing

policy applied in the

Group

Description of the Group’s

financial standing along

with its consolidated

financial statement

Organizational

structure of the Group

Indication of the related entity

that prepared information on the

Group along with the date of

filing its tax return.

Description of the

Intellectual Property

developed and used by

the Group

Description of the

agreements with the tax

authorities concluded by

the entities from the Group

Group’s business

activity overview

5

1

3

2

4

PwC

CbCR (1/2)

11

Country-by-Country Reporting form will allow to compare the volume of operations, taxable income and tax paid across the countries. Similar reporting obligations should be implemented in other countries as well. It will allow the tax authorities to easily compare financial data between the countries.

5

1

3

2

4

Domestic entities…

… parent companies, not

being a subsidiary…

…preparing consolidated

financial statements…

… havingforeign

subsidiaries/PEs…

…withconsolidated

revenueexceedingEUR 750 M

Who prepares

CbCR form?

PwC 12

5

1

3

2

4

CbCR (2/2)

…quick glance…

PwC

Summary of changes

13

Increased workload of the taxpayer as regards the transfer pricing documentation

The burden of proof transfered onto the taxpayer

5

1

3

2

4

New instruments for assessing the TP risk available for the tax authorities (CbCR, CIT-TP)

The necessity to reveal significant amount of information – more visible inconsistences (e.g. financial data has to be in line with the FS)

• Extended scope of the Local File

• Additional requirements (Taxpayer’s statement, Master File, CIT TP, CbCR)

• Tight deadlines

• Higher threshold defining related entities (25% compared to 5%)

• Higher documentation thresholds

PwC

Our recommendations

14

5

1

3

2

4

Analysis of potential risks under the new TP requirements

(CbCR, CIT-TP)

Possible changes in case of identified risks

• Assess what is requiredWhat should I do?

• Verify what is available and what is missing

What have I got?

• Need to aggregate data from various companies (including foreign entities)

• Time necessary to prepare and verify the documentation

• Very first documentation is crucial

When should I do it?

• Verify the documentation, not less than once a year (benchmarking studies every 3 years, assuming no changes of the market conditions).

Should I update it?

Who is responsible? • Define who does what(persons/companies)

Transfer pricing documentationTP risk analysis

Thank you for your attention!

Sebastian LebdaDirectorTel.: +48 502 18 4675Email: sebastian.lebda@pl.pwc.com

Piotr NiewiadomskiManagerTel.: +48 519 50 7279Email: piotr.niewiadomski@pl.pwc.com