Draft amendments regarding Transfer Pricing Documentation
The Ministry of Finance doesn’t allow the tax payers a moment of rest. The works on tax documentations in a new version (after the amendments which entered into force on 1 January 2018) are still ongoing in many entities, and now it is advisable to prepare for other big changes regarding the obligation of preparing tax documentation.
New definition of associates
Draft amendment of 15.07.2018 to the Personal Income Tax Act, Corporate Income Tax Act and certain other acts introduce the definition of “associates”. According to the definition provided in the amendment to the PIT and CIT Acts , “associates” should be understood as:
- entities, of which one entity exercises a significant influence on at least one other entity, or
- entities, on which a significant influence is exercised by
- the same other entity, or
- spouse, relative or kinsmen by affinity up to the second degree of the natural person having a significant influence on at least one entity, or
- a company without a legal personality and its partners, or
- a tax payer and its foreign company.
New transaction thresholds and transaction grouping
Another significant change in terms of transfer prices is the change of transaction thresholds. The amount of revenue would not determine the obligation to prepare the tax documentation as it has been so far, but the value of transactions belonging to a given transaction category:
| Transaction category | Transaction threshold |
|---|---|
| 1. Tangible current assets 2. Fixed assets 3. Debt financing 4. Surety or guarantee | PLN 10,000,000 |
| 5. Intangible assets 6. Services 7. Fixed assets (including hire, rent, lease) 8. Intangible assets (including licences) 9. Income assignment to a foreign company 10. Other transactions | PLN 2,000,000 |
In that point, it should be mentioned that the proposed amendments provide a subtle modification of transaction thresholds for the transactions with entities which have a place of residence, head office or a management board in the so-called tax heaven. Thresholds for transactions with such entities currently amount to EUR 20,000, but the draft amendment to the PIT and CIT Acts assumes an increase of the amount to PLN 100,000.
Entities exempted from the obligation to prepare tax documentation
The draft amendment provides for the exemption from the obligation to perform tax documentation for certain types of transactions, i.e. for:
- transactions covered by the decision on transfer prices (prior price agreement),
- transactions, of which the entire value permanently is not revenue or cost of revenue,
- transactions between companies creating a tax capital group,
- when the affiliations result solely from the affiliation with the State Treasury or local government or their associations,
- transactions, in which the price was agreed in the course of an open tender,
- specified transactions between a group of agriculture manufactures entered into designated registers and its members.
Currently, the draft is in the stage of ministerial arrangements. The effective date of new regulations is planned on 1 January 2019.
Małgorzata Kierczak, tax consultant, ATA Tax Sp. z o.o.
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