Transactions with tax havens – intended legal changes
At the beginning of 2021, a new law came into force amending the transfer-pricing regulations, which introduced certain new requirements concerning documenting transactions involving tax havens. Local transfer-pricing documentation has since been required from taxpayers engaged in revenue transactions with parties having their place of residence, seat or management on the territory or state pursuing harmful tax competition (the so-called ‘direct offshore transactions’). Moreover, the obligation to draw up a local file was extended to cover transactions where the ultimate beneficial owner has a place of residence, seat or management in a tax haven (the so-called ‘indirect offshore transactions’).
Currently, legislative efforts are underway on yet another amendment to the transfer-pricing regulations. The proposed changes aim to alleviate the rigorous requirements involved in documenting offshore transactions. The proposed bill amending the CIT Act and certain other statutes, as published on 28 June 2022, sets out to:
- Increase the documentation thresholds to PLN 200,000 for direct offshore transactions and diversify the thresholds for indirect offshore transactions (PLN 2,500,000 for financial and commodity transactions, and PLN 500,000 for other transactions).
- Clarify that auditing transactions for ultimate beneficial owners in tax havens or settlements with an offshore entity only concerns the entities receiving the payment.
- Determine that, as far as domestic transactions are concerned, the documentation requirement with regard to indirect offshore transactions will only rest with the entity receiving the payment.
- Repeal the presumption that an ultimate beneficial owner resides in a tax haven.
- Introduce an exclusion whereby the regulations on indirect offshore transactions will not apply where the entity receiving a payment under a transaction does not make any settlements, in a relevant fiscal (accounting) year, with regard to the payment, or is not related to an offshore entity.
- State that for the documentation requirement to be verified it will be sufficient if the other party states that it is the ultimate beneficial owner of the payment, or that the ultimate beneficial owner is not an offshore entity.
Quite importantly, under the interim provisions, taxpayers will be in a position to elect to apply the new regulations even to transactions carried out in 2021. Please note, however, that the bill is currently at a consultation stage; hence, the proposed regulations could change.
Anna Skórska, Transfer Pricing Coordinator, ATA Tax Sp. z o.o.
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