MoF proposes major changes to Polish transfer pricing regulations

On 16 July 2018, the Polish Ministry of Finance published proposed changes to the Corporate and Personal Income Taxes Acts, overhauling the current regulation of transfer pricing documentation. The main goal of the proposed bill is to ease the compliance burden for taxpayers and ensure greater consistency of local transfer pricing documentation regulations with OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration.

Below, we present the most important changes to the Polish transfer pricing regulations.

Transfer pricing documentation

The proposed bill introduces new, significantly higher thresholds for determining whether a transaction has to be documented in a Local file and whether the taxpayer is obliged to have a Master file. For the Local file, the thresholds will be set at PLN 2 million or 10 million (depending on the type of transaction), compared to approx. PLN 200 000 under current rules. The value of the transaction is to be the sole basis for determining the transfer pricing documentation obligation. As for the Master file, the threshold is set at PLN 200 million consolidated revenues of the taxpayer’s capital group. It is worth noting that the Polish tax authorities will accept an English version of the Master file (however, they may request that a Polish translation be provided).

The deadlines for preparation of the transfer pricing documentation will be:

• 9 months after the end of a tax year for the Local file,
• 12 months after the end of a tax year for the Master file.

According to the proposed regulations, both the Local file and Master file should be more consistent with the OECD Transfer Pricing Guidelines approach.

Safe harbours

The Polish Ministry of Finance intends to implement a safe harbour regulation for low value-adding intra-group services and certain loans. According to the new regulations, 5% mark-up will be acceptable for those intra-group services, assuming that the taxpayer will provide the tax authorities with a detailed calculation presenting the cost base and allocation keys applied. The definition of low value-adding intra-group services will also become more consistent with the OECD Transfer Pricing Guidelines approach.

TP-R declaration

The Polish Ministry of Finance plans to replace CIT-TP and PIT-TP declarations with a new TP-R declaration. In practice, the TP-R form should be more understandable for taxpayers and provide more accurate information to the tax authorities.

Other important changes to the Polish transfer pricing regulations proposed by the Ministry of Finance concern the application of year-end transfer pricing adjustments, utilisation of transfer pricing methods, and exemption of certain inter-company transactions.

The new rules are set to enter into force on 1 January 2019, but some changes are to be expected, given that the bill is only at the beginning of the legislative path.