Changes to transfer pricing documentation rules to apply as from 2022
The “Polish Deal”—a broad package to help the country recover from the economic effects of the COVID-19 pandemic, attract investment and close loopholes in the tax law—has been passed by the Sejm, signed by the president and published in Poland’s Journal of Laws. The package includes changes to the country’s transfer pricing rules, in particular, the rules governing the preparation of the local file and other documentation and information reporting obligations.
The following new rules will apply as from 1 January 2022:
- Significant influence: The definition of “exerting a significant influence” is clarified to confirm that it applies to a participation in a non-legal entity’s losses (i.e., a relationship between a non-legal entity and its stakeholders). As a result, where a stakeholder’s participation in profits would not exceed the 25% threshold, but the participation in the entity’s losses would exceed the threshold, a significant influence would be deemed to be exerted.
- Deadlines and format for filing transfer pricing information: The deadline for filing transfer pricing information (TPR-C or TPR-P form) is extended from the end of the ninth month after the tax year-end to the end of the 11th month after the tax year-end of a related or other party with respect to transactions other than controlled transactions involving tax havens. Another two months have thus been added to the filing deadline.
The deadline for submitting transfer pricing documentation at the request of the tax authorities is extended from seven to 14 days. At the same time, the tax authorities will have the power to require a taxable person (other than a micro business) to prepare and submit a local file within 30 days on specified controlled transactions for which the taxable person had been exempt from the documentation requirement because it was using the financial safe harbor mechanism.
Finally, in a major change, the amendments impose an obligation on taxable persons (related parties) to prepare and submit local files electronically.
- Exemptions from the local file requirement: There are new exemptions from the obligation to prepare a local file in the following cases:
- Controlled transactions between foreign permanent establishments located in Poland whose head offices are related entities;
- Transactions between a foreign permanent establishment in Poland and its related party that is tax resident in Poland;
- Controlled transactions covered by a tax arrangement or an investment arrangement; and
- Controlled transactions covered by the safe harbor for loans, credits, bonds and transactions involving pure re-invoicing.
An important element of the new measures (in the case of transactions between foreign permanent establishments in Poland listed in bullets 1) and 2) above) is the requirement that all revenue and tax-deductible costs arising from a controlled transaction be reported for tax purposes in Poland.
- Benchmarking and compliance analysis: A local file will not have to contain a benchmark or compliance analysis for controlled transactions concluded by related parties that are micro businesses or small businesses as defined in the Business Operators Act, for transactions other than controlled transactions concluded with tax havens (direct transactions) or where the beneficial owner of a party is a resident of a tax haven (indirect transactions) covered by the documentation obligation.