On 16^th July 2018, Poland has released a bill to amend the country’s transfer pricing rules in line with the results of the BEPS project and the OECD transfer pricing guidelines 2017 in order to improve the taxation of large multinational companies. The changes are to generally apply from 1^st January 2019.

Some of the main changes are given below:

Local file: According to the draft amending law new transactional materiality thresholds have been introduced for local file under this draft law. The thresholds PLN 10 million or EUR 2.5 million approx. will be applied for transactions concerning tangible assets and financing, and PLN 2 million EUR 0.5 million approx. will be applied for other transactions. Failure to submit the local file within the deadline might result in a 50 percent tax rate to the assessed income.

Master file: As per the decree released by the Ministry of Finance on 15^th March 2018, the deadline for preparing master file is extended to the end of the ninth month after the end of the fiscal year. But the deadline for filing master file has been extended to 12 months after the end of the tax year under the draft law amending transfer pricing regulations published on 16^th July 2018. The master file may be prepared in English. Translation into Polish will only be required at the explicit request of the tax authorities. Failure to submit the master file within the deadline might result in a 50% tax rate to the assessed income.

Form: Form ORD-U must be submitted with the annual tax return. Form ORD-W1 must be submitted to disclose the fees paid to certain non-resident natural persons. Effective from 1^st January 2017 statement including related party transactions (form CIT-TP) must be submitted. On 16^th July 2018, the Polish Ministry of Finance published a draft law amending transfer pricing regulations. Under the draft law, taxpayers will be required to submit a new electronic form (TP-R form), which will replace the CIT-TP / PIT-TP forms.

Safe harbour rule:  Safe Harbor rules have been introduced for two types of transactions, i.e. loans that meet certain requirements and low-value-adding services under the draft law published on 16^th  July 2018. Under the new rules, 5% mark-up will be acceptable for intra-group services, assuming that the taxpayer will provide the tax authorities with a detailed calculation showing the cost base and allocation keys applied.

Low value-adding services: The optional simplified method for low value-adding services has been introduced under the draft law published on 16^th July 2018 , which allows the use of simple 5% mark up without a full analysis – 5% at most for services acquired and 5% at least for services provided.

Restriction on interest deduction: A reduction in the percentage of EBITDA limit under the interest deduction restriction rules from 30% to 20% has been made under the draft law published on 16^th  July 2018.