On 14 November 2018, President of Poland signed an act including amendment of transfer pricing measures effective in 2019. The new laws repeal the Article 9a of the CIT Act regarding transfer pricing, which is being replaced by Chapter 1a, addressing comprehensive changes in this respect.
The following items will be considered under the new transfer pricing measures.
- Arm’s length principle-The new rules provide for related companies to complete transactions based on market conditions. In addition, the responsible persons must confirm that the conditions applicable to related parties are compatible with the arm’s length principle.
- Transfer pricing adjustments- The new rules address the ability of making transfer pricing adjustments. The taxpayer may make an adjustment if all the criteria specified in the law are met. However, the adjustment may not be possible if the counter-party is domiciled in a country with which Poland has not concluded a double taxation agreement or any other agreement that forms the basis for the exchange of tax information.
- Amended definition of related parties-The definition of related parties will be broadened under the new law in a way that threshold of “at least 25% ownership stake” (for determining which entities can be considered to be related parties) will also apply to instruments other than shares. Thus, related-party relations could be determined, for example, by reference to participation units or investment certificates held. Thus, for instance, investment funds may be found to be related parties.
- Transfer pricing documentation-The new law explicitly defines the purpose, beyond the formal framework, of the transfer pricing documentation. In general, the transfer pricing documentation must demonstrate that the terms of the transaction under review coincide with those of independent parties. The new approach is reflected in the obligation to produce a bench-marking analysis or, in the absence of comparable data, a simplified compliance analysis for each documented transaction.
- New reporting rules-Taxpayers will be required to provide information about related party transactions in a new form called TP-R, which replaces the CTA TP form. TP-R requires a much broader range of information, including the structured and specified presentation of the results of bench-marking studies.
