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Revolutionary changes to Polish TP rules

Ewelina Stamblewska-Urbaniak 04 Nov 2015

The amendments reflect recent developments in the field of transfer pricing rules elaborated by the OECD and the EU. Especially, the Polish companies will face new and extended obligations in the field of transfer pricing documentation. What is important is that the new regulations will indirectly affect also multinational enterprises (MNEs). In this respect, Polish companies will be obliged to get specific information on transfer pricing policy and intercompany transactions of the group as a whole.

This issue seems to be quite challenging for all concerned entities.

As from 2017 Polish transfer pricing documentation will consist of three parts involving also information from foreign entities related with the Polish company (particularly item 2 below):

1. Local file (local documentation) – detailed information on transactions concluded between Polish entity and its related entities within the group,
2. Master file (group documentation) – high level information regarding the group as a whole, including in particular organisational structure of the group, transfer pricing policy, description of the group’s business activity, description of the financial situation of the group, description of pricing arrangements concluded (note that the Master file will be applicable by larger entities exceeding a certain threshold),
3. Country-by-country reporting – aggregated group-level information covering income, tax paid and scale of activities conducted by the entities of the group in various countries; importantly  (requirement only for the largest groups in which the parent company is seated in Poland).

Apart from abovementioned changes in transfer pricing documentation, there are some other amendments such as:

• increase of threshold of share capital for related entities from the currently 5% to 25%,
• covering partnerships with documentation requirements,
• modifying value threshold for documentation requirements,
• introducing benchmarking studies as obligatory for companies having at least EUR 10m revenue / expenses in the previous year,
• new regulations on advanced pricing agreements.

From an international perspective, the most urgent issue concerns the Master file as its preparation will require a close cooperation between the Polish company and its related entities in the group.

The new laws are consistent with the OECD BEPS Project.

It is very clear that transfer pricing became one of the most important items on the priority list of Polish tax authorities. We see increasing numbers of tax audits taking place along with meaningful structural changes in the tax administration. Namely, the Ministry of Finance established so-called competency centres that aim at detecting tax areas that might have impact on tax avoidance and – in consequence – reduce state revenues. This also covers transfer pricing as a particular field of tax authorities’ interest.

Moreover, as a part of this new approach, the Ministry of Finance also succeeded to introduce revolutionary changes in transfer pricing rules.

Taxand's Take

In our view, the new regulations might be quite challenging for MNEs. As from 2017, Polish companies will have to request from their related entities (seated all over the world) various information on the group for Master file purposes. Since foreign jurisdictions might not have the same requirements, gathering a complete set of information will most probably become difficult. Although the Master file will only be obligatory for Polish companies having at least EUR 20m revenue / expenses in the previous year and concluding a single transaction / event worth at least EUR 140k, according to our analysis the potential list of involved entities is quite long.

Article tags

Poland | TP & Business Restructuring