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Another revolution in TP – the consultations stage is over

2018-09-20

On 27 August 2018, a report was published on the Government Legislative Centre’s portal from the public consultations of the bill amending the Personal Income Tax Act, Corporate Income Tax Act and certain other statutes, in which the Ministry of Finance responded to the remarks made during the consultations.

One of the most important issues mentioned in the report is undoubtedly the lifting of the obligation to draft tax documentation regarding transactions between domestic entities. However, the exemption from the documentation obligation is only to apply to the taxpayers that have generated taxable income in a given fiscal year. Hence, if one of the entities in question makes a loss – the exemption will not apply. The Ministry of Finance emphasises the fact that not having to draft the tax documentation does not release one from the obligation to apply market prices.

The announced changes merit positive assessment, particularly in view of the fact that transfer pricing regulations aim at preventing transfers of incomes between different tax jurisdictions.

Other remarks approved during the consultations include:

  • Resignation from the intended reduction (from 30% to 20%) of the threshold for the calculation of debt financing surplus mandatorily exempted from tax-deductible costs;
  • Indication that transfer-pricing evaluation methods are to be used to verify the compatibility of transaction terms with market prices rather than to the determination of prices by taxpayers;
  • Specification of the bases for controlled transaction value thresholds and their aggregation, as well as the manner in which a transaction is recalculated in the absence of a payment and invoice;
  • Indication of the criteria for a tax authority refusing to recognise or redefine a transaction – to be set out in an implementing regulation;
  • Clarification of the rules for signing the statements on drafting of tax documentation in case of joint representation - the current provisions are not unambiguous in whether such statement must be signed in accordance with the representation rules or whether it is sufficient for one authorised individual to sign it;
  • An assumption that comparative data analyses carried out by taxpayer in accordance with the regulations in force since 2017 will be valid for the 3 subsequent years.

Given that the Ministry of Finance is still working on the bill, its ultimate wording can differ from the current version. However, an analysis of the report shows that many remarks and postulates made during the consultations will be approved.

The bill has now been passed on to the Legal Committee.

Anna Skórska, Tax Consultant, ATA Tax Sp. z o.o.

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