Transfer Pricing

New transfer pricing rules applicable from 2017

Lower equity threshold From 2017, related parties are defined as entities having equity interests in other entities of no less than 25%, (versus 5% in 2016). As a result, a substantial group of entities with low equity interests will no longer be obliged to prepare transfer pricing documentation.	I I I I I I I	Note: Taxpayers who exceeded the EUR 2 million threshold in a given year, will be obliged to prepare the transfer pricing documentation also for the following year (even though they may not have reached the EUR 2 million mark in that year
Entities affected by new regulations Taxpayers who exceeded the revenues or expenses threshold of EUR 2 million and a transactions threshold of EUR 50 thousand.
Scope of documentation depending on operations volume New regulations provide specific requirements about what information is to be included in the transfer pricing reporting depending on the revenues/expenses brackets. The new statement Under the new rules, taxpayers will be required to submit a statement that they have prepared the transfer pricing documentation within the time limit for filing of the annual tax return. Regulations regarding the tax havens unchanged The new rules uphold an obligation to prepare transfer pricing documentation (in case of transactions exceeding 20 thousand euro), where a taxpayer makes payments, whether directly or not, to entities established in tax haven countries.

Reporting scope depending on operations volume

Scenario 1 (Revenues/Expenses
EUR 2 to 20 million):

- minimum transactions threshold EUR 50 thousand*

*The minimum transactions threshold of EUR 50 thousand is defined for revenues/expenses of EUR 2 million. This threshold is increased by EUR 5 thousand per each EUR 1 million of revenues in excess of EUR 2 million

Scope of transfer pricing documentation:

1) description of transactions with related parties, including liquidity management agreements, cost sharing agreements:

type and nature of transactions
financial data and cash flows
identification of related parties
description of transaction process, taxpayer functions, balance sheet and off-balance sheet assets, human recourses, risks
method of income (loss) calculation, algorithm used for calculation of settlements

2) description of financial data to allow comparison with financial statements

3) information about the taxpayer, including the description of:

organizational and governance structure
object and scope of business
business strategy pursued, transfers of economically viable functions, assets and risks
competitive environment

4) documents, in particular:

agreements concluded between related parties, partnership agreements, joint venture or similar agreements, documenting rules for granting profit/loss sharing rights
income tax arrangements entered into with tax administrations of other countries

I
I
I
I
I
I

Note:
Taxpayers with income/expenses of more than EUR 10 million or holding interests in non-corporate entities in excess of EUR 10 million also submit a benchmarking analysis based on Polish market data to be updated every three years (as a minimum).

Scenario 2 (Revenues/Expenses
EUR 20 do 100 mln):

- minimum transactions threshold EUR 140 thousand*

*The minimum transactions threshold of EUR 140 thousand is defined for revenues/expenses of EUR 20 million. This threshold is increased by EUR 45 thousand per each 10 million of revenues in excess of EUR 20 million

Scope of transfer pricing documentation: basic scope as for the 20 million threshold, plus:

Information about the group of related parties, including:

indication of related party providing information
organizational structure
description of transfer pricing rules (policies)
activities carried out by the group
description of intangible assets
financial situation of group entities, consolidated statements
income tax arrangements entered into with tax administrations of other countries

I
I
I
I
I
I

Note:
The obligation to prepare information about the group of related entities also applies to taxpayers who are partners of non-corporate entities if the revenues or expenses of such entity exceed a EUR 20 million mark.

Scenario 3 (Revenues/Expenses
in Excess of EUR 100 million):

- minimum transactions threshold EUR 500 thousand

Scope of transfer pricing documentation as for range of revenues/expenses from 20 to 100 million

I
I
I
I
I
I
I
I
I

Note:
The largest entities preparing the consolidated financial statements (ii) having foreign establishments in Poland or subsidiaries, (iii) whose consolidated revenue earned in Poland and abroad exceeded EUR 750 million, are additionally required to submit a statement of the amount of income tax and places of business, subsidiaries and foreign establishments forming the group.

For more information please call us at 604 235 897 or send us an email at mtarnowska@mtca.pl.