by Dr. Monika Laskowska, Center of Tax Analyses and Studies, Warsaw School of Economics
On 28 June, Poland’s Ministry of Finance launched plans for taxpayer-friendly amendments to the transfer pricing regulations. Most of the changes relate to regulations introduced in 2019 that have been the subject of criticism from practitioners.
Although the wording of the regulations has not yet been final, the announced plan includes a general overview of the proposed changes.
Negative transfer pricing adjustments
The Ministry of Finance has decided to introduce changes concerning negative transfer pricing adjustments, i.e., those that decrease the taxable base in Poland.
Under the regulations that entered into force in 2019, it is almost impossible to make a year-end transfer pricing adjustment that decreases the taxable base in Poland. The 2019 regulations introduced an “ex ante approach” in determining the transfer prices that does not allow correcting a price that was set too high at the beginning.
The planned amendments would change these controversial provisions.
Avoiding double reporting
Constant changes to the transfer pricing regulations over the last few years have resulted in instances of duplicate reporting of the same information in different filings.
The Ministry of Finance has decided to review the double reporting and eliminate the most significant redundancies.
Permanent establishment
The Ministry of Finance’s plan would also exempt from transfer pricing documentation requirements two situations relating to permanent establishments in Poland.
The first situation involves dealings between two permanent establishments in Poland that have related head offices. The second situation concerns dealings between a permanent establishment in Poland and another entity in Poland associated with the same head office.
The issue of preparing transfer pricing documentation for dealings between permanent establishments and other associated entities is highly controversial with respect to the regulations relating to attribution of profits to permanent establishments. The unfortunate provisions introduced in 2019 can be interpreted as requiring formulary attribution of profits, which was confirmed by the lower-level tax court.
There are no suggestions for changes with respect to the attribution of profits to permanent establishments. The changes only address associated documentation requirements.
Additional exemptions from transfer pricing documentation requirements
The Ministry of Finance has proposed a couple of additional exemptions from transfer pricing documentation requirements. This includes, for example, transactions covered by safe harbor regulations and transactions covered by advance pricing agreements or decisions issued in the program of cooperative compliance.
Conclusions
Most of the proposed changes respond to criticism of some of the regulations introduced in 2019. It is a welcome development that the Ministry of Finance is taking into consideration practitioner input, which was mostly expressed through the Polish Transfer Pricing Forum.
Monika Laskowska is a tax professional with extensive experience in transfer pricing and international taxation.
Monika served as Tax Partner in one of the Big 4 firms in Poland. She has over 20 years of experience in transfer pricing and international taxation with broad experience in supporting clients by giving pragmatic solutions in tax controversy and tax audit situations.
For almost a decade Monika served as Competent Authority in transfer pricing and double taxation cases in the Polish Ministry of Finance.
She was the country delegate for Working Party 6 in the OECD (for transfer pricing matters) and for the European Joint Transfer Pricing Forum. Monika holds a Ph.D. in political science and now is associated with the Center of Tax Analyses and Studies, Warsaw School of Economics
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