Poland proposes simplified advance pricing agreement program, improved tax dispute resolution

By Monika Laskowska, Partner, PwC Poland

Poland’s Ministry of Finance, on 22 March, presented for public consultation new draft tax regulations that offer taxpayers a simplified unilateral procedure for obtaining an advance pricing agreement (APA) and that would implement an EU directive on tax dispute resolution mechanisms.

Simplified APA regulations

Poland’s draft APA regulations aim to increase taxpayer interest in this kind of tool.

The main benefit of the simplification is a decrease in the documentation required for filing an APA for specific transactions that are considered to have a low risk of eroding the tax base in Poland.

Additionally, APAs would now be accessible to foreign investors that plan transactions with a Polish subsidiary even before the Polish entity is not yet established. Also, under the regulations, fees for APAs remain unchanged.

According to the Polish Ministry of Finance, these low-risk transactions include low value-adding services and royalties paid for tradenames or know-how.

The low-value services definition is aligned with the EU Joint Transfer Pricing Forum definition. However, the taxpayer must prove that the value of services provided to uncontrolled recipients is not more than 2% of low-value services rendered by the service provider.

Generally, for the simplified approach to apply, registered taxable income in two of the last three taxable years must be 1% of revenue. The simplified APA is not binding if, for the first two years, income is lower than 1% of revenue. Another benefit is that the simplified APA will be issued in only three months.

These proposed changes to the general APA procedure create confusion regarding whether cost contribution arrangements can still be covered by APA.

Additionally, the APA procedure was extracted from the general code of conduct (tax code) which should make it flexible; however, not all taxpayer rights were fully replicated in the new regulations.

Polish tax dispute resolution

The draft Polish regulations on tax dispute resolution mechanisms are generally aligned with the EU directive (2017/1852).

The regulations address the treatment of binding court decisions. The regulations also provide that the mutual agreement procedure (MAP) in tax treaties should be implemented when agreed to despite time limitations of tax liabilities.

An advisory committee will not be established in case of intentional tax crimes or gross negligence. Also, the procedure can be suspended until a final court decision is issued in these criminal cases. A special committee was named to nominate members of the advisory committee.

Tax dispute resolution will end if a court issues a final decision and competent authority is informed about it before a MAP is signed.

–Monika Laskowska is a Partner at PwC Poland and leads PWC’s Poland TP practice.

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