Tax documentation – transfer pricing

The limit of shares or stocks from which the duty to prepare tax documentation arises was increased from 5% to 25%. From 1st January 2017, the duty to prepare tax documentation applies to the following  entities:

1) which run a non-agricultural business or special agricultural production, who/which in the fiscal year and in the year preceding the tax year were running accounting ledgers:

1. a) who/which in the tax year had transactions with related entities of a significant

impact on the amount of their income (loss), or

1. b) who/which in the tax year recognized in the accounting ledgers other events, whose

terms were set out (or imposed) with related entities, of a significant impact on the

amount of their income (loss),

– whose revenues or costs, as understood by the provisions on accounting, established based on the accounting ledgers run exceeded in the year preceding the tax year, the equivalent of Euro 2,000,000 (or else in the case of tax payers starting up non-agricultural business or special agricultural production – from the month following that when  revenues or costs, as understood by the provisions on accounting, established based on the accounting ledgers run exceeded the equivalent of Euro 2,000,000 or,

2) which pay, directly or indirectly, the amounts due to an entity, having its place of residence, registered office or management board in the territory or in the country that applies harmful tax competition, arising from transactions or other events recognized in the accounting ledgers if the total amount (or its equivalent) of the contract or the total amount due in the fiscal year actually paid in the tax year exceeds the equivalent of EURO 20,000, or

3) which conclude with an  entity being resident, having  registered office or its management board in the territory or in the country that applies harmful tax competition:

1. a) a contract of partnership not being a legal person, if the total value of the contributions brought by shareholders exceeds the equivalent of EUR 20,000 or
2. b) a joint venture contract or another contract of a similar nature, in which the value of the project to be jointly implemented, set out in the contract or else when lacking in the contract but anticipated at the moment the contract is concluded, exceeds the equivalent of Euro 20,000.

The tax documentation is to be made for a given tax year, in the deadline for drawing up financial statements for a given year. If in a given year, the duty to draw up the documentation arises, it passes to the next year, regardless of the value of turnover in the other year. The taxpayer will declare whether they were under the obligation of drawing up tax documents, and whether such documentation was drawn up together with the annual CIT / PIT returns.

The tax documentation shall contain:

1) a description of the transactions or other events with the particulars of the parties engaged in the transactions, the assets involved, the risks borne,

2) a description of such  taxpayer’s financial particulars to make a settlement comparison possible with the data, arising from the approved financial statements, if the obligation to draw them up results from the accounting regulations, binding the taxpayer or the company;

3) the information on the taxpayer, including a description of:

1. a) their organizational and management structure,
2. b) the object and scope of their business,
3. c) economic strategy undertaken, the transfers between related parties of economically important functions, assets and risks, affecting the taxpayer’s income (loss) included which were carried out in the fiscal year or in the year preceding the fiscal year,
4. d) the competitive environment;

4) documents, in particular:

1. a) contracts, agreements concluded between related parties or other documents of transactions or other events referred to in Article 25a subparagraph 1 of PIT Act or Art. 9a subparagraph 1 of CIT Act, a contract of partnership not being a legal person, a joint venture contract or similar ones, that document the rules for granting rights to shareholders (the contracting parties) to participate in the profits or in losses,
2. b) understandings on income tax concluded with tax offices of countries other than the Republic of Poland related to transactions or other events referred to in subparagraph 1, in particular, earlier price understandings. Additionally, in the event of large taxpayers ( with turnover in excess of the equivalent of EURO 10,000,000 and 20,000,000) the provisions provide for additional data. These entities will have to draw up and file together with the tax return an annual simplified report on transactions with related parties or other events that occur between related parties, or with reference with which the amounts shall be paid directly or indirectly to a person having its place of residence, seat or management board in the territory or in a country which applies harmful tax competition.