Transfer pricing – simplifications from 1 December 2020

Taxpayers who ended the fiscal year on 31 December 2019 and are obliged to prepare transfer pricing documentation have to perform this obligation by the end of the year:Anti-Crisis Shield 4.0 – extension of transfer pricing deadlines

Transfer pricing 2020 – major changes

The simplifications introduced as of 1 December concern the following issues:

• TP statements – simplification in respect of the signing of the statement on preparation of transfer pricing documentation

Related entities which prepare local transfer pricing documentation are also obliged to submit a statement on preparation of such documentation. According to the CIT Act, this statement is to be signed by the head of the unit in the meaning of the Act on Accounting, and if several individuals meet the definition of the unit head or such an individual cannot be identified, then the statement is to be filed and signed by all authorised representatives.

The simplification introduced with the amendment to the legal regulations makes it possible for the statement to be signed by authorised representatives, which is particularly important in the case of entities having management boards composed of more than one person.

It has to be noted that this simplification concerns statements filed for the financial year or at the time when the state of epidemic threat or epidemic announced in relation to COVID-19 existed throughout Poland. What is important, the statement still cannot be signed by a proxy.

• TP adjustments – discharge from the obligation to have a statement on the adjustment from the related entity

Pursuant to the applicable legal regulations, in order to make a transfer pricing adjustment, when making the adjustment, apart from meeting the other conditions set out in the act, it is necessary to have a statement of the related entity that the entity made a transfer pricing adjustment in the same amount as the taxpayer.

Starting from 1 December 2020, on the other hand, taxpayers are discharged from the obligation to have such a statement, if they make the adjustment for the fiscal year or at the time when the state of epidemic threat or epidemic announced in relation to COVID-19 existed throughout Poland.

• Discharge from the obligation to prepare documentation for domestic transactions – tax loss condition not applied

In accordance with the provisions of the CIT Act, only entities executing domestic transactions in which each of the entities meets specified conditions, including showing no tax loss, may be discharged from the obligation of preparation of transfer pricing documentation.

The amended regulations state that the condition concerning the tax loss in the fiscal year starting after 31 December 2019, during which the state of epidemic threat or epidemic announced in relation to COVID-19 existed throughout Poland, does not apply, if the total revenues earned in that year by the related entity which does not meet this condition are lower by at least 50% than the total revenues earned during an analogous period directly preceding that year.