Starting from 2022 the taxpayers will have to deal with further changes in the area of transfer pricing. Documentations prepared for 2021 will have to include not only transactions with related parties and settlements made directly with entities from tax havens (as before), but also a large part of transactions with unrelated parties.
What is new in the transfer pricing regulations
Starting from 2022 (so for transactions realized in 2021) taxpayers will be obliged to prepare local transfer pricing documentation:
- performing transactions with an unrelated entity with a place of residence, registered office or management in a territory or country applying harmful tax competition, if the value of this transaction exceeds PLN 100,000 during a tax year,
- performing transactions with a related or unrelated entity, if the actual owner of the receivables has a place of residence, registered office or management in a territory or country applying harmful tax competition and the value of the transaction exceeds PLN 500,000 during a tax year.
The above means that each settlement of our contracting party with the tax haven entity may be treated as a tax haven transaction. It means any transaction – e.g. purchase of electronic equipment – realized by our counterparty with one of the countries recognized as tax haven – e.g. Hong Kong (list of tax havens is presented at the bottom of the material). Then, if our settlements with the contractor exceed PLN 500 thousand in a given tax year, the taxpayer is obliged to prepare transfer pricing documentation.
Presumption concerning tax haven entity
What is important, the legislator has introduced a presumption that the beneficial owner has a place of residence, registered office or management in the so called tax haven in a situation when our counterparty makes settlements with an entity having its registered office in the tax haven. It means that any settlements of the contracting party with an entity from the tax haven are sufficient to apply the presumption that this entity is a real owner in this case.
The presumption is applied in a situation where it is confirmed that the other party to the transaction exceeding the value of PLN 500,000 (our contractor) makes settlements with the tax haven entity directly.
In determining these circumstances, the legislator requires taxpayers to exercise due diligence.
How to exercise due diligence while verifying settlements of a counterparty?
In order to exercise due diligence it will be necessary to obtain a statement from the counterparty confirming that it does not make any settlements with the tax haven entity in a given tax year.
In the case of transactions with related parties, due diligence means, in addition to obtaining the aforementioned statement, verification of information available in connection with the relationship, i.e. transfer pricing documentation, financial statements, ownership structure.
The statement should be obtained ex post, i.e. after the end of the taxpayer’s fiscal year. We suggest that the parties undertake to mutually submit the statements in question as part of their agreements with counterparties.
Scope of documentation and deadlines
In case of detection of tax haven transactions performed with unrelated entities, taxpayers will be exempt from the obligation to prepare benchmarking studies. At the same time, apart from the necessity to verify the beneficial owner, the taxpayer will be obliged to prepare local file documentation and submit a TPR report.
The new regulations will apply to documentation covering the year 2021. According to the amendments resulting from the so-called Polish Deal, the deadline for preparation of documentation for 2021, which includes e.g. tax haven transactions, falls at the end of the 10th month after the end of the tax year (for taxpayers with tax year coinciding with the calendar year it will be the end of October 2022).
List of tax havens
|Principality of Andorra||Anguilla – Overseas Territory of the United Kingdom of Great Britain and Northern Ireland||Antigua and Barbuda|
|Sint-Maarten||Curaçao – countries included in the Kingdom of the Netherlands||Kingdom of Bahrain|
|British Virgin Islands – Overseas Territory of the United Kingdom of Great Britain and Northern Ireland||Islands Cook – Self-Governing Territory Associated with New Zealand||Dominica|
|Grenada||Sark – Dependent Territory of the British Crown||Hong Kong – Special Administrative Region of the People’s Republic of China|
|Republic of Liberia||Macau – Special Administrative Region of the People’s Republic of China||Republic of Maldives|
|Republic of Marshall Islands||Republic of Mauritius||Principality of Monaco|
|Republic of Nauru||Niue – Self-Governing Territory Associated with New Zealand||Republic of Panama|
|Independent State of Samoa||Republic of Seychelles||Saint Lucia|
|Kingdom of Tonga||Virgin Islands – United States Unincorporated Territory||Republic of Vanuatu|
|Republic of Fiji||Guam||Cayman Islands|
|Republic of Palau||Sultanate of Oman||Republic of Trinidad and Tobago|
Accace strongly recommends analyzing your business activity to see if the new rules could potentially affect your settlements and, therefore, how to determine due diligence process for verifying contractors.
If you need more information on changes in transfer pricing regulations and their impact on your business, please contact us.
Phone: +48 22 313 29 50