New transfer pricing regulations in Poland in force since January 1st, 2017

Transcription

1 New transfer pricing regulations in Poland in force since January 1st, 2017 November 15th, 2017 Marta Klepacz and Agnieszka Krzyżaniak 1 Taking control of the future tpa-global.com

2 Presenters Agnieszka Krzyżaniak Manager in Transfer Pricing Group, MDDP tel. (+48) (22) Marta Klepacz Transfer Pricing Senior Consultant, MDDP tel. (+48) (22) Taking control of the future tpa-global.com

3 Breaking TP news in Poland 18th of September published final Regulation of the Minister of Finance of the information to be included in transfer pricing documentation National Revenue Administration (NRA) plans to create Transfer Pricing Forum a platform for discussion about transfer pricing between tax administration and business, the world of science and NGOs constant discussion platform meeting at least 2 times per year Preliminary draft budget act for 2018 year predicts increase of income taxes, including transfer pricing from tax collection system A Ministry of Finance has set up new Department for Transfer Pricing and Valuation responsible for: forming the Ministry of Finance s policy in the area of transfer pricing preparation of proposals of system solutions development of guidelines for taxpayers and ensure uniform application and interpretation of regulations database for transfer pricing analysis / valuation 3 Taking control of the future tpa-global.com

4 New TP documentation obligations Values expressed in EUR currency are converted into PLN currency at the exchange rate published by the National Bank of Poland at the last business day of the tax year preceding the tax year for which the TP documentation is applicable (for 2017 year EUR exchange rate on 30 December 2016 year = PLN 4,4240) No TP obligations CbC Reporting Master File Benchmarking study + CIT-TP form * Local File + statement confirming that the Local File is prepared (8,848) (44,240) (88,480) (3 318) The amount of income/costs in the previous tax year meur mpln value for year Taking control of the future tpa-global.com

5 Statutory TP deadlines from FY 2017 Local File* and benchmarking studies*** CIT TP form Statement confirming that Local file is prepared Master File **** Local File** 31st Dec st Mar Mar Submission of CIT 8 statement in Poland Approval of the financial statement + 10 days 31st Dec LEGEND: Assumptions: Calendar year = Tax year * Without financial data description (Article 9a par. 2b, point 3 of Corporate Income Tax Act) ** Supplementation of the description of the financial data (Article 9a par. 2b, point 3 in Corporate Income Tax Act) *** Exceeding EUR 10 m of revenues/ costs in the previous year **** Exceeding EUR 20 m of revenues / costs in the previous year 5 Taking control of the future tpa-global.com

6 TP documentation obligation transaction limits Transaction limits (till 31 December 2016 year) Transaction limits (since 1 January 2017 year) EUR 100k - the value of the transaction does not exceed 20% of the capital share of the party to the transactions EUR 30k provision of services, sale, share of intangible assets EUR 50k other types of transactions EUR 20k transactions with entities from tax heavens Revenues / costs < EUR 2m no obligations related to transfer pricing documentation Revenues / costs > EUR 2 m TP documentation obligations Transaction thresholds: Revenues <EUR 2-20 m > from 50k EUR (increased by 5k EUR for every 1 m EUR of revenues over 2 m EUR) Revenues <EUR m> from EUR 140k (increased by EUR 45k for every EUR 10 m revenues over EUR 20 m) Rvenues > EUR 100 m EUR 500k. 6 Taking control of the future tpa-global.com

7 Transaction threshold for the tax year [keur] Transaction thresholds from FY Revenues of the taxpayer for the year preceding the tax year [meur] 7 Taking control of the future tpa-global.com

8 Local file documentation Exeptions Transactions in which prices are set by public regulators What it covers? LOCAL FILE Transactions and other events (e.g. liquidity management, joint ventures, consortium, company agreement, business event affecting on the financial result e.g. restructuring, CCA agreements) Deadlines Who is obliged? Taxpayers (and partnerships), whose revenues or costs (according to Accounting Act) in the previous tax year -> EUR 2 m Preparation till the date of submission of the annual tax return (& financial data description 10 days from approval of the financial statement) Submission: 7 days upon request 30 days upon request transaction below TP limits 8 Taking control of the future tpa-global.com

9 Local file documentation crucial areas General part of Local File Information about taxpayer: organizational and management structure subject and scope of activities business strategy (including restructuring) competitive environment Financial data related to taxpayer Documents: related to transaction (agreements, and other documents) Agreements concluded with tax administrations (e.g. APA) Transfer of significant functions, assets, risk influencing profit/loss of the taxpayer, conducted in previous or current tax year Comparison of settlements on income / loss of the taxpayer with point in the approved financial statements Method and manner of calculation of income / loss of taxpayer + justification + algorithm Current for the particular tax year 9 Taking control of the future tpa-global.com

10 Local file documentation crucial areas Transactional part of Local File Transaction value resulting from: - issued / received invoices / contracts - received / transferred payments Description of IC-transaction or other event: Type and subject of the transaction Financial data related to the transaction Identification data of parties Description of the transaction Method and the manner of calculating income / loss of taxpayer + justification + algorithm Actual data at the beginning or at the end of the tax year Separate functional analysis for each type of activity Functional profile Balance sheet and offbalance sheet assets Human capital Impact of settlements on income / loss of the taxpayer Benchmarking analysis* 10 Taking control of the future *Justification for lack of information indicated in the TP Regulation What is the description of comparability? Comparable data, data sources Annual or multiannual data Justification for TP adjustments

11 Benchmarking analysis Exeptions Transactions in which prices are set by public regulators Who is obliged? Taxpayers (and partners of partnership), whose revenues or costs (according to Accounting Act) in the previous tax year exceeded > EUR 10 m BENCHMARKING ANALYSIS What is it? Deadlines An element of Local File, which is justification for the arm's length prices. Can be prepared in two variants: internal or external comparison. In any of two above variants can t be applied, a description of the compliance of the terms of the transaction with the market conditions should be applied Preparation and submission: together with Local File documentation 11 Taking control of the future tpa-global.com * Source: BEPS Action 13 Country-by-Country Reporting; Handbook on Effective Tax Risk Assessment

12 Benchmarking analysis- cont. Internal comparison Internal comparison - comparison of prices used in the analyzed transaction with prices used by the taxpayer in similar transactions with independent entities BENCHMARK ANALYSIS External comparison External comparison - comparison of prices used in the analyzed transaction with prices used by independent entities on the market carrying out activity comparable to the taxpayer Problems with using group benchmarking analysis primarily including Polish entities, if available the content of the benchmarking analysis report should address all Polish regulations updated once in three years 12 Taking control of the future tpa-global.com

13 CIT-TP / PIT-TP Who is obliged? Taxpayers (and partners of partnership), whose income or costs (according to Accounting Act) in the current tax year exceed -> EUR 10 m CIT-TP/PIT- TP The purpose of the introduction The statement enables tax authorities to type tax payers and the transactions to be subject of the potential tax control in the field of transfer pricing Deadlines What is it? by the date of submission of the annual tax return A separate simplified statement on transactions and other events between related entities Submitted as the attachment to the tax return. 13 Taking control of the future tpa-global.com

14 Simplified statement on transactions and other occurrences between related entities (CIT-TP) The main issues: more then 140 items to fill the information is divided into 6 main categories: A. Data identifying the taxpayer B. Identification of taxpayers TP relationships with related parties C. Information about related entities D. Main taxpayer's business activity and functional profile E. Restructurings F. Related party transactions or other events (divided into 6 subcategories) 14 Taking control of the future tpa-global.com

15 Master file What is it? Information about the group of related entities MASTER FILE Who is obliged? Taxpayers (and partnerships) whose revenues or expenses (according to Accounting Act) in the previous tax year > EUR 20 m Deadlines Until the date of submission of the tax return by the Group entity preparing the Master File 15 Taking control of the future tpa-global.com

16 Master file - crucial areas Information about entity Group description Transfer Pricing policy Group activity Main activities Description of intangible assets Financing Advance pricing agreement Entity oblied to prepare? Date of submission of its tax return Organizational structure Services Intangible assets Financing activities Other Geographic markets Business factors Significant value-added chains Restructuring events Possession Creation Developing Exploitation Changes during the year Financial situation External financing List of significant external loans and credits Other CIT agreements outside Poland 16 Taking control of the future tpa-global.com

17 Country-by-Country reporting according to Polish regulations What is it? Sanctions? The cash penalty imposed by the Head of the NRA in the amount of PLN 1 m Information about a group of related entities Who submits? The main entity in the Group or other entity appointed within the group to submit a CBC report Form? Electronic (model template - not available online yet) CBC report Who is obliged? Capital Groups: Consolidated revenues in the previous financial year > EUR 750 m To whom the form should be submitted? To the Head of the NRA Information about: - the global allocation of profit in the group - the amount of taxes paid in each country - location and type of economic activity What covers? 17 Taking control of the future tpa-global.com

18 CBC report deadline for submitting* Deadline Submission of the CBC report for FY months from the end of the financial year st Jan st. Jan st Dec st Dec Submission of the CBC report FY 2016 by taxpayers with a financial year beginning January 1st, 2016 and ending December 31st, 2016 * Assumption: fiscal year = calendar year If the financial year covers a different period, the deadlines for submitting the CBC report are respectively changing 18 Taking control of the future tpa-global.com

19 CBC notification Starting Point Determine EBIT% Sanctions? The cash penalty imposed by the Head of the NRA in the amount of PLN 1 m What is it? Key People Functions Allocation of EBIT% Notification about an obligation of CBC notification submission CBC NOTIFICATION Who is obliged? Entities belonging to capital groups that are subject to the obligation to submit information about a group of entities (CBC report): - Polish entity being a participant of group of entities - PE ("plant") in Poland Form? To whom submit? Interactive form in epuap platform (CBC-P) - submitted electronically or in writing form directly to the Head of the NRA To the Head of the NRA 19 Taking control of the future tpa-global.com 19

20 CBC notification - deadline for submission* Deadline Transitional period: Deadline for the first year -> 10 months after the end of the financial year General principle: Deadline -> last day of the financial year Obligation to submit a CBC notification for FY 2017 (covering period January 1st, 2017 and ending December 31st, st Jan st. Jan st Oct st Dec st Dec Transitional period Obligation to submit a CBC notification for FY 2016 (by taxpayers with a financial year covering period January 1st, 2016 and ending December 31st, 2016) * Assumption: fiscal year = calendar year If the financial year covers a different period, the deadlines for submitting the CBC report are recpectively changing 20 Taking control of the future tpa-global.com

21 Areas of interest of Polish tax authorities Shared service centers AREAS OF INTEREST OF TAX AUTHORITIES Licenses fees especially related to transactions with entities from tax havens Intangible services particularly management fees Restructuring Group financing transactions 21 Taking control of the future tpa-global.com

22 Tax audits In 2016 in comparison to 2015, the number of tax audits regarding transfer pricing issues increased by 36% (commenced) and 119% (ended). Compared to 2015, in the year 2016 the controlled taxpayers made an estimation of their income by: Increasing number of transfer pricing tax audits is one of the most important task of the tax administration for next years. Reduction of losses in terms of tax optimization PLN 88 m in 2015 and PLN m in 2016 (an increase of 2 500%!) Reduction of losses - in transfer pricing area: PLN 5,3 m in 2015 to PLN 458,6 m in 2016 (an increase of 8 500%!) Determination of tax liability on tax optimization: PLN 23,8 m in 2015 and PLN 779,7 m in 2016 (an increase of 3 200%!) Determination of tax liability in transfer pricing area: PLN 5,4 m in 2015 and PLN 166,1 m in 2016 (an increase of 2 950%!) Taking control of the future tpa-global.com

23 Summary of Polish transfer pricing legislation in force since January 1st, Taking control of the future tpa-global.com

24 Q&A Question: Do you still need to provide a notification if the MNE parent elects a surrogate entity to file in another country which has a multilateral agreement signed with Poland? Yes, in this case you still need to provide a CbCR notification. All the entities, including dependent entities located in Poland and permanent establishments operating in Poland, which are part of the group whose consolidated revenues exceeded EUR 750 m should submit the CbCR notification regardless of role of entity in filing CbCR. Question: Furthermore, if a notification was filed, and now the reporting entity has changed, what is the timeline to change that notification? As we understand, the question concerns the CbCR notification which was already submitted for FY Such situation is not regulated in Polish legislation. However, in such case in our opinion taxpayer should notify Head of the National Revenue Administration about the change of reporting entity filling CBCR report for FY 2016 as soon as possible. In this respect Polish taxpayer should submit the new data of the reporting company in the amended CBC notification and explain the reason of changes in the CBC notification form. 24 Taking control of the future tpa-global.com

25 Q&A Question: Can you please address the concept of the multilateral agreements, and how this works with Poland before the end of the webcast if possible? I think this will play a critical role for a number of taxpayers. On 7 June 2017 Poland signed o the Multilateral Convention to implement tax treaty related measures to prevent BEPS (so called MLI ). The goal of the MLI is to allow signing parties to amend currently in force double tax treaties (DTT s) without time-consuming mutual negotiations. Poland has provided an initial list of the of the DTTs that it wishes to be subject to MLI. Out of the 89 DTT s concluded by Poland, 78 DTT s were Covered Tax Agreement. Poland is already in the process of renegotiation of some of the DTT s and those are likely to be deal separately. Recently in Poland MLI was implemented into the law. The MLI will come into force after 3 months after 5 countries will ratify it - at this stage Poland is the 3rd country. In reference to respective DTT agreements, both countries must ratify MLI and special procedures must be kept in order to apply MLI. 25 Taking control of the future tpa-global.com

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