5 February 2021

Transfer pricing TPR – new deadlines and obligations in 2021

From January 1st, 2021, the transfer pricing reporting obligation has been expanded to include two new types of transactions. There is also a new deadline for submitting TPR information for entities closing the tax year by January 31st, 2021. With this in mind, we would like to remind you about the significant aspects regarding transfer pricing in Poland.

Transfer pricing– definition

Transfer pricing are rates agreed between related parties for the goods, services, or ownership rights. In practice, prices are used during the income transfer within an international capital group, most often across national borders. The transnational groups are required to report Country-by-Country (CBC) to provide the tax administration with information on the size of their activities, revenues, profits (or losses), the amount of tax due, and the subject of business activity.

Companies belonging to the capital group with an annual turnover exceeding 750 million EUR should submit a notification (CBC-P) within three months from the end of the financial year. The reporting unit and the country, in which the information about the group of entities will be submitted, should be indicated as well. Note that in 2019, the information on transfer prices form, TPR, replaced previously applicable CIT-TP and PIT-TP forms.

New deadlines for submitting TPR information

Information on transfer pricing must be submitted to the National Revenue Administration within nine months from the date of the tax year closing. The management board of the entity is required to submit a declaration concerning the preparation of local transfer pricing. Both information can be submitted only electronically.

According to the amendment to the act counteracting the effects of the COVID-19 pandemic under Shield 4.0, the deadlines for reporting transfer pricing and TPR documentation have been extended by an additional three months. Therefore, on December 31st, 2020, there was a new deadline for companies whose tax year ended on December 31st, 2019, and the documentation obligation was for the period between March 31st and September 30th, 2020. Companies for which the statutory period of nine months expired between October 1st, 2020, and January 31st, 2021, has received an additional three months to fulfill their obligations – via electronic TP-R form.

The deadline for TP documentation for 2020 has not yet been changed – it expires on September 30th, 2021.

Please keep in mind that the market conditions of transactions in 2020 have changed in many industries due to COVID-19. Therefore, we recommend paying attention to whether the benchmarking analysis remains valid.

Transfer pricing – reporting

The obligation to prepare documentation will arise if the value of homogeneous transactions carried out by the taxpayer with related entities exceeds the statutory thresholds: 10 million PLN (for commodity and financial transactions) and 2 million PLN (for service transactions and other unclassified).

Information on TPR transfer pricing includes reporting:

• controlled transactions subject to the obligation to prepare local transfer pricing documentation;
• controlled transactions exempt from the obligation to prepare local transfer pricing documentation under art. 11n point 1 of the Law;
• receivables payable to entities established in countries and dependent territories applying harmful tax competition and contracts concluded with these entities, referred to in art. 11o paragraph. 1 of the Law.

New instances that need to be reported

The amendment, which entered into force on January 1st, 2021, extends the documentation obligation to:

• transactions other than controlled transactions, carried out with an entity residing with its registered office or management board in the territory or a country applying harmful tax competition, if the value of this transaction for the tax year, and in the case of companies that are not legal persons – for the financial year, exceeds 100 000 PLN net (approx. 25 000 EUR net),
• controlled transactions or other transactions, if the beneficial owner of the receivables has a place of residence, seat, or management in the so-called tax haven, and the value of such a transaction in the financial year exceeds 500 000 PLN net (approx. 110 000 EUR net).

The said documentation must additionally contain a benefit test, in particular a description of the expected economic benefits, including tax benefits.

Each transaction exceeding an annual value of 500 000 PLN should go along with verification whether the contractor or the beneficial owner has no further connections (in terms of capital transfer) with the tax haven.

Additional definitions

Beneficial owner – an entity that meets all of the following conditions:

• obtains the receivable, decide independently regarding its use, and bears the economic risk related to the loss of the receivable or its part;
• is not an intermediary, representative, trustee, or other entity legally or factually obliged to transfer all or part of the receivables to another entity;
• conducts it’s actual economic activity in the country of the company’s headquarters, if the receivables are obtained in connection with the conducted activity.

Tax haven – a country that uses harmful tax competition in the field of corporate income tax. The regulation of the Minister of Finance (Journal of Laws of 2019, item 600) explicitly defines 26 countries as tax havens. The full list is available on the website of the Ministry of Finance. Also, the list of tax havens was supplemented with seven new territories following the Announcement of the Minister of Finance on July 7th, 2020 (Ministry of Finance of 2020, item 614).