This is to alert you to the publication of Finance Ministry’s official guidance on transfer pricing adjustments (“Guidance”), which refers to the transfer pricing adjustment regulations in force as of 1 January 2019 (specifically, Article 11e of the CIT Act and Article 23q of the PIT Act).
See our newsletter 58/2020 for an outline of the previously published draft of the Guidance.
Below you will find the most important matters explained in the Guidance:
- A transfer pricing adjustment is made to ensure that a transfer price applied with respect to a given settlement period is arm’s length.
- The regulations of the Article 11e of the CIT Act and Article 23q of the PIT Act pertain only to the transfer pricing adjustments made with respect to the transactions which were originally at arm’s length.
- A transfer pricing adjustment has a retroactive character – it adjusts a result earned in specific settlement period.
- A transfer pricing adjustment should generally be made before submission of the annual tax return for the year in question and should not refer to any period longer than one tax year.
- In the case of in minus transfer pricing adjustments, the taxpayer should hold a representation of the related party that the latter has made a corresponding adjustment for the same amount (a “TP adjustment representation”).
- When making a TP adjustment ex post, the related parties should strive to apply the same method they used to determine their transfer price ex ante. Any change of method is possible by way of exception, in which case reasons for the change must specifically be given.
- Where a TP adjustment does not change the price of the transactions (i.e. of specific supplies of goods or services) but is intended to bring the company’s profit margin to the arm’s length level, such adjustment is outside the VAT regime and as such should not be accompanied by a VAT invoice.
- Where a in minus TP adjustment is made pursuant to an accounting document issued by the taxpayer himself (no accounting document received from the related party), the taxpayer should obtain the related party’s TP adjustment representation.
- Where the taxpayer receives an accounting document issued by its related party as the basis for a TP adjustment, the taxpayer is treated as being in receipt of the related party’s TP adjustment representation, provided that the document also complies with the requirements imposed under applicable accounting regulations on accounting documents generally.
- There is no TP adjustment when revision is made as a result of such matters as accounting errors or other evident mistakes, rebates or discounts, or changed scope of supply.
Click the link below to see the full text of the Guidance (in Polish):
If this issue pertains to your business and you are interested in our assistance, please contact your WTS&SAJA consultant.
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