This is important information for taxpayers who have agreements with associated enterprises requiring them to make a retroactive transfer pricing adjustment for 2019 and the adjustment decreases their costs or increases their gross income for tax purposes. Pursuant to Article 11e of the CIT Act or Article 23q of the PIT Act, you can recognise the adjustment as your tax cost or income, respectively, for 2019 if all of the following is true:
- Your transactions during the year were priced at arm’s length.
- There has been a change of material circumstances affecting the terms agreed during the tax year or you now know the actual costs or income underlying the transfer price calculation and a transfer pricing adjustment must be made to ensure they are at arm’s length.
- At the time of the adjustment you have received a representation of the associated enterprise that it has made a corresponding adjustment for the same amount as you.
- The associated enterprise is resident in Poland or in a country or territory with which Poland has signed a double tax treaty and there is a legal basis for the exchange of tax information with that country.
- You mention the adjustment in your annual tax return for the tax year to which the adjustment relates.
Note in particular the requirement to have the other party’s representation that it has made a corresponding TP adjustment for the same amount. If you do not have one, the tax authorities may question formal grounds on which you have recognised your adjustment.
If a TP adjustment increases your income or decreases your costs, you will need to meet only the first two conditions.
If this issue pertains to your business and you are interested in our assistance, please contact your WTS&SAJA consultant or our office.
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This Newsletter is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries. Doradztwo Podatkowe WTS&SAJA shall not be held legally liable for any acts or omissions resulting from reliance on such information.