Transfer pricing - the most important information about changes in duties for 2022

Deadlines – longer, yet shorter than in previous years

According to the regulations applicable to documentation prepared for 2019, the deadline for fulfilling transfer pricing obligations, in accordance with the Income Tax Acts, expired at the end of the 9th month after the end of the tax year. However, at the beginning of 2020 we experienced the outbreak of the COVID-19 pandemic, which contributed to the modification of a wide range of reporting deadlines. These activities also did not miss the above-mentioned deadline for fulfilling the obligations related to transfer pricing. The "covid" regulations extended this deadline to the end of the 12th month after the end of the tax year. This year (in relation to the obligations for 2022) for the first time, the amended provisions of the tax laws apply, according to which:

• The deadline for preparing local transfer pricing documentation expires at the end of the 10th month after the end of the tax year,
• The deadline for reporting TPR with an embedded statement of possession of documentation is the end of the 11th month after the end of the tax year.

Therefore, the deadlines have been formally extended in relation to those applicable under the Income Tax Acts, but in practice, in relation to the extensions in force in recent years, they are significantly shorter.

Important! Despite the extension of the deadline for submitting the CIT-8 tax return for 2022, the Ministry of Finance directly informs that it does not intend to extend the deadlines for fulfilling the reporting obligations, thus it should be assumed that the deadlines related to transfer prices will not be extended either!

Tightening of sanctions

In 2023, tightened penalties imposed under the Fiscal Penal Code are in effect, related to the taxpayer's failure to comply with transfer pricing obligations. It should be noted that the amount of the penalty, determined in daily rates, depends on the amount of the minimum wage, which will change in 2023. It increased for the first time on January 1, and the next increase will take place on July 1. The currently applicable sanctions are regulated as follows:

• If the local transfer pricing documentation is not prepared (at all) or the group documentation (Master File) is not attached to it, the taxpayer may be fined up to 720 daily rates (PLN 33.5 million - according to the currently applicable amounts).
• The same amount of fine is imposed on the taxpayer in the event of preparation of local or group documentation contrary to the actual state.
• In the case of late preparation of documentation - a sanction of up to 240 daily rates (PLN 11.2 million - according to the currently applicable amounts).
• Failure to submit or submit unreliable transfer pricing information is subject to a sanction of up to 720 daily rates.
• Submission of transfer pricing information after the deadline is subject to a sanction of up to 240 daily rates.

Haven transactions - relaxation of regulations

Pursuant to the amendment to the Income Tax Acts, published in the Journal of Laws on October 7, 2022, the documentation obligation for the so-called indirect haven transactions, i.e. concluded with contractors who do not have their place of residence, registered office or management in the territory or in the country applying harmful tax competition, if the actual owner had their place of residence, registered office or management in the territory or in the country applying harmful tax competition.

At the same time, the threshold values for direct haven transactions (carried out for the benefit of a counterparty with a place of residence, registered office or management board in the territory or in a country applying harmful tax competition) were increased to the amount of:

• PLN 2,500,000 - in the case of a financial transaction,
• PLN 500,000 - in the case of a transaction other than a financial transaction.

Until now, this limit was PLN 100,000.00, regardless of the type of transaction. The change in the value of the documentation thresholds, although beneficial, willnot significantly reduce the scope of obligations in many cases, because reaching the amount of PLN 500,000 per year for a goods or service transaction is not unusual for even a medium-sized enterprise.

Thanks to the transitional provisions, these regulations were already applicable to the fulfilment of the documentation obligation for 2021.

Simplifications for micro and small entrepreneurs

In the case of transactions concluded by related entities that are micro or small enterprises, the local transfer pricing documentation may not contain a benchmarking or compliance analysis. The provision applies to an entrepreneur who met the conditions set out in the Entrepreneurs' Law in the last tax year.

When determining the right to exemption, it is necessary to take into account the difference in regulating the period in which the taxpayer must meet the above-mentioned requirements. conditions. Pursuant to the Entrepreneurs' Law Act (Article 7(1)(1) or (2)) the status of a small entrepreneur or micro-entrepreneur is granted to entities that met the conditions set out in the Act in at least one of the last two financial years. However, pursuant to the Income Tax Acts, the right to exemption from attaching a transfer pricing analysis is vested in an entrepreneur who in the last tax year met the conditions set out in the Entrepreneurs' Law.

Pursuant to the transitional provisions, the said exemption was already applicable to the fulfillment of the documentation obligation for 2021.

However, it should be remembered that the simplification of the exemption from the preparation of a transfer pricing analysis does not mean that the transaction cannot be verified by the tax authorities in terms of arm's length prices. In addition, despite the right to exemption, even a micro and small entrepreneur is required to submit a declaration on the arm's length of the transaction. Thus, in order to make the declaration in question truthfully and at the same time protect oneself against the possible sanctions mentioned above, it may be necessary to prepare appropriate analyses.

Changes in the TPR form - greater detail

Although the new TPR form, appropriate for reporting transactions carried out after December 31, 2021, has not yet been published, significant changes in the reported data emerge from the wording of the new Transfer Pricing Regulation. The table below presents a comparison of the scope of reported information in terms of the introduced changes.

Taking into account all the presented changes, the commencement of works aimed at fulfilling the taxpayer's transfer pricing obligations for 2022 should take place as soon as possible. In order to obtain support from PKF experts in this area, please contact us.