On the 1st of January 2019, four regulations adjusting transfer pricing issues based on the provisions of Chapter 1a of the amended Corporate Income Tax Act entered into force.

The regulations adjust the following issues:

  • assessment of compliance of transactions between entities related to the arm’s length principle,
  • local and group transfer pricing documentations obligatory elements
  • detailed scope of data and information with explanations as to how to prepare transfer pricing information (TP – R),
  • rules on method and procedure of eliminating double taxation in the case of adjustment of profits of related parties.

Changes in Transfer Pricing Regulation concern, among others, the following:

  • certain definitions (e.g. the definition of restructuring has been modified),
  • the elimination of comparability of human capital from the research process,
  • the introduction of a requirement that comparability testing must be based on data publicly available (secret comparables principle),
  • requirement envisaging that circumstances have a material impact on the level of the transfer price when assessing comparability,
  • removal of the principles for eliminating differences in the degree of comparability of observations with a controlled transaction using statistical measures,
  • compensations temporal extension from two to three years.

There have also been important changes in the Transfer Pricing Information Regulations. These include, among others:

  • introduction of other profitability rates for banks, insurance and reinsurance undertakings,
  • addition of new types of transactions to the list of categories of transactions controlled,
  • introduction of an obligation to report the value of debt for granting or obtaining financing, sureties, guarantees, cash pooling and deposits.

The Regulations were published on 29 December 2018 for the Corporate Income Tax Act and 31 December 2018 for the Personal Income Tax Act in the same wording with effect from the 1st of January 2019.

Author: Piotr Rzepka – Tax consultant