The previous publication dealt with the introduction of simplified solutions for low-value-added services. In this section we describe the changes in Transfer Pricing since 1 January 2019 in the scope of simplified solutions in favour of loan transactions.
Related party lending or borrowing transactions belong to a group of types of transactions that involve a Transfer Pricing risk. The key risk areas in financial transactions include primarily the interest rate of a loan.
Until now, legal acts of statutory rank did not contain guidelines concerning the interest rate on intra-group loans.
The draft of 16 July 2018 introduces a regulation enabling the tax authorities to waive the market verification of the interest rate for loans that jointly meet the conditions set out in Article 11g of the CIT Act and, accordingly, Article 23t of the PIT Act, i.e. the following conditions:
– the total capital value of all loans from related parties (also understood as credits or bond issues), calculated separately with reference to loans granted and received, maintained during the financial year is not more than PLN 20 000 000 or the equivalent of this amount, where for the purpose of calculating the limit the value of capital (without interest) obtained or granted, regardless of its form (i.e. total loans, credits and bond issues) should be summed up,
– no charges other than interest shall be payable in respect of the acquisition or provision of finance. In economic practice, charges other than interest are very rarely included in the financing of related party transactions and therefore the exemption from safe harbour under this condition will not apply to a materially quantitative group of related parties,
– the loan was granted for a period not exceeding 5 years,
– the lender is not an entity domiciled, established or managed in the territory or in a country where harmful tax competition is applied.
For transactions meeting the above conditions, the taxpayer will also not have to prepare a Comparative Analysis, provided that the interest rate of such a loan is calculated on the basis of the base interest rate and the margin specified in the decree of the Minister of Finance.
If loans (also understood as bond issues) are granted in a currency other than PLN, then for the purpose of determining whether the loans exceed the limit of PLN 20,000,000, the loan amounts expressed in a foreign currency will be converted into PLN at the average exchange rate announced by the National Bank of Poland for the last business day preceding the date of granting or taking out the loan, understood as the date of disbursement of the loan amount or leaving it at the borrower’s disposal.
The announcement will be issued by the Minister of Finance at least once a year, in particular if there is a significant change in economic conditions resulting in the margin level indicated in the announcement deviating significantly from market conditions.
Taking into account the fact that lending transactions are areas subject to special verification by tax authorities, it should be concluded that the introduced regulation increases the transparency of tax law and its application, in particular by small and medium-sized taxpayers.
Author: Sylwia Imiela ? Tax consultant
