On 26th November 2018, The Minister of Finance responded to a parliamentary question concerning the provisions of Article 15e of the Corporate Income Tax Act.
Pursuant to Art. 15e sec. 1 of the CIT Act, specified taxpayers are obliged to exclude from tax deductible costs of services, fees and receivables above a defined level. Article 15e sec. 15 of the CIT Act introduces an exemption, according to which the said limitation does not apply to costs of services, fees and charges incurred directly or indirectly for the benefit of affiliated entities, to the extent that the decision on the recognition of the correct choice and application of the method of determining the transaction price between affiliated entities covers the correctness of the calculation of remuneration for these services and charges in the period to which the decision relates (APA decision). It should be noted that these provisions also apply to the tax year in which the APA Decision was issued and to the tax year preceding that tax year.
In the parliamentary question of 6 November 2018, it was pointed out that already during the first Transfer Pricing Forum, which took place on 12 April 2018, the Ministry of Finance announced the introduction of the so-called simplified procedure of the Advance Pricing Agreement. Due to the lack of any information in this respect made public and the approaching deadline for submitting annual declarations, the Minister of Finance was contacted with an appeal.
In accordance with the answer to the parlamentary question, the Ministry of Finance intends to introduce the so-called simplified procedure of a prior price agreement. The Ministry of Finance is currently working on this procedure. It was indicated that the ready-made draft would be sent for public consultation. The extended time of work on the procedure results from the necessity to carry out additional analyses, the aim of which is to develop a regulation which will correspond to the need to introduce it, while at the same time protecting the interests of the State Treasury.
As announced by the Ministry of Finance, the planned regulations concerning the simplified procedure will provide for the possibility of transforming the submitted application under the standard APA procedure into a simplified procedure. Detailed conditions for the transformation of the application will be presented in the draft regulation.
In a situation where a taxpayer has submitted an application for an APA decision but it has not yet been issued, according to the position of the Ministry of Finance, the taxpayer is obliged to apply the limitation to tax deductible costs resulting from Art. 15e sec. 1 of CIT Act. On the other hand, once the APA decision has been issued, the taxpayer may make use of the possibility to correct the annual tax return.
According to earlier announcements of the Ministry of Finance, the planned procedure is to be of a simplified nature, i.e. it will involve fewer obligations related to the taxpayer’s preparation of the application, a lower fee and a much shorter application processing time (estimated at 3 months). Initially, the draft was to be submitted by the end of March 2018. With the end of 2018 approaching, this raises the question of when the simplified APA will be introduced, since the draft implementing legislation has not yet been published.
Author: Karolina Ostapiuk – Tax Consultant