The draft law amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other laws published on 16 July 2018 provide for new conditions for the preparation of group documentation.
According to the draft art. 11n sec. 1 “related entities obliged to prepare local transfer pricing documentation shall attach to the documentation group transfer pricing documentation prepared for the financial year by the end of the 12th month after the end of the financial year, if they belong to a group of related entities:
- for whom the consolidated financial statements are prepared;
- whose consolidated revenues exceeded in the previous financial year the amount of PLN 200,000,000 or its equivalent.
It should be noted that under the current regulations there are doubts as to what is meant by a “group of related entities”, which according to CIT Act 9a sec. 2d is obliged to prepare information about a group of related entities, i.e. group documentation. Contrary to the Personal Income Tax Act, the Corporate Income Tax Act does not apply the concept of a capital group to the obligation to prepare group documentation. Therefore, taxpayers applied to the tax authorities for individual tax interpretations. An example of doubts concerning the understanding of the term “group of related entities” in the aspect of the obligation to prepare group documentation is an individual interpretation issued by the Director of National Tax Information on 30 July 2018, ref. DPP13.8221.97.2018, which changed the individual interpretation by ref. 0111-KDIB1-3.4010.468.2017.1.IZ. of 29 December 2017. In the opinion of the body, it should be concluded that despite the lack of an explicit reservation in Art. 9a sec. 2d of the CIT Act, the concept of a group of related entities should be connected with the concept of a capital group within the meaning of the provisions of the Accounting Act.
The draft Act clearly indicates that the obligation to prepare group documentation by related entities arises if they belong to a group of related entities for which consolidated financial statements are prepared and whose consolidated revenue in the previous financial year exceeded PLN 200,000,000 or its equivalent.
The draft provides for an extension of the deadline for preparing group transfer pricing documentation to 12 months after the end of the tax year.
According to the draft act, the elements of local and group transfer pricing documentation are also to be modified, the scope of which is to be determined by a regulation of the Minister of Finance, taking into account the OECD guidelines.
According to the proposed Article 11o sec. 2, ‘the group transfer pricing documentation shall include:
- description of the group of related entities;
- description of significant intangible assets of the group of related entities;
- description of significant financial transactions of the group of related entities;
- financial and tax information of the group of related entities.
The draft Act also introduces the possibility to implement the obligation to have group transfer pricing documentation by using documentation prepared by another entity of the group, including in English. According to the draft, if the group transfer pricing documentation was prepared in English, the tax authority may request that the group transfer pricing documentation be submitted in Polish within 30 days of the date of delivery of the request.
The extension of the deadline for the preparation of the group transfer pricing documentation and the clarification that the obligation to prepare the group documentation applies to the group of related entities for which the consolidated financial statements are prepared should be considered as a positive change.
Author: Karolina Ostapiuk ? Tax consultant