As of November 14, 2019, issues concerning advance pricing agreements are regulated by the Law on Settlement of Double Taxation Disputes and Conclusion of Advance Pricing Agreements (hereinafter the Law).

Pursuant to Article 83(1) of the Act, the Head of KAS shall issue a prior price agreement concerning a controlled transaction in the performance of which a domestic related party participates.

The exemption from the obligation to prepare transfer pricing documentation applies during the period in which the prior agreement is in force – in accordance with Art. 95(2) of the Act, this period may not be longer than five tax years.

On 27 January this year. On 27 January this year, the Ministry of Finance published updated statistical data on agreements on determining transaction prices.

According to the published data, from March 30 to December 31, the number of pending APA cases increased by 102 applications. Bearing in mind that the average time to conclude a unilateral price agreement is 11 months, and that of the filed applications 93% concern this type of agreements, one can (hypothetically) expect a significant increase in the number of concluded agreements in 2021. In 2020, 98 such applications were concluded (76 related to unilateral agreements).

Speaking hypothetically, it should be borne in mind that in 2020, the number of preliminary meetings held fell by more than half (from 53 to 23 meetings).

Undoubtedly, the increase in popularity of APAs in the last two years was significantly influenced by the provisions of Article 15e of the AIT regarding the limits on the possibility to treat as CIT the expenses concerning services, fees and charges incurred for the benefit of related parties.

The recently published “OECD Guidelines on the Impact of COVID-19 on Transfer Pricing” identified APA as one of the four issues of greatest practical importance given the impact of the COVID-19 pandemic on transfer pricing.

The OECD encourages tax administrations to allow taxpayers to request an APA.

At the same time, as indicated, consideration should be given to the potential updating of projections and data indicated in the application to correct any impact of COVID-19. Entities that have already entered into an APA should review the determination for any changes relating to the period that was significantly impacted by COVID-19.

It should also be borne in mind that there is a risk that the COVID-19 pandemic will alter the economic terms of the proposals entered into to cover 2020. The OECD indicates that agreements entered into remain binding unless there is a condition leading to the amendment or cancellation of the APA in the event of a breach of critical assumptions.

If taxpayers are concerned about whether planned actions, e.g. making price adjustments, are consistent with the terms of the agreement, they should contact the Head of KAS in order to resolve their doubts.

We encourage those interested in the APA process to refer to the document.


Author: Beata Rawa – Transfer Pricing Manager