The new reality of combating tax evasion and profit shifting in Poland is just about to begin. From the year 2017 onwards, the obligation to prepare transfer pricing documentation between related companies will rest only with those whose revenue in the previous fiscal year exceeded EUR 2 million and only with regard to transactions of value exceeding EUR 50 thousand.
This is a revolutionary change which means that the Polish tax authorities are going to focus on large entities and transactions. Thus, smaller companies will be released from the very burdensome obligation to prepare tax documentation for every transaction within their capital group. The set of rules which are coming into force in Poland is similar to the measures implemented in the UK, Germany, France, Austria, Portugal and Luxembourg. This is a part of the BEPS Action Plan prepared by OECD to counter profit shifting.
In addition to the basic tax documentation, entities with revenue over EUR 10 million will be also required to submit simplified report on related parties transactions altogether with comparable analysis. The role of this obligation will be to present with the use of data from independent sources that the price in a related party transaction was an ‘arm’s length’ price. The philosophy behind the new rules is that it is for the taxpayers to demonstrate that their transactions had been executed on terms acceptable to independent entities.
Taxpayers with revenue over EUR 20 million will be obliged to prepare additional documentation on the entire group they form part of, including description of business activity, organizational structure, transfer pricing policy, financial condition and relevant tax agreements.
The largest entities (capital groups the revenue of which exceeds EUR 750 million) will further need to submit special reports on the business activity, the income and the tax paid by all the subsidiaries and foreign establishments of the group. This obligation concerns any tax year started after 2015.
Moreover, from 1 July 2016 large business entities will be obliged to prepare complete accounting data (tax and accounting books, inventory movements, bank statements, sale and purchase evidence etc.) in electronic version to provide tax authorities on request. With regard to that, Poland is introducing the OECD upgraded Standard Audit File for Tax format (SAF-T 2.0), already implemented in some European countries. Large business entities, pursuant to the Act on Freedom of Business Activity, mean enterprises which within 2 subsequent years employed over 250 persons on full time per year or achieved yearly net revenue over EUR 50 million and total assets over EUR 43 million.
The SAF-T 2.0 will require electronic exchange of a vast scope of accounting data provided in a single file in unified format and in compliance with national regulations. The data transfer will be conducted by interface software with the use of electronic signatures and security certificates. In the future, even more information will be required. Thus, examination of transactions of larger market players will be really thorough and efficient. In the next 2 years, these reporting obligations will be extended on medium and small business.
Therefore, from 1 July large businesses should be prepared to provide tax authorities with complete data in a single file. If they fail to answer on time established by the authorities, they may be subject to fines. In order to avoid complications and additional costs, it is better to adjust electronic accounting data to SAF format beforehand.
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