Change in the provisions on the documentation obligation in the field of transfer pricing for the so-called tax heaven transactions
On October 25, 2022, the Act of October 7, 2022 amending the Corporate Income Tax Act and certain other acts was announced in the Journal of Laws of the Republic of Poland, which:
- waives the documentation obligation for indirect tax heaven transactions and
- changes the documentation obligation thresholds for direct tax heaven transactions.
The Amendment Act repeals the controversial provisions related to the obligation to apply the arm's length principle and the documentation obligation for indirect tax heaven transactions. As a result, taxpayers are no longer required to audit the real owner of the receivables resulting from each transaction, including those concluded between unrelated entities, exceeding the threshold of PLN 500,000 in terms of documentation obligations.
Moreover, due to the fact that the economic conditions have changed over the last few years, the legislator has additionally made the materiality thresholds real, the exceeding of which results in a documentation obligation in the case of direct transactions with unrelated entities, respectively, to the value of PLN 2.5 million for financial transactions and PLN 500,000 for transactions other than financial transactions (basic threshold).
Importantly, both the provisions abrogating the documentation obligation for indirect tax heaven transactions as well as introducing new thresholds for direct tax heaven transactions enter into force on the day of announcing the above-mentioned of the Act, however, they will apply retroactively from 01/01/2021, and therefore will retroactively apply to transactions started and not completed before 01/01/2021 and transactions concluded after 31/12/2020.