Worldwide transfer pricing reference guide 2014

Poland (continued)
Relevant regulations and rulings (continued)
• Introduce a definition of low value-added services and set out guidelines for the tax authorities in respect of examining intra-group
services of that type
• Expressly indicate that the cost base used for estimating the fee for low value-added services should exclude shareholder expenses
• Introduce a definition of a business restructuring (transfer of commercially significant functions, assets or risks between related entities)
The APA regulations are contained in Articles 20a–20r of the Tax Ordinance Act. The introduction of APAs has brought with it special
reporting requirements. According to the Ministry of Finance Decree of 31 May 2006, taxpayers who have agreed to an APA must
submit, along with their annual CIT return, a progress report on the implementation of the method stipulated in the APA decision.
APAs may also be concluded by permanent establishments of foreign companies in Poland, as well as permanent establishments of
Polish taxpayers based abroad.
OECD Guidelines treatment
The Polish transfer pricing regulations do not refer to the OECD Guidelines directly. Nevertheless, the tax authorities sometimes refer
to the OECD Guidelines when applying transfer pricing principles; e.g., during APA negotiations. Also, the countries listed in Article 9a
Clause 6 of the CIT Act (Article 25a Clause 6 of the PIT Act) as tax havens, are based on guidelines issued by and work done by the OECD.
At the same time, the transfer pricing methods set out in the Polish rules are based on the authorized OECD approach.
The amended Decrees also introduce specific rules regarding business restructuring and guidelines for tax authorities during tax
inspections. These rules are based on Chapter IX of the OECD Guidelines (Business Restructurings) and include a definition of a business
restructuring, which covers not only firm-wide supply chain changes, but also less extensive restructurings involving shifts of risks
among group companies (the regulations are designed to implement the OECD Guidelines in the local legislation and cover not only
foreign but also local restructuring projects).
During a tax audit, detailed regulations on business restructuring require the tax authorities to focus on:
• Whether the restructuring arrangement would have been acceptable to independent companies
• Business reasons/commercial justification for the restructuring
• Benefits from the restructuring (including synergy effects)
• Options realistically available to the restructured parties
• Whether the allocation of risks properly reflects a given entity’s capability to make risk management decisions or financial ability to bear
the cost of the risk that has materialized
Priorities/pricing methods
Generally, the transfer pricing methods accepted by the tax authorities are based on the OECD Guidelines. These methods are: CUP,
Resale Price, Cost Plus, Profit Split and Transactional Net Margin Method (TNMM). The most appropriate method for assessing income
should be chosen.
The amended Decrees give traditional methods priority over transactional methods for the purpose of assessing income in related party
transactions (previously the CUP method was preferred method by tax authorities and possibility of CUP use was verified by them at
first). When the transfer price is determined by the tax authorities, the application of traditional methods is verified in the first instance.
Additionally, the amended Decrees provide specific criteria for the selection of the transfer pricing method. In determining whether the
correct pricing method has been selected the tax authorities will consider:
• The specifics of the transaction, including the parties’ contribution to the transaction
• Access to reliable data on similar transactions/companies in the market
• Comparability of the respective transactions/companies
If a taxpayer has determined the arm’s length value of a transaction by applying one of the three accepted traditional methods (i.e., CUP,
Resale Price and Profit Split), and there is no doubt about the objectivity in choosing the method, the method is also binding on the tax
authorities.
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