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The transfer pricing regulations in force since January 2019 have introduced numerous changes in this respect, such as for example:

• new documentation thresholds,
• the obligation for related entities to submit information on transfer prices TPR-C (legal persons) or TPR-P (natural persons) to the Head of the National Fiscal Administration,
• an obligation to make a statement confirming that the transfer pricing documentation has been prepared and that the transactions are carried out on arm’s length principle.

Taxpayers must therefore pay particular attention to the new regulations, while keeping in mind the statutory deadlines in this respect. These deadlines have been extended for most taxpayers due to the coronavirus pandemic and will expire on 31 December 2020.

Deadline for submitting of TPR-C lub TPR-P in the year 2020

The deadline for submitting this information TPR-C (TPR-P) and statements is generally passed for entities whose tax year is consistent with the calendar year of the day 30 September 2020 (in connection with the COVID-19 pandemic, the deadline was extended to 31 December 2020) For failure to comply with the deadlines for the performance of the obligations or for the certification in the submitted documents an untruth, the legislature provided for severe penalties. For this reason, it is important not only to complete the formalities within a certain period of time, but also to prepare the required documentation reliably.

Preparing the required data can be time consuming

According to the explanatory memorandum to the Act introducing the above mentioned obligations, the purpose of the introduced regulations is to obtain by the Head of the National Fiscal Administration detailed information on the conditions of controlled transactions concluded by taxpayers obliged to prepare local transfer pricing documentation. The collected data is to be used for statistical and economic analyses and analysis of the risk of income underestimation by taxpayers through non-market behaviour.

Additionally, it should be pointed out that the key element of information TPR is to properly supplement information on:

• the realized result on the transaction,
• data from prepared benchmark analysis,
• values of indicators such as achieved operating margin, gross profit margin, profitability of assets or profitability of equity.

Do not hesitate to prepare transfer pricing documentation

Taking into account the above, in order to meet the transfer pricing obligations imposed by the legislator in a timely and reliable manner, we suggest taking appropriate steps now. Taxpayers have gained additional time to complete the formalities, however, this does not mean that they can postpone the above topic to the last moment. Identifying transactions and then preparing the necessary documents and completing the formalities in accordance with the new regulations may prove to be time consuming.

On 15^th September 2020 from 11:25 a.m. attorney at law, Mr. Kamil Niciecki from VON ZANTHIER & SCHULZ in Berlin will give in Polish an introduction to the business activities of Polish companies in Germany during the webinar "Chances for Polish companies in the German capital region - European double city Frankfurt (Oder) and Słubice", explaining the German sale contract, the contract for work and services and the foundation of limited liability company (GmbH) in Germany. Before that, important economic data for Polish companies in Germany will be explained by the Investor Center Ostbrandenburg (ICOB), Mrs. Kania. The webinar is organized by ICOB in cooperation with the German-Polish Business Circle (DWK) from Poznań and starts at 11 a.m. The webinar is free and open for everyone after prior registration at adamus@.icob.de.

Program of the webinar

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From 1 July 2020 VAT on the import of goods to Poland can be settled directly in the tax declaration. Previously, this required a special permit. The aim of the amendment is to improve the competitiveness of Polish ports, which until now have been losing the battle for the customer with i.a. German and Dutch ports. In these countries, the possibility of non-cash settlement of imports for all taxpayers has been long provided for. The new rules for settlement of the VAT will avoid freezing of funds and will have a positive impact on the financial liquidity of companies.

Previous rules have reduced the competitiveness of Polish companies

So far due VAT on the import of goods to Poland should in principle be paid within 10 days of customs clearance. Taxpayers could then deduct the tax paid in the relevant tax declaration, which frozen the entrepreneur's funds for about 90 days. Taxpayers often decided to carry out an import procedure in another EU member state and subsequently settle intra-Community movement of goods.

Currently, every active VAT taxpayer can avoid the obligation to pay VAT on import earlier and settle it directly in one VAT return.

In practice, this means that it is possible to avoid temporary freezing of the amount of VAT paid to the customs office, which makes importing goods into Poland more advantageous.

What formal conditions must be met?

Such a solution will be available for taxpayers who make customs declarations through a direct or indirect representative. Traders will have to present an appropriate and current (not older than 6 months) certificates of no arrears in taxes and social security contributions and confirmation of registration as an active VAT taxpayer. For convenience- the required documents may also be replaced by a written statement of the taxpayer with the appropriate content.

The new regulations do not provide for special requirements for foreign VAT taxpayers who are registered in Poland only for VAT purposes and do not pay, for example, social security contributions. In our opinion, it will be sufficient in such a case to submit an appropriate statement, which will ultimately be assessed by the competent authority.

The documents should be submitted to the head of the customs office in view of the taxpayer's place of residence or headquarters. In the case of taxpayers who do not have their place of residence or headquarters in Poland, the head of the Lower Silesian Customs Office in Wrocław is competent.

The taxpayer is also obliged to present documents confirming the settlement of VAT due on import within 4 months after the month in which the customs declaration was accepted to the competent head of customs office. However, this obligation will probably be repealed after 1 October 2020.

When will companies benefit from the simplifications of VAT settlement?

The provisions do not directly regulate the moment from which the simplification may be applied. It seems that it will be possible already in the next settlement period after fulfilling formal conditions. In this regard, taxpayers must remember to submit the relevant documents to the competent head of the customs office. Failures in this case will result in the inability to take advantage of the simplifications.

If you are interested in taking advantage of this simplification or have you further questions in tis topic, please contact our VAT specialists. Our team will help you to make an appropriate notification, correctly settle the tax, as well as take care of the timely submission of documents to the relevant office.

We encourage you to read the article "Comparative legal argument in the Polish discussion on changes in the judiciary", published in the prestigious Jahrbuch des Öffentlichen Rechts. The author of the publication is Jan Muszyński, a lawyer from our Firm. The article concerns the abuse and instrumentalisation of comparison of changes in the judiciary in Poland with the solutions of Western countries, especially Germany.

We are pleased to announce that once again, in the field of legal advice, we have obtained a certificate confirming the quality introduction and management in accordance with the requirements of ISO 9001:2015. The certificate issued by TÜV SÜD Management Service GmbH is valid until 26 July 2023. We thank the entire VON ZANTHIER & SCHULZ Poznań team for their commitment and professionalism.

In connection with the SARS-CoV-2 pandemic, many companies are confronted with problems such as reduced income, production downtime, delays in the supply of materials and raw materials, insolvency of contractors, etc.

In practice, this may lead to situations where the supply chain in transactions with related parties has to be reorganised due to the temporary closure of the plant, lack of staff, the need for longer storage of goods due to lack of transport capacity, etc.

These aspects may have a significant impact on the transfer prices agreed in settlements with related entities, for example by changing the distribution of functions, assets and risks between the various parties to a transaction. In addition, changes in the method of settlement between related parties, extensions of payment terms, distribution of payments in instalments, etc., may in turn require verification that the method and calculation method used corresponds to arm’s length principle.

Given the fact that:

- in certain cases it is important to apply arm’s length principle already during the year,
- significant changes in commercial or financial relations may be treated as restructuring covered by transfer pricing regulations

we suggest that you analyse your transactions from the transfer pricing perspective.

On 23 April 2020, on the pages of the Government Legislation Centre a draft regulation of the Minister of Finance amending the regulation on the exclusion or limitation of the application of Article 26, paragraph 2e of the Corporate Income Tax Act was published. The draft provides for another, already fourth postponement of the entry into force of the new withholding tax collection mechanism, this time to 31 December 2020.

In case, if the amount paid out in favor of the same taxpayer (i.e. the same foreign company) exceeds the amount of PLN 2,000,000.00 during the tax year, the tax remitter will in principle be obliged in the first place, in relation to the surplus above PLN 2,000,000.00 to collect the withholding tax without applying an exemption under the non-preferential Polish tax rate (19% or 20%) and pay it to the Polish tax office. Only after the tax authorities have checked whether the conditions for exemption from the withholding tax or for the application of a preferential tax rate have been met, the collected withholding tax may be refunded.

The postponement of the date of entry into force of the new withholding tax collection mechanism was justified by the announcement of an epidemic on the territory of the Republic of Poland in connection with the SARS-CoV-2 virus infection and the need to limit the obligations related to withholding tax collection for entrepreneurs, as well as the need to ensure proper efficiency on the part of the tax administration. Due to the lack of possibility to precisely determine the date of cancelling the state of the epidemic and mitigating the effects of this state for entrepreneurs, it was proposed to postpone the entry into force of new rules on withholding tax collection until 31 December 2020.

In addition, it should be pointed out that the published draft remains essentially unaffected by the scope of application of regulations other than Article 26 paragraph 2e of the of the Corporate Income Tax Act e.g. the obligation to exercise due diligence when verifying the conditions for applying a lower rate or qualification of the recipient of the debt as the actual recipient.

Have you been punished for irregularities in VAT settlements with a mandate in Poland? Even if you accept this fine, failure to complete the necessary formalities on time may expose you to further problems.

If you are a registered Polish VAT taxpayer and you receive letters from the Polish Tax Office, you shall respond to them within the deadline indicated in the letter to avoid sanctions. Communication with the Polish Tax Office is conducted in Polish, therefore we understand that it may cause difficulties for foreign entities. The proper conduct of the mandate procedure involves not only the payment of a penalty, but also the completion of appropriate documentation. Additionally, the imposition of a fine does not release from the obligation to make a correct settlement.

We can support you in this matter. Send us a scan of the letter received from the Tax Office and we will do the rest.

Do you sell goods or services in Poland and have not yet registered for VAT in Poland? Or maybe you make purchases in Poland and have not deducted the tax? Do not hesitate!

An entity conducting VAT-taxed activity in Poland shall report it in advance. However, failure to make such a notification on time does not release you from the obligation to submit tax returns and settle the VAT.

We provide support to entrepreneurs in the field of, among other things:
- registration for VAT purposes in Poland with the possibility to submit missing documents for past periods;
- preparation and submission of overdue tax returns;
- verification of the possibility of recovering the tax not yet deducted;
- calculation of overdue VAT with interest;
- determining the impact of a lack of timely registration on business;
- analysis of possibilities of avoiding sanctions for lack of timely registration.

In order to correctly settle VAT we will need certain documents (i.e. an excerpt from the register or a certificate with an assigned tax number in a foreign country) and information on conducted business transactions. In case of doubts call or write us.