Warsaw hosted the first Transfer Pricing Forum on 12 April. The event, which is organised by the Finance Ministry as a platform for discussion on intra-group transactions, saw more than 200 representatives of the tax consulting industry, business and science. SENDERO Tax & Legal was represented by its TP specialists Andrzej Jagiełło and Michał Wodzicki.
The Finance Ministry used the opportunity to disclose details of a long-awaited proposal of new regulations to simplify the issuance of Advance Pricing Agreements (APAs). It will be recalled that taxpayers holding APAs in relation to their transactions will not fall under the statutory limit on the deductibility of expenses to purchase intangible services from related parties. As announced earlier by the Ministry, simplified APA procedures are supposed to be as informal as possible while simplified APAs themselves would be issued much faster than standard ones.
The Finance Ministry also revealed that:
- simplified APAs are generally supposed to be issued within 3 months of application, but in practice this deadline could be extended by the authorities;
- the procedure would be based on taxpayer’s representation as to his functional profile and on a standard-form application, while the taxpayer would not be required to present the financial projections underlying his calculations;
- APAs will contain strictly specified critical conditions, i.e. requirements which must be met for the APA to work (e.g. conditions relating to the transaction value bracket during tax year);
- an APA will be effective as of the start of the tax year in which it was applied for;
- an APA will remain in force for three years.
The Ministry says the proposed regulations on simplified APAs should be released in draft in late April / early May.
A number of other transfer pricing matters were discussed during the Forum, including those related to benchmarking studies. Some matters that were touched upon in this area include:
- the duty to prepare benchmarking studies for low value adding services;
- the reasonableness of the duty to base comparability analyses solely on data about Polish entities;
- the difficulties of preparing studies for financial transactions;
- the acceptable numerical adjustments to results;
- what should be the content of the description of arm’s length nature of transaction (this is a document that must be prepared where a comparability analysis is not possible).
Finance Ministry’s representatives exhibited an open attitude and attentively listened to questions and proposals from participants, providing positive feedback to many of them. This flexible approach and openness to dialogue with taxpayers is particularly encouraging. Let us hope that it will affect the work of revenue authorities locally.