Taxpayers must “exercise due diligence” to assess transactions made by their business partners. But they have received no guidance to make sure their assessment efforts are sufficiently diligent – says Grzegorz Młynarczyk, tax advisor and Sendero Tax & Legal partner.

This is the first year taxpayers will have to comply with documentation requirements for indirect transactions with tax havens. Even though the new law has been with us for one and a half year now, many are still in the dark about how to apply it. That there is clearly room for concern can be seen by the flood of requests received by all larger taxpayers to submit declarations with what is often unclear content.  Why do we receive them? Do we have to send them back? Should we send our own declarations? What is the new law all about?

Let’s start by quoting the law. Under the CIT Act in force since 1 Jan 2021, taxpayers making transactions must prepare transfer pricing documentation if the beneficial owner has its residence, seat or management in a tax haven and the transaction is worth more than PLN 500,000 with respect to a tax year.

Note that, in accordance with this law, whether or not the other party is related is irrelevant. That’s new because, previously, TP documentation duties as a rule applied to transactions with related parties. With the requirement now extended to apply also to unrelated parties, the scale is much greater and so is the burden on taxpayers.

Another, perhaps even bigger, complication is that the law steers clear of objective or at least easily verifiable criteria as to when documentation must be prepared. In an “ordinary” TP documentation, it suffices for the taxpayer to quantify the transaction and check if any of the exemptions is available. In the case of the new regulation, the taxpayer must apply a vague “beneficial owner” test without having sufficient tools for the purpose, as I will explain further below.


For the full interview with Grzegorz Młynarczyk, see