In 2023, taxpayers will be required to fulfill reporting obligations regarding intra-group transactions carried out in 2022. Due to the approaching deadlines for the preparation of the required documents in the area of transfer pricing, in this article we present a summary of the most important changes effective from 2023.
Controlled transactions executed after December 31, 2021 will be subject to the obligation to prepare local transfer pricing documentation by the end of the 10th month from the end of the tax year and to submit information on transfer pricing in the field of corporate income tax (“TPR-C form”) by the 11th month from the end of the tax year. Thus, for entities whose tax year coincides with the calendar year, the reporting deadlines will be the end of October 2023 (local transfer pricing documentation) and the end of November 2023 (TPR-C form).
At the end of September 2022, a new Regulation of the Minister of Finance on transfer pricing information in the field of corporate income tax (TPR-C form), hereinafter referred to as the "Regulation", entered into force. The new Regulation results in the introduction of changes in the TPR-C form and the imposition of additional obligations on taxpayers.
Since the reporting activities carried out during 2023 will be governed by the new Regulation, below we present the key changes that will apply to TPR-C forms completed for the 2022 tax year, i.e. started after December 31, 2021.
1. Change of the TPR-C form addressee
Pursuant to the Regulation, the addressee of the TPR-C is changed from the head of the national tax administration to the head of the tax office.
2. Combination of the TP Statement and the TPR-C form
Pursuant to the Regulation, the so-called TP Statement, which has been submitted separately so far, confirming that the local transfer pricing documentation has been prepared in accordance with the actual state and that the transfer prices covered by this documentation are determined on terms that would be agreed between non-related entities is an integral part of the TPR-C form. Thus, submitting the form to the authority will be tantamount to submitting such a TP Statement.
3. Change of authorised signers of TPR-C
The TPR-C may also be submitted by a proxy who is an advocate, legal adviser, tax advisor or statutory auditor.
Due to the combination of the TP Statement and the TPR-C form (described in the point above), the submission rules will be as follows:
Information on transfer pricing should be signed by the head of the unit (member of the management board or other managing body). In addition, it is acceptable to sign the TPR-C form by a proxy. A lawyer, legal adviser, tax advisor or statutory auditor may become a proxy. However, it should be noticed that the above described proxy will have to be previously reported to the tax office and receive a power of attorney by submitting a separate UPL-1 form.
Thus, especially considering the combination of the TPR-C form and theTP Statement, there are numerous doubts, who will take the responsibility of the correctness of the information contained in the TPR-C form (proxy or head of the unit).
4. Transaction value presentation
Hitherto, the value of transactions was shown jointly and as the sum of values attributable to individual counterparties. It was only required to indicate the countries of counterparties residence without the need to assign the allocated transaction values to each country. The new Regulation introduces the requirement to break down the transaction value and assign it to individual countries.
5. New indicator
Hitherto, it was required to present four financial ratios designated for the taxpayer (operating margin, gross profit margin, return on assets and return on equity). The new Regulation introduces the obligation to present an additional indicator presenting the ratio of operating costs with related entities in total operating costs.
This obligation applies to entities other than banks and insurance and reinsurance companies as well as micro and small enterprises.
The requirement will also not apply to entities that only carry out controlled transactions exempt from the obligation to prepare transfer pricing documentation (domestic transactions, transactions covered by an advance pricing agreement (“APA”), re-invoices and safe harbor for loans and low value added services).
The application of this indicator in practice may introduce some difficulties for the taxpayers. The income statement does not specify operating costs relating to related and unrelated entities, respectively, and therefore additional calculations and the use of internal data will be necessary to determine the indicator.
Pursuant to the new Regulation, the section on restructuring transactions is also modified. A new field to be completed will be the restructuring fee. This field will have to be completed by selecting one or more of the five codes describing the nature of the remuneration (e.g. the nature of the remuneration in cash or non-monetary remuneration).
7. Comparability adjustments
In the new TPR-C form, taxpayers will be required to provide more detailed information, e.g. on comparability adjustments. It will be required to indicate whether such an adjustment changed the financial result by more or less than 30%, or select the option of disability to determine the impact of the adjustment on the taxpayer’s financial result.
8. Transactions covered by the pricing agreements
So far, despite the lack of documentation obligation for transactions covered by an advance pricing agreement (“APA”), it was required to include such transactions in the TPR-C form. The new Regulation extends the catalog of transactions required in the TPR-C form by transactions covered by an investment agreement or a tax agreement.
9. Micro and small entities
In the case of micro or small entities, the scope of information to be included in the TPR-C form will be significantly limited. At the stage of completing the identification data of the entity to which the TPR-C form obligation applies, it will be possible to supplement the information on the status of a micro or small entrepreneur by indicating whether the entity met certain conditions in the last tax year. In the event of meeting the above definition, there will be no requirement to provide details regarding, among others, information on the applied transfer prices and methods of their verification.
Pursuant to the Regulation, reporting of re-invoices has been moved to a separate category - F.