Doing business in Poland in 2016? Stay on top of changes to transfer pricing and the potential for tighter local tax regulations.
Over the past 12 months we have seen improvements in business-related procedures for tax payers in Poland. Setting up a new company is easier and more efficient, and certain accounting rules were simplified - to the benefit of smaller companies. Building permit procedures have also been improved; and the time spent on tax calculations, tax payments and fillings is lower than before, partly due to new IT solutions.
In 2016, the frequency of fiscal and tax inspections may rise as a result of the new Polish government election-winning promise to tighten the country’s tax regulations and increase the flow of tax revenue into state treasury. Businesses operating in Poland are also now subject to new transfer pricing rules - applicable from 1 January 2016 (although some aspects will not come into force until 2017).
Transfer pricing changes include:
- A requirement for companies to prepare / update transfer pricing documentation on a regular basis, that is, at least once a year and within the deadline for annual CIT-8 tax return.
- A requirement for an additional annual tax return, containing a summary of transactions with related parties to be submitted together with a CIT-8 form.
- The scope of the required documentation is now significantly wider, but in exchange, the thresholds activating certain reporting obligations are also higher.
- The tax authorities may request the transfer pricing documentation to be delivered within 30 days even if the thresholds are not exceeded.
New transfer pricing regulations increase the volume of obligatory records to be prepared by the tax payers which results in additional costs. Consulting local tax advisors is recommended as the cost may be significant for global companies.
Potential tax regulation changes
Proposed changes to CIT rules means that mandatory cost adjustment (regarding overdue invoices) will be abolished. The change can reduce the potential tax liabilities for companies with temporary liquidity problems, and allows for tax cost and revenues matching regardless of the overdue liabilities.
The preferential budgetary interest rate will be decreased to 50% of the basic rate, but it should be noted that this may only be applied for tax corrections submitted within six months of the tax return deadline.
Budgetary sanctions will also be introduced – up to 150% of the basic rate applicable, in case of missing tax returns or tax undervaluation over certain limits.