Transactions triggering transfer pricing documentation
The legislation would expand the list of related-party transactions that trigger the requirement to prepare transfer pricing documentation. The new list includes partnership agreements (but not those of SKA and sp.k. entities*), joint venture agreements, and agreements of a similar nature. In such instances, the required documentation would focus on the rules concerning a participation in profits and losses.
The requirement to prepare transfer pricing documentation also would apply to “internal” transfers between a taxpayer and its foreign or Polish branch with respect to the income attributable to the branch.
*The legislation would treat joint-stock partnership (SKA) and limited partnership (sp.k.) entities as taxable entities.
Thin capitalization changes
The legislation would further expand the scope of the thin capitalization rules to loans provided by entities that are indirectly related to the taxpayer. Such indirect participation would be determined based on rules contained in Poland’s transfer pricing regulations.
The legislation also introduces an alternative method of calculating the thin capitalization limits. Taxpayers would be able to select the method to apply in limiting deductible interest expenses to 5% of the assets presented in the financial statements (excluding intangible assets) but no more than 50% of the operating profit, regardless of the amount of liabilities involving related entities and regardless of the share capital level.
Any interest not deducted under the new method could be deducted in the subsequent five years.
The limitation of 50% of operating profit would not apply to entities allowed to provide loans on the basis of other Polish laws (e.g., banks).
Read a February 2013 report [PDF 161 KB] prepared by the KPMG member firm in Poland: Draft bill on amendments to corporate income tax law
Contact a tax professional with KPMG's Global Transfer Pricing Services.