New TPR-C form for information on transfer prices

The obligation imposed on taxpayers to provide information on transfer prices according to the new formula is to enable tax authorities to more effectively select entities for control. In recent years, companies have provided information on transfer prices on the CIT-TP form. As a result of a comprehensive amendment to the provisions of law on transfer pricing, the scope of information provided has been significantly increased. The Ministry of Finance has recently published a new interactive TPR-C form on which corporate income tax payers will provide information since the tax year starting after 1 January 2019. Although the statutory deadline for providing information expires at the end of the ninth month after the end of the tax year, this year, taxpayers have received an additional three-month period to fulfil their obligations under the package of legislative changes related to COVID-19.

The new form must be filed by entities which conclude transactions with related entities and which are required to prepare local transfer pricing documentation. Information will also have to be submitted in relation to transactions for which transfer pricing documentation is required, which are concluded with entities based in countries and territories that apply harmful tax competition. In addition, the obligation to file the form will arise in relation to controlled transactions concluded between Polish related entities, the value of which exceeds the thresholds specified in the Act, but for which, after additional conditions have been met, no transfer pricing documentation is prepared. In a recent reply to a parliamentary inquiry, the Ministry of Finance also confirmed that information about transfer prices should be provided individually by companies being members of a tax capital group. The TPR-C form is filed only in electronic form.

A wide range of information provided

The TPR-C form requires that detailed data on both parties to controlled transactions and the terms of the transactions be provided. With regard to the entity for which the form is filed, it is necessary to calculate several financial indicators - operating margin, gross profit margin, return on assets and return on equity.

Reported controlled transactions will have to be allocated to the appropriate categories and their value should be provided. The form requires that the chosen price verification method, as well as a wide range of information based on a comparability analysis be indicated. It will be necessary to indicate the source of comparative data and the type of comparison made, information on the selection of the controlled party, criteria for selecting comparative data, comparability adjustments made and the final result of the analysis. Additional information is required for controlled transactions relating to financing and transactions relating to intangible assets.

Questions and answers from the Ministry of Finance

The Ministry of Finance has recently completed consultations on a draft document covering the most common questions and answers that may occur with respect to increased obligations. Unfortunately, the document does not constitute tax explanations that protect taxpayers similarly as in the case of individual rulings, and the responses contained therein are for information purposes only.

In the prepared questions and answers, the Ministry of Finance confirmed the possibility for a proxy to sign the TPR-C form according to the same principles as for signing other information or tax returns, unlike when signing a statement on the preparation of local transfer pricing documentation. In relation to unincorporated entities (which do not have legal personality), the obligation to submit information rests with the designated shareholder.

It was explained that the TPR-C information should also include those controlled transactions for which there is a requirement to prepare local transfer pricing documentation, and which were concluded in previous years and are now only being continued. This applies, for example, to a loan taken out in 2018 and repaid in 2019.

The Ministry of Finance also drew the taxpayers' attention to the part of the TPR-C form , which may contain additional information in the form of comments and explanations. The relevant taxpayer's comment may be needed, for example, in a situation where the determined transfer price exceeds the range resulting from the comparability analysis, which does not necessarily mean that the terms of the transaction have not been set in line with market conditions.

It should be remembered that the adjustment of transfer prices made after the deadline for filing of the TPR-C form means that the information already filed must be updated. In a situation where the comparability analysis was updated during the year, the range resulting from the most current analysis must be shown in the TPR-C form.

The reporting obligation relating to the TPR-C form will require additional effort to gather all necessary information. Therefore, despite the extension of statutory deadlines to include several additional months to complete the form, it is worth starting preparing it for filing in advance. The wide range of information provided also suggests that the number of transfer price controls may be increased in the coming years. Therefore, proper documenting of transactions is all the more important.

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