Simplified APA implementation date draws closer

The Government Legislation Centre published on its website on 22 March 2019 a bill introducing the simplified advance pricing agreement ("simplified APA procedure"), which had been long-awaited by taxpayers.

The purpose of the simplified APA is to confirm the price calculation methodology used in intra-group payments. The bill is supposed to introduce the simplified APA only for some transactions, namely low value-added services, fees for the use of or the right to use a trademark or know-how. Only the domestic associated enterprise will be bound by the simplified APA.

The bill provides for:

  1. Quicker, easier and cheaper procedure. Procedure for a simplified APA will to a large extent consist in establishing the facts of the case on the basis of statements made by the applicant.

  2. Changes in Article 15e of the CIT Act. Article 15e will not apply to costs of services, fees and payments covered by an advance pricing agreement or a simplified advance pricing agreement.

  3. At least 1% share of income in revenues.

  4. Transformation of pending procedures will be possible. The bill stipulates that pending procedures for advance pricing agreements may be transformed into procedures for simplified advance pricing agreements. Taxpayers will have 3 months from the date of receiving a notification from the authorities – the procedure will be transformed if they submit the relevant request within that period.

  5. Positive consequences for taxable persons. The procedure may cover the entire year in which the taxable person applies for it – for instance, if he applies for a simplified APA in October 2019, the APA may cover the entire 2019.

  6. APA for 2018 still possible. The lawmakers have introduced a transitional regulation whereby taxpayers may still "save" the costs incurred in 2018 – the bill stipulates that a simplified APA may apply to costs incurred in the year preceding the year of application for a simplified advanced pricing agreement.

  7. Harmonisation of dispute resolution procedure. In addition to the simplified APA, the bill mentions also a procedure to harmonise the resolution of disputes over avoidance of double taxation within the EU. A unified procedure is to be used to resolve disputes arising from interpretation and application of agreements and conventions on elimination of double taxation signed by Poland.

  8. Differences between a simplified advanced pricing agreement and an advanced pricing agreement

The table below presents the main differences between APA and simplified APA.

As the simplified APA will let the taxpayers "save" the portion of the costs which are non-tax-deductible under Article 15e CIT Act, we encourage you to review the cost items and consider applying for a simplified APA.

If you are interested in details of the changes described above, Rödl & Partner's transfer pricing experts are at your service in our offices in Cracow, Gdansk, Gliwice, Poznan, Warsaw and Wroclaw.

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