The decrees introduce regulations regarding the elimination of double taxation, as well as placing an increased significance on documentation requirements. There have also been changes to the use of the profit split method.

The new double taxation rules will be applicable to a price adjustment in cross-border transactions between related parties or in cross-border settlements between a head office and its permanent establishment.

The decrees have been introduced following amendments to the country’s personal and corporate income tax laws. Poland is now fully compliant with OECD transfer pricing guidelines and the EU Arbitration Convention regarding the elimination of double taxation in transfer pricing transactions.

According to the new regulations, taxpayers are entitled to file an application to the ministry of finance to initiate a mutual agreement procedure in order to avoid double taxation.

Under the previous decree, if the taxpayer applied one of the traditional transfer pricing methods, the tax authorities were obliged to use the chosen method.

The new decrees provide an additional condition that should be met for acceptance of the method chosen by the taxpayer. The taxpayer will also have to provide transfer pricing documentation compliant with the provisions of the country’s corporate income tax law.

Significant changes were also made to the profit split method. The biggest change was the deletion of the sentence permitting the decrease of profits allocated from the first stage of the residual analysis by any loss from the second stage of the analysis.

The two new decrees come into force yesterday.

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