Transfer Pricing - Amended Rules on Advance Pricing Agreements

Tax Alert (22/2015)

17 December 2015

On 5th October 2015 the President of the Republic of Poland signed the Act Amending the Tax Ordinance and some other Laws that had been enacted on 10th September 2015 [hereinafter: the “Act”]. The Act introduces, in particullar, a number of material changes to regulations regarding the advance pricing agreements [hereinafter: "APA”] set out in Section IIa of the Tax Ordinance.


In Poland, the APA is the Minister of Finance’s decision which is a confirmation of the selection and application of a method for determining transaction prices between related parties. The advantage of such decision is elimination a risk of the tax auditors questioning a transfer pricing mechanism applied in the covered transaction (assuming that the taxpayer has observed the APA provisions) and protection from penal and fiscal sanctions for individuals responsible for tax settlements.


The main changes to the Tax Ordinance with respect to APA comprise:

1)   Addition of cost sharing agreements to the scope of APA and indication that the APA decision pertains to the “terms and conditions” agreed between related parties, not exclusively to “transactions” – the changes aim to remove selected limitations regarding the object and scope of agreements. For example an APA may also be possible in the cases where no transaction occurred (which may be important for example in the case of business restructuring);

2)   Extension of the catalogue of entities that may apply for an APA – new types of entities (i.e. entities without legal personality) that are eligible to apply for APA are to be added to the list;

3)   Clarification of an obligatory APA application elements and addition of a description of critical assumptions, i.e. boundary conditions for using a given pricing method;

4)   New procedure: renewal of an APA decision replacing the procedure of extension of APA validity period – the new procedure offers more flexibility, as it allows the taxpayer to change/update minor APA elements (provided that they result from changes in the external economic environment and do not constitute significant changes to the terms and conditions of APA);

5)   Description of the content of an application for renewal of an APA decision – the application should include a description of changes to the original APA decision and a justification of these changes;

6)   Limited roll-back of the APA: the APA decision to be binding from the date of submitting the APA application to the Minister of Finance under the regulations applicable before the amendment of the Act, the period covered by the APA decision starts on the date of the taxpayer’s receipt of the decision. This change allows the APA decisions to cover the period between the filing of the APA request and the issuing of the decision; it will adjust the Polish law to the regulations of other countries;

7)   New rules on delivery of decisions on cancelation of APA proceedings by the Minister of Finance to the head of the tax office or director of the tax inspection office, whichever is proper for the taxpayer;

8)   Clarification that several transactions / cost sharing agreements may be covered by one APA application in such case each transaction / agreement is subject to a separate fee due to the Minister of Finance;

The introduced changes to the APA will come into force on 1st January 2016.

Our comments:

Part of the changes introduced in the Tax Ordinance should be deemed as positive to the taxpayers. These changes are intended, for example, to increase the number of entities that are eligible to apply for APA and the scope of agreements between the taxpayer and the Minister of Finance, which will facilitate conclusion of the APA.

Furthermore, establishment of the “renewal” of an APA decision will enable taxpayers to update those elements of the original APA decision that can be affected by material changes in the economic environment – such as benchmarking analyses.

Another positive change is that, upon taxpayer’s request, the APA decision will be binding as of the date of submitting the respective APA application.

On the other hand, delivery of decisions on cancelation of APA proceedings by the Minister of Finance to the head of a tax office or director of the tax inspection office, competent for the taxpayer, is a significant change with a possibly adverse effect on execution of APA by taxpayers. The aforesaid decisions will be sent to the tax authorities only when a formal procedure regarding conclusion of APA has begun and the taxpayer has decided to withdraw from the process at a later stage.

In spite of the above, we would like to stress that, at the moment, conclusion of APA seems to be the only available solution mitigating the risk that the tax authorities will question the terms and conditions agreed between the related parties - holders of an APA decision.

The Act is available on the Parliament’s website:

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