Changes of 17 June 2013 introduced to the Minister of Finance Decree on transfer pricing – part 4: business restructurings – allocation of risk


Below we quote section 4 par 23a of the Polish transfer pricing decree regarding business restructuring:

4. Tax controllers recognize that relevant risks are allocated correctly to a related party only when it can be demonstrated that the related party has the power to take decisions to manage this risk or has the financial capacity to bear the consequences of the risk should it materialise.

The OECD Guidelines on Transfer Pricing indicate that the determination of which party bears the risk starts from the examination of contractual terms, then whether the actual conduct of the related parties conforms to the contractual terms. The examination of the arm's length nature of the risk allocation, in the absence of comparables, it based on which party has greater control over the risk or financial capacity to assume the risk.

If the risk is allocated to the party which has less control over the risk, then tax administration may challenge the arm's length nature of the such a risk allocation.

Taxpayer should review their agreements, further conduct and documentation to see if the question of the allocation of risk is consistent.

Changes of 17 June 2013 introduced to the Minister of Finance Decree on transfer pricing – part 3: The right to remuneration for business restructurings

The amended Decree on transfer pricing in a very general manner indicates the remuneration for restructuring. The OECD Transfer Pricing Guidelines of 22 July 2010 have a full chapter dedicated to this matter (Chapter no IX). Therefore in case of doubts it is possible to be guided by the OECD Guidelines, Chapter IX.

Below we quote the first 3 sections of the Polish transfer pricing decree on business restructurings:

1. Tax controllers examine the terms of business restructurings agreed or imposed between related parties with the terms which would have been agreed between independent parties.

2. Business restructurings mentioned in section 1 means the transfer, between related parties, of economically relevant functions, assets or risks.

3. The examination mentioned in section 1 should consider the business reasons for the business restructurings, expected benefits from the restructurings, including the effect of synergy, and realistic options available for the related parties involved in the restructuring.

Taxpayer should review their transactions concluded in the past that might be recognized as business restructuring in the above meaning of section 2. Furthermore, taxpayers should review their transfer pricing documentation to see if it sets out arguments that will allow to protect the taxpayer from income adjustment and from tax on restructuring (so called exit charges).

New Minister of Finance Decree on transfer pricing

Tax up-date of 3 July 2013
New Minister of Finance Decree on transfer pricing
The New Decree on transfer pricing was published on 3 July, 2013, so it will come into effect on 18 July, 2013.
The New rules introduce to the Polish legal system the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations as changed in July 2010. The main issues are: tax treatment of business restructuring (famous exit charges), comparability analysis, choice of the most appropriate method.

Further, the New rules introduce the results of the workings of the EU Joint Transfer Pricing Forum on low value adding services and shareholder costs.

The New Decree on transfer pricing has introduced very revolutionary rules which deeply interfere with the business activity carried on between related companies, therefore on this site we shall discuss in detail each of the topics of this New Decree.


Changes of 17 June 2013 introduced to the Minister of Finance Decree on transfer pricing – part 2: Choice of method


One of the main changes in the Decree is the choice of the method used to evaluate the income of the taxpayer.
Still the tax administration has the obligation to apply the method chosen by the tax payer, but what is new is that the tax administration (when choosing he method) must take into account:
• the functions performed in the transactions, including risks, assets and human capital,
• data available to apply the method,
• comparability of the transactions or of the taxpayers.

Additionally a new hierarchy of methods is introduced. The Comparable Price Method is less favoured, whereas the profit methods are more recognised. More details on this we shall provide you in next part, next week.

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