Draft amendment regarding income taxes

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Dear All,

You may find below some basic information on a draft amendment to Corporate Income Tax Act and Personal Income Tax Act and some other acts as regards transfer pricing, issued by the Ministry of Finance for public consultation on 16 July 2018. Namely, the draft provides for:

  • a decrease in the cap on deductions of debt financing costs from the current level of  30% EBITDA to 20% EBITDA;
  • an increase in the cap on deductions of expenses for intangible services acquired from affiliated entities from the existing PLN 3 million + 5% EBITDA to PLN 3 million + 10% EBITDA;
  • deep changes in transfer pricing regulations including but not limited to:- new thresholds in local documentation, a new approach to group documentation,
    –  introducing the so called “safe harbours” (margins for  low added value services, which if applied and as long as they meet some additional conditions, shall be deemed by tax authorities to be at arm’s length),
    –   opening a catalogue of transfer pricing methods,
    – introducing benchmarking analysis as the indispensable element of local documentation, expanding tax authorities’ powers in audits of transfer pricing,
    –  new definitions and specifying the existing notions in greater detail.

In accordance with the current draft, the new regulations would come into effect on 1 January 2019, however, taxpayers would be able to optionally apply some of them as regards transfer pricing documentation also to tax years that commenced  after 31 December 2017.

Should you have any questions, please be so kind and contact us by email or telephone.