Post by Adamski on Mar 13, 2009 8:57:17 GMT 4
Poland: New corresponding adjustment mechanism
MDDP & Partners
Amendments to the Polish tax regulations relating to transfer pricing came into force on January 1 2009. Article 11 of the corporate income tax law was supplemented with regulations, which allow the taxpayer to apply for a correction to its taxable profit in the situation when such profit was already taxed by a foreign tax administration relevant to the taxpayer's related customer (corresponding adjustment).
These new regulations allow the avoidance of double taxation of the profit resulting from the transaction between the related parties located in different tax jurisdictions. This applies to the situations where such profit is subject to a transfer pricing adjustment (increase) made by the tax administration relevant to the foreign related party.
The above regulations apply also to a foreign entity having a permanent establishment through which the profit is achieved in Poland. The amendments introduce to the Polish tax law the regulations of the arbitrage convention (of July 23 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises) and the code of conduct for the effective implementation of the convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (EU C 176 of 28.07.2006, p. 8-12).
Additionally, the new regulations oblige the minister of finance to issue a decree covering the detailed procedure of applying for the corresponding adjustment and the course of this process. The draft decree is subject to parliament legislative works and business environment consultations. The existing decree indicates the possibility of applying for a corresponding adjustment, however the regulations lack details on the procedure of application and process.
Tomasz Adamski (tomasz.adamski@mddp.pl)
MDDP & Partners
Amendments to the Polish tax regulations relating to transfer pricing came into force on January 1 2009. Article 11 of the corporate income tax law was supplemented with regulations, which allow the taxpayer to apply for a correction to its taxable profit in the situation when such profit was already taxed by a foreign tax administration relevant to the taxpayer's related customer (corresponding adjustment).
These new regulations allow the avoidance of double taxation of the profit resulting from the transaction between the related parties located in different tax jurisdictions. This applies to the situations where such profit is subject to a transfer pricing adjustment (increase) made by the tax administration relevant to the foreign related party.
The above regulations apply also to a foreign entity having a permanent establishment through which the profit is achieved in Poland. The amendments introduce to the Polish tax law the regulations of the arbitrage convention (of July 23 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises) and the code of conduct for the effective implementation of the convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (EU C 176 of 28.07.2006, p. 8-12).
Additionally, the new regulations oblige the minister of finance to issue a decree covering the detailed procedure of applying for the corresponding adjustment and the course of this process. The draft decree is subject to parliament legislative works and business environment consultations. The existing decree indicates the possibility of applying for a corresponding adjustment, however the regulations lack details on the procedure of application and process.
Tomasz Adamski (tomasz.adamski@mddp.pl)