Obligation to show controlled transactions in the Transfer Price Information (pl. TPR) form and no need to submit information on contracts concluded with non-residents (pl. ORD-u)

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Kamila DOBOSZ
Tax Consultant at RSM Poland
 

In 2021, among the taxpayer’s reporting and information obligations for the tax year ending on December 31, 2020, there were reporting on contracts concluded with non-residents within the meaning of the foreign exchange law (ORD-U form) and reporting related to transactions with related entities or contractors from tax havens (TPR form). The obligation to submit the ORD-U information expired on March 31, 2021, and the TPR information on December 31, 2021.

In both cases, these deadlines apply to entities whose tax year was consistent with the calendar year. Moreover, the recently introduced provisions of the Polish Deal have slightly changed the obligations in this respect. From 2022, it will not be necessary to submit information on contracts concluded with non-residents on the ORD-U form, if the entity was previously required to submit the TPR form.

How, then, will the Polish Deal affect the reporting and information obligations? Here are the most important changes in this regard.

When should I submit an ORD-U form and when should I complete a TPR form?

The obligation to submit an ORD-U information applies to contracts concluded with non-residents within the meaning of the foreign exchange law and results from Art. 82 §1 point 2 of the Tax Ordinance (Journal of Laws of 2021, item 1540).

The ORD-U form should include contracts for which the sum of receivables or liabilities exceeds:

• 300 thousand EUR – if a party to the contract is a related entity,

• 5 thousand EUR – if the party to the contract is a non-resident who has a company/branch/representative office in Poland.

For the purposes of reporting on the information contained in the ORD-U form, we assume that we refer to related parties when one of the parties:

• participates directly or indirectly in the management or control of the other party,
  OR

• has a share in the capital of the other entity, entitling to at least 5% of all voting rights.

For the purposes of identifying related entities in the area of transfer pricing (and therefore TPR reporting), the minimal share in the capital is 25% of all voting rights. Thus, the definition of related entities, for the purposes of filling in the ORD-U and TPR forms, is not identical.

Reporting transactions with related entities and entities from tax havens

The submission of the TPR form by the taxpayer is associated with the obligation to report on transactions with related entities, as well as transactions with entities with a residence, registered office, or management board in the territory of a country applying harmful tax competition – i.e. in the so-called tax haven. The amount of transactions subject to reporting is higher than in the case of the ORD-U form and amounts to:

• PLN 10 million for commodity and financial transactions,

• PLN 2 million for service and other transactions,

• PLN 100 thousand for the so-called „direct haven transactions”,

• PLN 500 thousand for the so-called “indirect haven transactions”.

We have prepared a more extensive text on the haven transactions. People interested in this issue are invited to read the note „Tax havens – new documentation obligations".

As the Ministry of Finance explains, TPR reporting is aimed at providing information necessary to assess the risk of understanding taxable income, thus facilitating the process of selecting entities for inspection, as well as obtaining data for the purposes of statistics. The records are to concern, for example, the type of controlled transactions carried out by related entities and entities using the “safe harbour” rights.

What changes will the introduced provision of the Tax Ordinance bring?

To sum up, in 2022, in accordance with the transitional provisions of the Polish Deal, Art. 82 § 1c of the Tax Ordinance, entitling to the exemption from the obligation to submit the ORD-U, will already apply to forms submitted after December 31, 2021.

However, this exclusion will not apply to taxpayers and companies that are not legal persons, referred to in Art. 11o paragraph 1 and 1a of the Act of February 15, 1992 on income tax from legal persons (Journal of Laws of 2021, item 1800, i.e. as amended), i.e. entities making the so-called haven transactions.

IMPORTANT: we no longer submit the ORD-U for transactions reported in TPR-C for 2021. However, we must pay special attention to the definitions of related entities!

The changes introduced to the Tax Ordinance should be assessed positively, as they aim to reduce the taxpayer’s reporting burden by eliminating the need to send ORD-U information to tax authorities in a situation where the same data are required by other forms.

However, we would like to draw your attention to different definitions of related entities and a different level of reporting thresholds for contracts and transactions specified for the needs of ORD-U and TPR. They mean that even when the taxpayer is obliged to submit TPR for 2021it may turn out that he will also have an ORD-U reporting obligation. Submitting these forms still requires a thorough analysis of the company’s situation, so it is worth using the help of a tax advisor in this case.