The taxpayer's choice of rules for preparing transfer pricing documentation also applies to transactions within his or her partnership.
If an individual, as part of an individual business activity, has selected the regulations according to which they prepare transfer pricing documentation, this selection is also binding for transactions conducted by a partnership in which that individual is a partner (interpretation of the Director of the National Tax Information of September 9, 2019, No. 0112-KDIL3-3.4011.216.2019.1.DS).
For the tax year starting after 31.12.2017, it is possible to choose the regulations according to which the transfer pricing documentation is prepared. These may be the regulations in force from 1.1.2019 (2019 Rules) or the regulations in force until the end of 2018 (2017 Rules - were introduced on 1.1.2017).
The choice does not have to be reported. However, if the selected rules require the preparation of transfer pricing documentation, the choice is communicated in the statement on the preparation of transfer pricing documentation. The statement usually indicates the provision on the basis of which the documentation was prepared. Additionally, the 2019 Rules specify the content of the statement submitted on their basis.
Regardless of which rules are chosen, the deadline for submitting a declaration for a tax year started after December 31.12.2017, 9 remains the same - the end of the XNUMXth month after the end of a given tax year.
Each set of rules defined different transaction thresholds. Additionally, the 2017 Rules also provided several entity thresholds, beyond which the scope of documentation obligations increased.
In turn, the 2019 Principles have significantly limited the list of cases in which local documentation must be prepared. The 2019 Principles also allow for the complete exemption of an entity from the obligation to prepare transfer pricing documentation.
According to the transitional provisions, each taxpayer is required to apply the selected rules to all relationships with related entities. In practice, taxpayers choose those rules that require less administrative effort, i.e. less documentation.
The interpretation was issued on the basis of the provisions of the Personal Income Tax Act, but the provisions of the Corporate Income Tax Act in the area of transfer pricing are virtually identical. Therefore, the interpretation may have significant negative effects, including those unintended by taxpayers. It may prevent the use of the exemption from the obligation to prepare transfer pricing documentation or impose additional obligations on the entity.
The interpretation may prove particularly burdensome for entities that are partners in many partnerships and bind them with regard to the choice of rules that are unfavourable to them.
The interpretation does not specify how to proceed if taxpayer partners of a partnership choose different rules. In principle, the transfer pricing documentation is prepared by the designated partner, but in the context of the indicated interpretation it may turn out that each partner has a different scope of obligations resulting from the adoption of different rules.
Date of publication: 2.10.2019/XNUMX/XNUMX
