New rules for documenting transactions with tax havens - are you prepared?

A favourable change for the taxpayers is the proposed simplification under the so-called “Polski Ład” to apply retroactively, i.e. from 1st of January 2021. These changes will include removed obligation to prepare transfer pricing analyzes (analyzes justifying arm’s length character of transaction) in the case of tax haven transactions made with unrelated entities. At the same time, taxpayers must be still verifying the beneficial owners and subject to reporting obligations (transfer pricing documentation, TPR).

3. ACTIONS TO BE TAKEN BY THE TAXPAYER

The implemented changes may become a significant challenge in terms verifying contractors as well as preparing documentation.
It is the right time now to see how to exercise due diligence in verifying contractors in terms of documentation obligations in transfer prices to avoid disturbing regular operations and business relations.
To exercise due diligence, taxpayers must prepare and collect statements regarding transactions made by their contractors with tax havens. In addition, it is worth implementing additional solutions across the organization, i.e. dedicated provisions in contracts with contractors, as well as drawing up and implementing a detailed contractor verification procedure.
It is worth acting now because the deadline for preparing documentation for 2021, including tax haven transactions, is the end of October 2022.
The deadlines may seem distant yet given the complex and lengthy procedure of obtaining statements from contractors, it is worth establishing the contractor verification process before the end of the year.

4. TAX HAVENS
The Regulation of the Minister of Finance of 28th of March 2019 on the determination of countries and territories applying harmful tax competition in the field of corporate income tax lists 26 countries (territories) whose tax systems feature harmful tax competition. Among them are: Principality of Andorra, Anguilla – Overseas Territory of the United Kingdom of Great Britain and Northern Ireland, Antigua and Barbuda, Sint-Maarten, Curaçao – countries included in the Kingdom of the Netherlands, Kingdom of Bahrain, British Virgin Islands – Overseas Territory of the United Kingdom of Great Britain and Northern Ireland, Islands Cook – Self-Governing Territory Associated with New Zealand, Dominica, Grenada, Sark – Dependent Territory of the British Crown, Hong Kong – Special Administrative Region of the People’s Republic of China, Republic of Liberia, Macau – Special Administrative Region of the People’s Republic of China, Republic of Maldives, Republic of Marshall Islands, Republic of Mauritius, Principality of Monaco, Republic of Nauru, Niue – Self-Governing Territory Associated with New Zealand, Republic of Panama, Independent State of Samoa, Republic of Seychelles, Saint Lucia, Kingdom of Tonga, Virgin Islands – United States Unincorporated Territory, Republic of Vanuatu.
In addition, the list of “tax havens” has been completed in accordance with the Notice of the Minister of Finance of 7th of July 2020, containing the list of countries and territories indicated in the EU list of non-cooperative jurisdictions for tax purposes adopted by the Council of the European Union. It includes Republic of Fiji, Guam, Cayman Islands, Republic of Palau, Sultanate of Oman, Republic of Trinidad and Tobago, American Samoa.
Interestingly, the reported transactions with tax havens for 2019 totaled PLN 140,218.02 million – most of them with Panama and Hong Kong (86.27% of total tax havens transactions).
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If you want more insights and information on the impact on your business, please contact:

or your advisor at MDDP.