On 15 April 2019, the Act of 4 April 2019 amending the Act on the Exchange of Tax Information With Other Countries and Certain Other Acts (Journal of Laws of 2019, item 694), hereinafter: “Amendment”, was published in the Journal of Laws. The new regulations introduce changes among others in the Country-by-Country Reporting mechanism, hereinafter: “CBC”. This newsletter will give you a summary of the introduced regulations.
WHAT IS COUNTRY-BY-COUNTRY REPORTING?
Large multinational enterprise groups are under obligation to submit information about their group of entities. The scope of information that should be reported includes, but is not limited to:
- the size of the business (the amount of assets, share capital, number of employees);
- the amount of revenue, the profit (or loss), the income tax paid (and output tax);
- the place of business and type of business.
1. CHANGED DEFINITION OF A GROUP OF ENTITIES
The Amendment has modified the definition of a group of entities, thus abandoning the reference to accounting regulations. The previous wording of the provision raised doubts as to which entity shall be obliged to submit information about the group of entities in the case of consolidation at least at two levels. According to the Amendment, in the case in which the parent entity located in Poland is at the same time a subsidiary of a parent entity located abroad, the CBC-R shall be filed by the ultimate parent entity that is seated abroad or has its management board abroad.
2. MORE DETAILS ABOUT THE METHOD OF THRESHOLD CALCULATION
New regulations change the method of determining the threshold for groups preparing consolidated financial statements in:
- PLN: next to the threshold in EUR, the PLN equivalent of the indicated amount was provided in the amount of PLN 3.25 billion;
- currency other than EUR: the method of converting exchange rates was specified through a provision that the calculation of the threshold of consolidated revenue (EUR 750) shall be made according to the calculation method adopted in the country of residence of the parent entity.
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The aforementioned changes shall apply retroactively for entities that started their reporting fiscal year after 31 December 2017.
The Amendment also defines the method of calculating the threshold in the case in which the fiscal year covers a period other than 12 months. The threshold shall then be defined in the amount of 1/12 for each started month of the fiscal year.
3. SUBMITTING THE CBC-R AND CBC-P BY ELECTRONIC MEANS
The obligation to submit CBC-R and CBC-P online only means that the CBC-P shall no longer be filed on paper. The definition of electronic means has been set forth in more detail, as well. The CBC-R and CBC-P shall be filed using interface software, whose address will be available in the Public Information Bulletin of the office of the minister in charge of public finance.
4. EXTENDED DEADLINE FOR SUBMITTING THE CBC-P
Under the Amendment, the deadline for submitting the CBC-P shall be extended to up to 3 months from the end date of the reporting fiscal year of a given group of entities.
5. SUBMITTING ADDITIONAL INFORMATION AND CLARIFICATION
Another change is the obligation to submit additional information or clarification both in Polish and English. The additional information or clarification may be about, e.g. the identification data of entities that form a group of entities, equity, retained earnings from previous years, number of employees, tangible assets (non-current and current) or the type of business of entities that form a group of entities.
6. AUDIT BY THE HEAD OF NATIONAL REVENUE ADMINISTRATION
Under the Amendment, the Head of the National Revenue Administration (hereinafter: “Head of the NRA”) shall have the right to check whether entities comply with their obligations resulting from the exchange of tax information.
7. REVISION OF CBC-R AND CBC-P
Under the Amendment, the reporting entity shall have the right to make a revision of their CBC-Rs and CBC-Ps. However, the right to revise CBC-Rs and CBC-Ps shall be suspended for the duration of the audit performed by the Head of the NRA.
8. UPL-1 ALLOWED
According to the new regulations, the authorisation to sign a declaration submitted via electronic means (UPL-1) can be used for filing the CBC-R and CBC-P. As a result, there is no need to grant a separate power of attorney for the purpose of the discussed obligations. The UPL-1 granted before the date of the entry into force of the Amendment shall include an authorisation to sign the CBC-R and the CBC-P, as well.
Under the Amendment, sanctions shall be imposed not only for a failure to submit the CBC-R or CBC-P, but also for providing incorrect data or submitting an incomplete document. Under new regulations, it is an offence classified as treated less severely and regulated directly in the Penal and Fiscal Code. If you fail to comply with the CBC reporting obligations, in cases of minor significance you shall be subject to a fine like in the case of a fiscal offence.
The changes discussed in items 3 – 10 shall enter into effect within 14 days after the publishing of the Amendment, i.e. on 30 April 2019.
Most of the changes introduced by the Amendment shall be welcome as they eliminate doubts concerning the automatic exchange of tax information about businesses that form a group of entities.
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Should you have any questions or need to discuss the topic, we encourage you to contact out expert, Tomasz BEGER:
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