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Business partner screening in transactions with tax havens – how to avoid problems?


by Mateusz Żyła

28 June 2022

Although more than one and a half year has passed since the enactment of laws on indirect transactions with tax havens, the application of the laws is still unclear to many taxpayers.

The Ministry of Finance has still not explained how exactly the business partners should be screened even though sanctions for failure to screen them may be serious. Further waiting and idleness seem dangerous. We recommend implementing the necessary procedures as soon as possible.

New rules

Taxpayers will have to screen their business partners this year for the first time. Screened have to be partners who receive payments exceeding 500 thousand zloty per tax year. Then, you need to check if those partners have also paid more than 500 thousand zloty to an entity from a tax haven, i.e. a jurisdiction that practices harmful tax competition (e.g. Hong Kong, Maldives). If so, you have to identify the beneficial owner, that is one:

  • who receives the payments for his own benefit;
  • is not an intermediary obliged to remit the payment to someone else;
  • who conducts a genuine business activity, not only on paper.

Screening of business partners 

First, you need to identify your payees who have received more than half a million zloty in the year and learn from them if they have paid more than 500 thousand zloty to entities established in tax havens. This obligation is new and may be very onerous because it requires a lot of work and transfer pricing expertise.

Second, you need to identify the beneficial owner of the payments and this may be very difficult in some cases. The lawmakers are not helping with the obligations because some provisions are unclear and the Ministry of Finance has still not issued official tax explanatory notes on this matter. 

After analysing the draft notes, you may wonder whether it is enough to obtain the business partner’s statement about exceeding the threshold and information about the beneficial owner of the payments to demonstrate that you have exercised the due care. However, we cannot forget that taxpayers are also obliged to demonstrate due care in identifying the beneficial owner. They must check the available sources of information to secure themselves against the accusation of not exercising due care. Incorrect identification of the beneficial owner poses a risk of not having transfer pricing documentation. This, in turn, exposes the company to tax liability and board members to fiscal crime liability.

Due care procedure

The amended CIT Act imposes on taxpayers unclear but stringent requirements to be met still this year. That is why we recommend having a written due care procedure and carrying out the procedure in consideration of the draft explanatory notes of the Ministry of Finance.

Should businesses wait for the final explanatory notes from the Ministry of Finance?

Holding on any further is a bad idea, so it is best to plan actions before the transfer pricing season. If the official explanatory notes are issued and differ significantly from the draft, Rödl & Partner’s experts will swiftly adapt the procedure.

The deadline for preparing the TP documentation for 2021 expires on 31 December 2022. However, given that the procedure has to be conducted and statements from business partners have to be obtained earlier, the time for fulfilment of the obligations is short. We would like to reiterate that the screening required by law does not apply to associated enterprises only, but to independent ones as well.

If you have any questions, please contact Rödl & Partner experts.

Legal basis:
Article 11o(1a) and (1b) of the Corporate Income Tax Act


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Dominika Tyczka-Szyda

Tax adviser (Poland)


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