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Designation “TP” – dispelling doubts on intra-group transactions – tax interpretation

The company became doubtful whether it should use the designation “TP” for transactions of intra-Community acquisition of goods or import of services and therefore requested a binding interpretation.

Brief summary of the facts: the applicant is a Polish tax resident taxed on all its income in Poland and an active, registered taxpayer of tax on goods and services. The company is part of an international capital group The applicant systematically purchases goods and services from foreign related parties. The applicant’s contracting party is a taxpayer, based in another EU member state, that systematically carries out intra-Community transactions.

The applicant took a position that indicated that he should not use such a designation in the new JPK_V7 declaration. It mainly related to the Regulation on the new SAF, which literally does not impose such an obligation in relation to i-Ca transactions with a related entity. In the regulation according to SAF-T of October 15, 2019, § 10 sec. 4 point 3, the designation “TP” refers us to the VAT Act, Art. 32 sec. 2 points 1, and this article in turn to the CIT and PIT Acts on Income Taxes. So being detailed to Art. 23m of paragraph 1 point 5 of the Personal Income Tax Act and Art. 11a paragraph. 1 point 5 of the Corporate Income Tax Act.

Here it is worth being tempted to interject and explain relatedness. For legal entities related parties – this means:

  1. the subjects out of which one subject exerts considerable influence upon at least one other subject; or
  2. the subjects upon which the following subjects or persons exert considerable influence:

– the same other subject or

– a spouse, relative or relative by affinity up to second degree of a natural person exerts considerable influence upon at least on subject; or

  • a partnership and its partners; or
  • a taxpayer and its foreign establishment, and in the case of a tax capital group – a company belonging to the group and its foreign establishment;

So the most enigmatic statement is to exert significant influence. This means:

  1. holding directly or indirectly at least 25 per cent:
  2. of shares in capital or
  3. of voting rights in control bodies, decision-making bodies or managing bodies; or
  4. of shares or rights to share in profits or property or expectancy thereof, including participation units and investment certificates; or
  5. actual ability of a natural person to influence taking key economic decisions by a legal person or an organizational unit which has no legal personality; or
  6. remaining in a marriage or occurrence of consanguinity or affinity up to the second degree.

That is, de facto ownership of certain shares in another company or of voting rights results in an individual having such a relationship.

For natural persons, in addition to the condition of possessing significant influence in the form of holding shares, etc., kinship and affinity are also considered. Unfortunately, it is often the case that each case must be considered separately due to the frequent non-obviousness in the first analysis.

Returning to the subject of the interpretation in question, the basis for such a thesis was also a brochure of the Ministry of Finance, which indicated this indication only in terms of output tax to transactions made by the self.

The Director of the National Tax Information did not agree with such arguments. He explained that the TP designation refers to the relationship between the purchaser and the supplier of goods or services. He stressed that the “TP” designation should be used for each transaction included in the sales records (containing data allowing for settlement of output tax), if there are connections between entities involved in this transaction. Therefore, this designation should also be used for purchases of goods/services for which the purchaser is required to account for output tax on that account).

Individual interpretation by the Director of the KIS of 2 December 2020, ref. 0112-KDIL1-2.4012.427.2020.1.PM

Another query about the “TP” designation is a doubt about the value of the transaction. This was asked by a company which rents out residential premises. The interest in this code was caused by the fact that several premises were rented by persons evidently connected with the company, which was also mentioned in its application. Namely, one apartment was rented by the president’s husband, another by his daughter and another by two spouses. These are the undisputed connections we wrote about above.

The applicant argued that there is no obligation to report this code especially as the transactions are for relatively small amounts. The director of the KIS explained that the designations should be applied in principle on a zero-one basis. Thus, each transaction amount obliges to apply the designation on related parties.

Individual interpretation by the director of the KIS of 3 February 2021, ref. 0111-KDIB3-1.4012.876.2020.2.KO

More and more frequently, individual interpretations are issued with regard to markings in JPK_V7. Taxpayers want to be sure that they account for transactions correctly in order to avoid fines and enquiries from tax offices. Hence the noticeable and right (for security reasons) trend to request interpretations regarding the use of various codes (not only GTU) in the new JPK. The good news is that the KIS does not place formal obstacles against issuing interpretations in this respect. Nevertheless, it is recommended to apply for a formal confirmation in the form of an individual interpretation.

Anyone interested, wishing to obtain practical information or assistance in preparing an application for an individual interpretation, is encouraged to contact our expert Mirosław Siwiński at msiwinski@advicero.eu or +48 533 339 592 or contact our office at office@advicero.eu.