ELEMENTS OF TAX DOCUMENTATION

Local documentation (so-called local file)

1. Pursuant to Art. 9a paragraph. 2b of the CIT Act, the basic documentation includes a description of transactions or other events, including liquidity management agreements, cost sharing agreements between the taxpayer (as well as a company that is not a legal person) and its related entities, including :
   1. indication of the type and subject of these transactions or other events,
   2. financial data, including cash flows relating to these transactions, or to record these events,
   3. data identifying related entities carrying out these transactions or capturing these events,
   4. description of the course of these transactions or other events, including functions performed by the taxpayer (or a company other than a legal person) and related entities, balance sheet and off-balance sheet assets engaged by them, human capital and the risks incurred,
   5. indication of the method and manner of calculating the taxpayer’s income (loss) with the justification for their choice, including the algorithm for calculating settlements related to these transactions or other events and the method of calculating the value of settlements affecting the income (loss) of the taxpayer (or other partners of the company that is not a legal person)
2. Comparative data analysis (taxpayers whose revenues or costs exceeded the equivalent of EUR 10,000,000 or who have a share in a partnership whose revenues or costs exceeded the above-mentioned threshold).
3. Description of the financial data of the taxpayer  (or a company other than a legal person) allowing the comparison of settlements (reminding settlements between entities regarding transactions or other events) with the data resulting from the approved financial statements, if the obligation to prepare it results from the applicable taxpayer or company accounting regulations
4. Information about the taxpayer  (or the company that is not a legal person), including a description of:
   1. organizational structure and management structure,
   2. the subject and scope of the business,
   3. the implemented economic strategy, including transfers between related entities between related entities of economically significant functions, assets or risks affecting the income (loss) of the taxpayer,
   4. competitive environment.
5. Documents , in particular:
   1. agreements, agreements concluded between related entities or other documents relating to transactions or other events, a company agreement that is not a legal person, a joint venture agreement or similar agreements documenting the principles of granting rights to shareholders (parties to the agreement) to participate in profit and participate in losses
   2. income tax agreements concluded with tax administrations of countries other than the Republic of Poland, relating to transactions or other events, in particular advance pricing agreements.

Tax documentation should be described based on the following scope of information:

1. Defining the functions to be performed by the entities participating in the transaction  , taking into account the assets used and the risk taken,
2. Determination of all expected costs related to the transaction  as well as the form and date of payment,
3. The method and manner of  profit calculation and determination of the price of the subject of the transaction,
4. Defining the economic strategy and other activities  as part of it – if the value of the transaction was influenced by the strategy adopted by the entity,
5. Indication of other factors  – if, in order to determine the value of the subject of the transaction by the entities participating in the transaction, these other factors have been taken into account, and in the case of concluding a company agreement that is not a legal person, a joint venture agreement or a similar agreement – in particular the principles adopted in the agreement regarding the rights of partners (parties to the contract) to participate in profit and participate in losses,
6. Specification of the benefits expected by the entity obliged to prepare documentation related to obtaining benefits – in the case of contracts for benefits (including services) of an intangible nature.

The above catalog is included in Art. 9a section 1 of the Corporate Income Tax Act (Journal of Laws No. 21, item 86) and in Art. 25a paragraph. 1 of the Personal Income Tax Act (Journal of Laws No. 80, item 350) and presents the minimum scope of information that must be included in the tax documentation. In order to best fulfill the documentation obligation, the taxpayer should also include in the documentation all other information that may have an impact on the described transaction. For example, service documentation should be expanded with a detailed description of the services received and confirmation that the fees paid are related to the services provided.