APA statistics for Q1 2022

The National Revenue Administration (KAS) has released the latest statistical data on APAs.

Briefly: in Q1 2022, only 14 advance pricing agreements were made (all of them unilateral). Although a record was broken in 2021 for the number of agreements made (101), the data for Q1 2022 are not optimistic.

Progress – based on data for the last three months – is not great and will certainly not be satisfactory for taxpayers who applied for APAs. As reported by KAS, as at 31 March 2022, as many as 399 applications were pending (348 for unilateral agreements, 50 for bilateral agreements and 1 for multilateral agreements). This is still a huge number that KAS has been trying to process for 2 years.

The authority assures work is underway to streamline this process to make it more effective and, above all, less time-consuming. However, no specific solutions have been revealed for the time being.

In addition, unfortunately, there are no signs that the average deadline for handling applications for unilateral pricing agreements, which was extended from 12 months in 2020 to 20 months in 2021, will change in favor of taxpayers in 2022.

Along with the Polish Deal, i.e. from 1 January 2022, Article 15e of the CIT Act was repealed that was limiting the possibility of recognizing expenses for intangible services as tax deductible costs.

So far, an effective way to exclude from the limit was precisely to have an advance pricing agreement. Therefore, it is so important for taxpayers to consider their previously submitted applications for the period in which this provision was in force (i.e. 2018-2021) as soon as possible.

The waiting time for an APA decision has a direct impact on the financial liquidity and tax settlements of a taxpayer. As stated above – the prolonged period of examining the application for an APA may directly affect, for example, the recognition of certain expenses as tax deductible costs above the statutory limit.

Additionally, while waiting for the decision, taxpayers cannot benefit from the exemption from the obligation to prepare local file for transactions covered by the APA. This triggers the need to incur additional funds and spend more time on compiling the documentation, which – if the application was processed more efficiently – could be exempted.

Therefore, it seems that the coming years will be a challenge for KAS – primarily to deal with the pending applications since taxpayers often wait for them almost 2 years.

For detailed statistics, go to the official website of the Minister of Finance – here.