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The Minister of Finance’s General Ruling on Updating Tax Documentation

On 3 April 2018 the Minister of Finance published a general ruling dated 28 March 2018 on the obligation of preparing, reviewing and updating tax documentation. In particular, the ruling applies to financial transactions such as loans, credits, the issuance of bonds, guarantees, and sureties.

Thus far the rulings given by the Head of the national Revenue Administration had been beneficial to taxpayers as they had provided for the loan transaction transfer pricing documentation to be prepared only for the year of its conclusion, without the obligation to prepare in in subsequent years when the calculation and payment of interest would take place. However, in the ruling of 28 March 2018, the Ministry of Finance contravened the abovementioned interpretation. Tax documentation for financial transactions that continue for subsequent tax years, prepared for said transactions in the tax year of their commencement, should be made subject to periodic reviews and updates, at least once every tax year. Therefore, should transaction terms change during its performance (e.g. by means of extending the term form the repayment of principal of interest, granting another installment of a loan or a credit, changing the interest rate), the taxpayer is required to take account of the information in the updated tax documentation.

What is more, even if no material change to a transaction or other event has taken place, the taxpayer is still required to update the tax documentation. The documentation updated in such manner should feature current data relating to the transaction, other events and the taxpayer himself.

Additionally, the Minister of Finance indicated that changing material properties of a transaction during its performance is not equivalent to concluding a new transaction, and does not require the taxpayer to prepare tax documentation from scratch. The taxpayer is only bound by the obligation to periodically update  the previously prepared tax documentation in this respect.

The purpose of periodic reviews and updates to the tax documentation is to reflect the factual course of transactions and other events, including all material changes that took place during their performance.

Pursuant to the ruling, the obligation to carry out reviews and updates applies not only to transactions and other events concluded after 1 January 2017, but also to the ones concluded prior to the date and which continue for subsequent years.

The Minister of Finance pointed out that the rules on reviews and updates apply not only to financial transactions but also to all transactions or other events extending into subsequent tax years.

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