Transfer pricing

Transfer prices are prices set in transactions between related parties. The prices used in this type of transaction should be determined taking into account the so-called “price of the transaction”. market price principle (arm’s length principle).

The CIT Law imposes documentation obligations on entities when statutory transaction value thresholds dedicated to service, financial, commodity and other transactions are exceeded. The documentation obligation serves to eliminate situations in which taxpayers within a single group shift income between countries so that income is taxed in the country with the most favorable tax jurisdiction, or transfer the financial result between domestic entities.

The thresholds for triggering the documentation obligation are respectively:

• PLN 10,000,000 – in the case of commodity transactions,
• PLN 10,000,000 – in the case of financial transactions,
• PLN 2,000,000 – in the case of a service transaction,
• PLN 2,000,000 – for transactions other than those listed above.

To calculate the value of transactions in a given year, controlled transactions of a homogeneous nature are taken into account.

Yes – the law provides for exemptions from documentation requirements for domestic transactions. However, in order to take advantage of the exemption, statutory prerequisites must be met, which include, among other things, entering into controlled transactions between related parties with a registered office in Poland during the tax year and which, in addition, have not incurred a tax loss.

Yes. Even if an entity enjoys a documentation exemption, it is still obliged to file Form TPR-C by the end of the 11th month of the year following the year to which the exemption applies.

Currently, the obligation to file TPR-C forms for companies whose fiscal year equals the calendar year expires on the last day of November 2023. As of this year, it is no longer necessary to submit a separate statement on the preparation of local transfer pricing documentation – the actaul statement is an integral part of the TPR-C form.

A taxpayer whose tax year coincides with the calendar year is required to prepare transfer pricing documentation by the 10th. month of the year following the year in which the event giving rise to the obligation occurred. Note, however, that the deadlines for preparing transfer pricing documentation may change in subsequent tax years.

Intra-group transactions are a common phenomenon among both emerging entrepreneurs and complex groups with a long history of doing business. Due to the continuing upward trend in the prices of goods and services, as well as the volume of transactions carried out in the market, resulting from the increase in competition and the attractiveness of domestic companies, the issue of transfer pricing concerns an increasing number of entities.

The concept of implementing transfer pricing obligations under the CIT Law boils down to the proper interpretation of the regulations in the context of transactions carried out with counterparties, mainly but not only related parties, during the tax year.

Chapter 1a of the CIT Law and the accompanying regulations contain requirements for taxpayers that, due to their general, and therefore imprecise, nature, are intended to apply to the diverse, and often complex, transactions of various types that business entities carry out during the year in connection with their business.

The regulations require that once the statutory criteria are met, a description of the transaction, including the parties involved, the nature of the relationship, the course and value of the transaction, and how the price was determined, should be made corresponding to the structure required by the regulations. In addition, in order to confirm the correctness, in light of market principles, of the transaction terms adopted, it is incumbent on taxpayers to conduct and document appropriate benchmarking analyses. In turn, the entire complex transaction and all relevant aspects from the point of view of transfer pricing, must ultimately be summarized in a structured information, in the form of an appropriate form, the correct completion of which is particularly important from the point of view of the purposes it serves for the tax authorities, ie. analysis of the risk of understatement of taxable income for transfer pricing and for other economic or statistical analysis.

Regular changes in recent years, changes in the scope of model documents provided by the Minister of Finance, as well as the dynamics of interpretative changes revealed in the issued Tax Explanations, make it necessary to review the approach to the analysis of realized transactions in the context of transfer pricing obligations, including those that, by their nature or business concept, are carried out on a continuous basis, from year to year.

Although the deadlines for the fulfillment of transfer pricing documentation obligations appear to be correspondingly long, and the transaction amount thresholds initiating the obligations sometimes relatively high, an appropriate intra-company approach should be introduced already at the stage of developing the business conducted.

It is significant that the implementation of transfer pricing obligations is receiving increasing attention from tax authorities. There is a significant increase in inspections in this area. In addition, tax authorities are equipped to recharacterize or disregard a transaction if it deviates from market prices. Thus, in the case of complex transactions, due to their subject matter or method of execution, many misunderstandings can arise between the taxpayer and the authority.

Therefore, it is worth disseminating knowledge within your organization covering transfer pricing issues, both through ad hoc cooperation with external advisors dealing with the issue in their daily work and through support in developing internal procedures.

Structuring verification, for the purpose of identifying the documentation obligation, both:

The transactions themselves – in the context of defining transactions of a homogeneous nature and their value, as well as
the status of the contractor – in the context of establishing residence, registered office and management and excluding their location in a tax haven,
– This is because it can take place by drawing up an internal procedure.

This type of document, will allow to define the stages, course and systematize the conclusions of the verification of transactions, so that it will be possible to do it not only cumulatively, in the period close to the deadline for the preparation of transfer pricing documentation, but on an ongoing basis during the year, parallel to the transactions carried out.