Transfer Pricing
The main purpose of transfer pricing is to ensure that transactions between related entities or parties are carried out in accordance with the arm’s length principle – meaning on the same terms as transactions between unrelated parties. This issue is particularly important from the perspective of tax authorities, as uncontrolled capital transfers between related companies may result in an understatement of their taxable base.
One of the more challenging aspects is identifying which entities can be defined as related parties. It should be noted that this includes not only capital relationships but also personal ones. The statutory phrase “exercising significant influence over a related party” often causes confusion for taxpayers, since an individual without formal authority in a company who makes key decisions may be considered a related party. It is therefore important to emphasize that the status of an individual (natural person) does not exempt them from the obligation to report transactions. Transfer pricing regulations are included in both the Corporate Income Tax Law and the Personal Income Tax Law.
In addition to transactions with related entities, taxpayers are also required to report transactions with entities that are residents of, have their registered office in, or are managed from territories or countries that apply harmful tax practices — commonly referred to as tax havens — as well as with foreign permanent establishments located in such jurisdictions. A further complication for taxpayers is the frequent updating of the list of non-cooperative jurisdictions for tax purposes.
The issues outlined above represent only a small part of the complex field of transfer pricing. Many aspects require thorough analysis. We encourage you to review the specific requirements regarding transfer pricing obligations. Based on experience, we know that taking action at an early stage greatly facilitates the submission of required documents and helps avoid many common errors.
How can we help
Documentation obligation
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Documentation obligation
Related parties conducting controlled transactions may be required to prepare transfer pricing documentation – a local file – and report settlements in transfer pricing information – TPR.
The requirement to report a transaction depends on whether it exceeds the following documentation thresholds :
- PLN 10,000,000 – for a commodity transaction,
- PLN 10,000,000 – for a financial transaction,
- PLN 2,000,000 – for a service transaction,
- PLN 2,000,000 – for other transactions.
In addition, transactions with entities in tax havens must be reported if their value exceeds:
- PLN 2,500,000 – in the case of a financial transaction,
- PLN 500,000 – in the case of a non-financial transaction.
Our support in the scope of defining documentation duties includes:
- Evaluating transfer pricing compliance activities and reviewing relationships between entities,
- Analyzing transactions with related entities and tax haven entities,
- Verifying the applicability of exemptions from local file or transfer pricing analysis.
As a result, you will receive a list of transfer pricing obligations covering documentation, transfer pricing analysis, or TPR.
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Transfer Pricing Documentation
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Transfer Pricing Documentation
Each controlled transaction that exceeds the applicable documentation thresholds (unless subject to relevant exemptions) must be included in the local file. In addition to a detailed description of the transaction, this document includes a functional analysis (covering functions, risks assumed, and assets used), a profile of the related party, a transfer pricing analysis, a summary of financial information, and the economic justification for the transaction.
The transfer pricing documentation must be prepared in electronic form no later than by the end of the 10th month after the end of the tax year.
Our support includes:
- Preparing comprehensive transfer pricing documentation,
- Adapting existing transfer pricing documentation to Polish requirements,
- Updating local transfer pricing documentation in line with current regulations.
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Transfer Pricing Analysis
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Transfer Pricing Analysis
A transfer pricing analysis – in the form of a comparability or compliance analysis – is part of the local transfer pricing documentation; however, it is often presented as a separate document. Its purpose is to verify whether the prices applied in related-party transactions are at arm’s length.
The transfer pricing analysis must be updated at least every three years, unless changes in the economic environment significantly affect the reliability of the current analysis. In such cases, a new analysis must be prepared in the year the change occurs.
Our support includes:
- Comparability analysis using benchmarking,
- Compliance analysis,
- Analysis of intra-group services – IGS (Intercompany Services).
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Transfer Pricing Information (TPR)
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Transfer Pricing Information (TPR)
The Transfer Pricing Information (TPR) is a summary of transactions with related parties and with entities in tax havens It must be submitted electronically by the end of the 11th month following the end of the tax year. This is the only transfer pricing document that must be submitted to the tax authorities, even if the taxpayer is not subject to the obligation to prepare full transfer pricing documentation.
Our support includes:
- Preparing Transfer Pricing Information on behalf of the Client for legal entities (TPR-C) and individuals (TPR-P),
- Assisting with interactive TPR declarations,
- Preparing a voluntary disclosure (czynny żal) in case of late submission.
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Group Transfer Pricing Documentation – Master File
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Group Transfer Pricing Documentation – Master File
Group transfer pricing documentation, also known as the Master File, is a collection of information about the entities within the group, including a detailed description of the group’s significant intangible assets and its financial transactions.
Taxpayers required to prepare a local file must also have a Master File by the end of the 12th month following the end of the tax year if:
- The group to which the taxpayer belongs prepares consolidated financial statements using the full or proportional method,
- The group’s consolidated revenues in the year preceding the year for which the Master File documentation is prepared exceeded PLN 200,000,000 or its equivalent.
Our support includes:
- Verifying Master File obligations
- Preparing comprehensive Master File documentation.
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Transfer Pricing Policy
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Transfer Pricing Policy
A transfer pricing policy sets out the rules for setting prices in key related-party transactions. While not mandatory, such a policy is a valuable risk management tool. It demonstrates the correctness of settlements and helps prove their compliance with tax regulations.
Our support includes:
- Developing a transfer pricing policy that outlines the settlement principles applied within a group of related entities and providing support in implementing it within the organization.
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Business and Intragroup restructuring
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Business and Intragroup restructuring
Restructuring within international capital groups is increasingly common. By reallocating functions and resources between entities, groups aim to reduce costs and improve operational efficiency. A restructuring may be relevant from a transfer pricing perspective if it involves changes to commercial or financial relationships, or the transfer of functions, assets, or risk categories between related entities, particularly if it significantly affects the taxpayer’s financial results – specifically EBIT.
Our support includes:
- Assessing economic events related to restructuring or reorganization,
- Preparing transfer pricing documentation for restructuring-related transactions.
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