The main Polish tax regulations in Transfer Pricing contain the Personal Income Tax (PIT) Law and the Corporate Income Tax (CIT) Law. These were specified in chapter 4b of the PIT Law and chapter 1a of the CIT Law from January 1, 2019.

On May 1, 2004, Poland joined the European Union, accepting the EU Transfer Pricing Code of Conduct. In January 2006, Poland introduced the APA legislation, which, from January 1, 2007, also applies to profit split to permanent establishments.

On June 28, 2022, the Polish government proposed legislation that, among other elements, would clarify the mandatory reporting of obliged entities to file the Transfer Pricing reports and modify the documentation requirements for transactions with entities located in “tax haven” jurisdictions.

Arm’s Length Principle

Article 11 of the Corporate Income Tax Law is the legal basis for the application of the Arm’s Length Principle.

Related Parties

Related Parties are entities directly or indirectly involved in the management, supervision, or share capital of at least 25% of the entity. It includes entities related to the family (spouse, relative, affinity up to the second degree).

From January 1, 2019, these entities were also related entities in circumstances in which an individual can effectively influence key economic decision-making in both entities.

Polish Transfer Pricing regulations also apply to entities performing transactions in Poland through a permanent establishment and the allocation of profits between a permanent establishment and the parent company.

Transfer Pricing Methods

Generally, the Transfer Pricing methods accepted by the tax authorities are based on the OECD Guidelines. These methods are as follows:

  • Comparable Uncontrolled Price
  • Resale Price
  • Cost Plus
  • Profit Split
  • Transactional Net Margin Method.

The taxpayer must ensure that the pricing method is appropriate for the transaction. The new regulation enables the utilization of another method, including a valuation technique, if none of the above five methods can be employed.

Transfer Pricing Documentation

Taxpayers must report related party transactions entered into under one of the following terms:

  • Non-residents exceeding € 300,000 in a single year with the same entity.
  • A non-resident holder of a company, permanent establishment, or representative of an office in Poland where the amount of receivables or payables resulting from a single transaction exceeds € 5,000.
  • Both foreign and domestic related parties at the specific request of the tax authority.

Local Report

A taxpayer who has exceeded the threshold of € 2 million in the previous fiscal year must prepare the Local Report documentation.

Master File

It must be prepared by consolidated entities by the comprehensive or proportional method, which are obliged to prepare the Local Report and if belonging to a group of related entities:

  • For which consolidated financial statements are prepared;
  • Whose consolidated revenues exceeded PLN 200,000,000 in the previous financial year.

Country-by-Country Report

Concerning the CbC Report requirement, Poland upholds the OECD Guidelines by requiring capital groups with consolidated revenues exceeding PLN 3,250,000,000,000 or € 750,000,000,000.

Deadlines for Preparation and Filing of the Transfer Pricing Information for 2021:

  • December 31, 2022 – Deadline for preparation of documentation and filing of the Transfer Pricing Statement along with the TPR-C form for entities with fiscal year coinciding with the calendar year,
  • Ending March 2023 – Deadline for preparing the group documentation, Master File.

Transfer Pricing Penalties

The penalty for failure to apply the Arm’s Length Principle in transactions with related companies may vary from 10% to 30% of the amount of the overstated loss or understated income, depending on the circumstances.

There are penalties in the Criminal and Tax Code for failure to prepare tax documentation and the TPR-C form or false declaration.

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