Transfer pricing are rates agreed between related parties for the goods, services, or ownership rights. In practice, prices are used during the income transfer within an international capital group, most often across national borders. The transnational groups are required to report Country-by-Country (CBC) to provide the tax administration with information on the size of their activities, revenues, profits (or losses), the amount of tax due, and the subject of business activity.
Companies belonging to the capital group with an annual turnover exceeding 750 million EUR should submit a notification (CBC-P) within three months from the end of the financial year. The reporting unit and the country, in which the information about the group of entities will be submitted, should be indicated as well. Note that in 2019, the information on transfer prices form, TPR, replaced previously applicable CIT-TP and PIT-TP forms.
Information on transfer pricing must be submitted to the National Revenue Administration within nine months from the date of the tax year closing. The management board of the entity is required to submit a declaration concerning the preparation of local transfer pricing. Both information can be submitted only electronically.
According to the amendment to the act counteracting the effects of the COVID-19 pandemic under Shield 4.0, the deadlines for reporting transfer pricing and TPR documentation have been extended by an additional three months. Therefore, on December 31st, 2020, there was a new deadline for companies whose tax year ended on December 31st, 2019, and the documentation obligation was for the period between March 31st and September 30th, 2020. Companies for which the statutory period of nine months expired between October 1st, 2020, and January 31st, 2021, has received an additional three months to fulfill their obligations – via electronic TP-R form.
The deadline for TP documentation for 2020 has not yet been changed – it expires on September 30th, 2021.
Please keep in mind that the market conditions of transactions in 2020 have changed in many industries due to COVID-19. Therefore, we recommend paying attention to whether the benchmarking analysis remains valid.
The obligation to prepare documentation will arise if the value of homogeneous transactions carried out by the taxpayer with related entities exceeds the statutory thresholds: 10 million PLN (for commodity and financial transactions) and 2 million PLN (for service transactions and other unclassified).
Information on TPR transfer pricing includes reporting:
The amendment, which entered into force on January 1st, 2021, extends the documentation obligation to:
The said documentation must additionally contain a benefit test, in particular a description of the expected economic benefits, including tax benefits.
Each transaction exceeding an annual value of 500 000 PLN should go along with verification whether the contractor or the beneficial owner has no further connections (in terms of capital transfer) with the tax haven.
Beneficial owner – an entity that meets all of the following conditions:
Tax haven – a country that uses harmful tax competition in the field of corporate income tax. The regulation of the Minister of Finance (Journal of Laws of 2019, item 600) explicitly defines 26 countries as tax havens. The full list is available on the website of the Ministry of Finance. Also, the list of tax havens was supplemented with seven new territories following the Announcement of the Minister of Finance on July 7th, 2020 (Ministry of Finance of 2020, item 614).