Contact
Łukasz Szczygieł

Tax adviser (Poland)
Senior Associate
Phone: +48 12 378 66 32
E-Mail

Starting from 2020 taxpayers will be obliged to apply exclusively the amended TP laws to transactions made in 2019. As part of the numerous changes related to, among other things, transactional thresholds and the TP documentation content, the penal rate has also changed since 1 January 2019. Before the amendments, if the taxpayer did not have TP documentation ready, he could face a 50% penalty CIT rate chargeable on the difference between the income declared by the taxpayer and the income assessed by the tax authorities. Now, if the taxpayer fails to meet the documentation obligation or sets transfer prices which are not at arm’s length, he will be at risk of the so-called “additional tax liability” (Article 58a–58e of the Tax Act). The new laws give tax authorities the right to impose the additional tax liability on the taxpayer by virtue of a decision in which they assess income or loss of the taxpayer due to non-arm's length pricing. In addition to the additional tax liability, the Penal Fiscal Code has also been amended with regard to transfer pricing provisions and the related obligations.

Additional tax liability amount

The basic rate of the additional tax liability is 10% of the amount of unduly disclosed or overstated tax loss or of the undisclosed (in total or in part) taxable income in the scope specified in the tax authorities’ decision. Before the additional tax liability is imposed, the taxpayer first has to pay the understated tax plus interest.

The standard rate can be increased to 20% if the basis for calculation of the additional tax liability exceeds PLN 15 million (in which case the increased rate is applicable to the amount above that limit) or if the taxpayer fails to submit TP documentation to tax authorities or if the submitted TP documentation is incomplete. If the taxpayer completes the incomplete TP documentation as required and within the deadline specified by tax authorities (which may not be longer than 14 days), the 20% rate will not apply (when it comes to the penalty for the failure to submit the TP documentation).

The rate can also be increased to 30% if both of the above failures are made jointly, i.e. if the basis for calculation of the additional tax liability exceeds PLN 15 million and if the taxpayer fails to submit the TP documentation.

What is important is that the additional tax liability must not be imposed on natural persons who are held liable for a fiscal offence or a fiscal crime on account of the same violation.

Sanctions under the Penal Fiscal Code

Another amendment concerning sanctions related to transfer pricing has affected the Penal Fiscal Code (PFC) in 2019. If the taxpayer decides to apply the new regulations to transactions made in 2018, then the new PFC provisions will be applicable, too.

The first sanction is related to the statement confirming the preparation of TP documentation. After the amendments, the statement is to confirm not only the preparation of TP documentation, but also the application of the arm’s length principle to setting the prices in transactions with associated enterprises. If the person(s) obliged to submit the statement on behalf of the taxpayer fails to do so or submits the statement after the deadline or if the statement is untrue, he is subject to a fine of up to 720 day-fine units. In minor cases such a person may be subject to a fine for a fiscal offence. In 2019 the day-fine unit ranges from PLN 75 to PLN 30 thousand. Therefore, the fine for 2019 for violations related to the statement confirming the preparation of TP documentation may range from PLN 54 thousand to no more than PLN 21,600 million. The said sanction may be imposed on the manager of an entity as defined by the Accounting Act, that is a member of the management board or another supervisory body in the entity. If several persons meet the criteria of the entity’s manager, or if it is not possible to indicate the manager of the entity, the statement must be submitted by all persons authorised to represent the entity.

Another sanction under the PFC is for a failure to file a transfer pricing report (TP-R) with the Head of the National Tax Administration. If the person obliged to file the report fails to do so or files it after the deadline, or if the report is untrue, the person will be fined in the same manner as described above in the paragraph about the statement confirming the preparation of TP documentation. The sanction may be imposed on persons authorised to file declarations on behalf of the taxpayer.

Multitude of sanctions

It should be noted that sanctions related to transfer pricing and documentation obligations based on the amended laws can be much more harsh for entities transacting with associated enterprises than the sanctions provided for in the old laws. The additional tax liability can be assessed not only on undisclosed (in total or in part) income, but also on an overstated or wrongly disclosed loss. Furthermore, the additional tax liability can be imposed at a rate being a multiple of the basic (10%) rate, i.e. at 20% or 30%. In addition to sanctions related to additional tax liability, failure to meet TP obligations may involve liability under the Penal Fiscal Code and other acts (such as the Criminal Code).

In case of doubts as to the sanctions, our experts will be happy to help you.

Joanna Bielecka

23.12.2019