Daria Walkowiak

Attorney at Law
Phone: +48 71 60 60 418

The deadline for drawing up transfer pricing documentation is coming. According to the current transfer pricing laws you can choose which legislative regime to follow in the TP documentation for 2018.

Taxpayers who transact with associated enterprises and meet certain statutory criteria are obliged to draw up transfer pricing documentation. The deadline for drawing up the TP documentation and filing a statement to confirm that it has been drawn up expires at the end of the ninth month after the tax year. If your tax year overlaps with the calendar year, this is 30 September.

Which regime to follow?

The transfer pricing laws were significantly modified on 1 January 2019. You can follow the new laws already for the 2018 documentation under the transitional provisions (Article 44(2) of the Act of 23 October 2018 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Tax Act and certain other acts)  If you choose this option, you have to apply the new rules comprehensively to all transactions, that is, in a coherent and consistent way.

In practice, this means that you can choose whether you want to prepare the 2018 TP documentation according to the old rules, i.e. those applicable until 31 December 2018, or the new rules that have been in force since 1 January 2019.

Old rules

According to the legislation applicable until 31 December 2018, taxpayer’s transfer pricing obligations were identified in several steps and on many levels. Once certain specific thresholds were exceeded (total revenues or total expenses of the previous year), certain documents had to be drawn up (local file, benchmark study, master file etc.).

New rules

In the legislative regime in force since 1 January 2019 the lawmakers have detached the documentation obligations from the taxpayer’s scale of business. The local file must now include only those controlled transactions which are uniform and which exceed statutory thresholds (PLN 10 million for transactions on goods and financial transactions, and PLN 2 million for services and other transactions).

Apart from numerous simplifications, the lawmakers have extended the number of taxpayers obliged to prepare a benchmark study which is a component of the local file under the new legislation. Moreover, they have preserved the obligation to submit a statement saying that the TP documentation is ready and extended its content to include an affirmation that the transfer prices of the controlled transactions described in the local file have been set on terms that would have been agreed between independent entities. If you fail to submit the statement, submit it past the deadline or state untruth in the statement, you may face sanctions under the Criminal Fiscal Code.

Which rules are better?

The choice of the best option should be based on an in-depth analysis of your particular circumstances and a practical comparison of the documentation obligations under each regime.

The new regime may prove better for certain taxpayers. However, it would be wrong to assume that the rules applicable since 2019 are always better. The benchmark study used to be required only from taxpayers who had more than 10 million euro in revenues or expenses. Under the new regime, it is required from everyone who has to draw up the TP documentation. Further consequences may also include an obligation to file the mandatory statement of the management board saying that the transfer pricing documentation is ready and declaring that the prices between associated enterprises have been set at arm's length, subject to criminal and fiscal liability.

In view of the upcoming deadline for preparation of the transfer pricing documentation, we recommend a thorough review of your transfer pricing obligations and a practical comparison of the documentation obligations under each legislative regime. Rödl & Partner’s Transfer Pricing Team is at your service to assist you in this effort.

If you are interested in details of the changes described above, the Rödl & Partner's TP Team is at your service in our offices in CracowGdansk, Gliwice, Poznan, Warsaw and Wroclaw.