Master File - aspects of this documentation method

Depending on the type of entity and a company’s income, transfer pricing documentation may be performed on two different levels — the Local File and the Master File.
Author:
Marta Bałaga
Junior Transfer Pricing Specialist
Olga Kucewicz
Junior TAX Manager

The Master File mainly pertains to capital groups and includes information about the entire group of affiliated entities. However, the Master File does not have to be prepared for each capital group, but only for those that meet specified conditions.

Who is required to prepare Master File documentation?

According to the provision of the Corporate Income Tax Act (hereinafter referred to as CIT), preparing the Master File is mandatory for affiliated entities with financial statements consolidated using the full or proportional method, obligated to prepare Local File transfer pricing documentation, and which meet the following conditions:

  • the group prepares consolidated financial statements;
  • the consolidated income of the group in the year preceding the year for which the Master File must be prepared, exceeded the value of 200 000 000 PLN, or is equivalent to this amount.

Current deadlines - when does the Master File need to be prepared?

According to the CIT Act, the deadline for submitting the Master File transfer pricing documentation for 2021 expires in 12 months following the end of the tax year. For the current year, this deadline has been extended for an additional 3 months.

This means that taxpayers with a standard tax year (whose tax year is analogous with the calendar year) have time till the end of March of 2023 to prepare the Master File for 2021.

What information does the Master File contain?

The scope of the Master File documentation has been specified by Art. 11q par. 2 of the CIT Act as well as in the ordinance of the Minister of Finance from December 21st, 2018, as to the documentation of transfer pricing in the scope of the Corporate Income Tax.

The Master File transfer pricing documentation should be comprised of four main elements:

  1. group description;
  2. description of the group’s essential intangible and legal values;
  3. description of the group’s essential financial transactions;
  4. indicating financial and tax information.

The Polish Deal and the Master File - ultimately unchanged

The project of the Polish Deal predicted abolishing the material threshold for the Master File documentation (200 mln PLN). This change has not come into effect and the material threshold remains unchanged.

To conclude, the obligation of preparing the Master File does not occur solely on account of consolidated financial statements. The responsibility of documentation arises when the consolidated income of the group in the year preceding the year for which the Master File must be prepared, exceeded the value of 200 mln PLN.

Currently, there are no legislative projects underway, the consequence of which would be an abolition of the Master File documentation threshold.

In case of any doubts regarding transfer pricing, we invite you to contact the KR Group team.

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