Transfer Pricing (TP)

Transfer pricing – for whom?

Transfer pricing at KR Group

Transfer pricing – KR Group offer

FAQ

• Transfer pricing – what are the key deadlines?

  Under applicable regulations, companies have a specified time to prepare and submit transfer pricing documentation for a given tax year. Failure to comply with these deadlines may result in the imposition of penalties.

  Transfer pricing documentation

  • Local File – preparation within 10 months of the end of the tax year.
  • Master File – preparation within 12 months of the end of the tax year.

  Reporting obligations

  • CBC-P – submission within 3 months.
  • TP-R – deadline is 11 months.
  • ORD-U – submission within 3 months.
  • CBC-R – submission within 12 months of the end of the tax year.

• How often should transfer pricing documentation be updated?

  Transfer pricing documentation, including the Local File and Master File, must be updated annually. The transfer pricing analysis in the Local File is updated at least every 3 years, or more frequently if there have been significant changes in the economic environment. Regular updating ensures compliance with tax regulations and minimises the risk of penalties.

• What is the arm's length principle?

  When selling services or goods, related entities are required to establish an appropriate price and to observe the so-called arm’s length principle (arm’s length principle).

  According to this principle, transaction prices applied in transactions with related entities should correspond to market prices that would have been established between unrelated entities.

  This means that the sale of goods, exchange of goods, provision of services, etc. must correspond to market prices, i.e. those that would be applied by independent counterparties in the same circumstances.

• What is the Local File?

  The obligation to prepare local documentation (Local File) falls on the largest number of taxpayers. Local transfer pricing documentation is prepared for a controlled transaction of a homogeneous nature whose value exceeds the following documentation thresholds in a tax year:

  • PLN 10,000,000 – in the case of a goods transaction;
  • PLN 10,000,000 – in the case of a financial transaction;
  • PLN 2,000,000 – in the case of a service transaction;
  • PLN 2,000,000 – in the case of a transaction other than those specified in points 1–3.

  Dynamic legislative changes over recent years have introduced new documentation obligations for related entities, changed the reporting rules and introduced new sanctions.

  We can also support you in preparing transfer pricing documentation in English, in accordance with the OECD Guidelines.

• What is the Master File?

  The Master File is group transfer pricing documentation, prepared at the level of the entire capital group. The following taxpayers are required to prepare group-level documentation:

  • those preparing consolidated financial statements;
  • those whose consolidated revenues exceeded the equivalent of PLN 200,000,000 in the previous financial year.

  Unlike local documentation, group documentation focuses on information about the capital group. The document should contain such information as: a description of the group, a description of the group’s significant intangible assets, a description of the group’s significant financial transactions and data from the group’s consolidated financial statements.

  The Master File may be prepared in English by another entity within the capital group, provided that it meets all conditions set by the Polish legislator and that a translation of the document into Polish is provided within 30 days.

  KR Group will support you in preparing the Master File (both in Polish and English), and will also carry out an audit of your existing documentation.

• Comparative analyses (benchmarking analysis) and compliance analyses – what are they?

  A mandatory element of transfer pricing documentation is a transfer pricing analysis (comparative analysis/benchmarking analysis) or a compliance analysis. Both forms are subject to updating no less frequently than every 3 years, unless a change in the economic environment or transaction conditions justifies more frequent preparation of the analysis.

  A comparative analysis (commonly known as a “benchmark”) is an analysis of data of unrelated entities or transactions concluded with unrelated entities or between unrelated entities, recognised as comparable to the conditions established in controlled transactions.

  A compliance analysis is an analysis demonstrating the conformity of the conditions on which a controlled transaction was concluded with the conditions that unrelated entities would have established – it is carried out in cases where preparing a comparative analysis is not appropriate in the light of the given transfer pricing verification method or is not possible while exercising due diligence.

  Both the benchmarking analysis and the compliance analysis are key tools for taxpayers and tax authorities alike, as they justify the market nature of the conditions established by related entities in transactions concluded between them.

• What is a transfer pricing policy?

  A transfer pricing policy is a document indicating the business model for intra-group settlements adopted within the group. The policy describes the principles that guide related entities when concluding transactions and, unlike transfer pricing documentation, applies to future transactions.

  A transfer pricing policy:

  • introduces common principles for intra-group settlements;
  • standardises the principles for calculating transfer pricing at group level;
  • develops verification of the market level of transfer pricing.

  A well-prepared settlement model for a capital group will systematise the settlement model, optimise time and serve as a defence tool in the course of a potential transfer pricing audit.

• What is TP-R in transfer pricing?

  TP-R is a transfer pricing report, mandatory for companies carrying out transactions with related entities, submitted as a form to the tax office. Its purpose is to prepare and report transactions carried out with related entities whose value exceeds statutory limits, as well as to demonstrate the compliance of prices with the arm’s length principle and the correct settlement of tax obligations.