Last updated: 26.02.2025
What is Advance Pricing Arrangement (APA)?
An Advance Pricing Arrangement (APA) is an official agreement between a taxpayer and the tax authorities regarding transfer pricing for related party transactions.
Under this prospective agreement, the tax authorities confirm the taxpayer’s chosen transfer pricing method for intercompany transactions, ensuring compliance with the arm’s length principle and preventing potential transfer pricing adjustments. The agreement is issued as an administrative decision.
Duration and Renewal of an APA
An APA applies prospectively, meaning it governs pricing transactions going forward. It remains in effect for up to five tax years. After this period, the agreement may be renewed through a simplified APA procedure, provided that its key elements—such as the tested party, pricing method, or market price – have not undergone significant changes.
By offering certainty in intercompany transactions, APAs serve as an effective tool for multinational corporations to mitigate double taxation risks and ensure compliance with financial reporting and documentation requirements.
What are the types of Advance Pricing Arrangements (APA)?
APA can be structured in three ways, depending on the scope of the intercompany transactions and the involvement of tax authorities in other countries:
- Unilateral APA – Issued by the Head of the National Tax Administration, covering transactions between domestic related entities or between a domestic and a foreign related entity.
- Bilateral or Multilateral APA – Concluded between the Head of the National Tax Administration and the competent authority of another jurisdiction, ensuring that both related parties to the same transaction are subject to an aligned transfer pricing method under a mutual agreement procedure.
How much is the application fee for the APA?
The fee for an APA application is calculated as 1% of the value of the covered transactions but is subject to specific thresholds:
- Unilateral APA:
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- Involving exclusively domestic related entities: no less than PLN 5,000 and no more than PLN 50,000;
- Involving a foreign related entity: no less than PLN 20.000 and no more than PLN 100,000.
- Bilateral or Multilateral APA: no less than PLN 50,000 and no more than PLN 200,000.
The fee must be paid within 7 days of submitting the application to account of the Head of the National Tax Administration.
By securing an APA, multinational companies can reduce tax risks, ensure financial statements reflect arm’s length pricing, and prevent transfer pricing disputes across many countries.
FAQ – Advance Pricing Arrangement (APA) in Poland
What is the main purpose of an Advance Pricing Arrangement (APA)?
An Advance Pricing Arrangement (APA) ensures that the transfer pricing method applied in intercompany transactions complies with the arm’s length range, preventing transfer pricing adjustments and reducing double taxation risks for businesses operating across multiple jurisdictions.
What types of APA agreements are available for companies?
APAs can be unilateral, covering one affiliate and approved by Polish tax authorities, or bilateral/multilateral, involving other parties and settled under the mutual agreement procedure (MAP) to align pricing agreements between jurisdictions, ensuring compliance for cross-border transactions.
How does an APA affect taxable income and pricing?
An APA provides certainty on taxable income by establishing market value for services provided or intangible assets transferred in intercompany transactions. It ensures that the prices charged align with the market price, avoiding dispute resolution issues with tax administrations.
How does the APA program help multinational companies manage tax risks?
The APA program allows taxpayers to pre-agree on pricing with tax authorities, reducing overall taxes by avoiding unexpected transfer pricing adjustments and ensuring profit level indicators remain consistent across jurisdictions under generally recognized tax principles.
What role does the mutual agreement program (MAP) play in APA?
The mutual agreement program (MAP) facilitates dispute resolution between tax authorities in cross-border transactions, ensuring that related parties operate under the same circumstances with market price consistency, avoiding potential double taxation issues.
Why do many taxpayers, including large companies like Coca-Cola, seek APA agreements?
Many companies, including Coca-Cola, use advance pricing agreements to ensure fair taxation in intercompany transactions involving multiple jurisdictions. APAs provide certainty on costs, taxable income, and transfer pricing, helping businesses minimize compliance risks.
What role do advocacy groups play in shaping transfer pricing policies?
Advocacy groups influence tax authorities by promoting fair transfer pricing regulations that balance the interests of taxpayers and governments. They often participate in discussions on pricing agreements, double taxation issues, and future events affecting international transactions.
What fees are involved in applying for an Advance Pricing Agreement (APA)?
The fees to tax authorities for Advance Pricing Agreements depend on the type of agreement and the transaction value. For unilateral APAs, the fee ranges from PLN 5,000 to PLN 100,000, while bilateral or multilateral APAs require fees between PLN 50,000 and PLN 200,000. Taxpayers must pay within 7 days of submission to the tax authorities to process the agreement.
