Transfer Pricing in Poland
Transfer pricing – Quick facts
|Key Transfer Pricing Obligations||
|Transfer Pricing thresholds||Local File is mandatory for transactions above the value thresholds:
Transfer Pricing / Poland
According to the Polish law, Polish taxpayers are required to prepare and maintain transfer pricing documentation that justifies the pricing, contracting parties and their roles in the relevant transaction.
If they fail to do so or if, in the opinion of the authority, their transaction would not have been concluded by rational independent entities, the authority determines the taxpayer’s income by way of estimation.
Transfer pricing thresholds
Thresholds – Local File
The obligation to prepare tax documentation (Local File) is mandatory for transactions above the value thresholds:
- PLN 100,000 for transactions with entities from “tax havens”;
- PLN 2 million for transactions in property, plant and equipment;
- PLN 10 million for financial transactions, service transactions and other.
Thresholds are set separately for each controlled transaction.
There are specified criteria for assessing the nature of a transaction, as well as the way in which its value is determined, for each of the identified types of transaction (e.g. – capital value for a loan).
Thresholds – Master File
Related entities whose financial statements are consolidated using the full or proportionate method prepare group documentation if they belong to a group of related entities:
- for which consolidated financial statements are prepared;
- whose consolidated revenues exceeded PLN 200 million or its equivalent in the previous financial year.
Transfer pricing documentation – Tax havens
Thresholds triggering obligation to prepare transfer pricing documentation (Local File) for transaction with tax havens is very low and amounts to PLN 100,000.
TP reporting deadlines
Deadline for the preparation of the Local File – 9 months after the end of the tax year.
The obligation to prepare the local transfer pricing file does not apply to controlled transactions concluded exclusively by related entities having their place of residence, registered office or management in the territory of Poland in a tax year in which each of these related entities meets all of the following conditions:
- does not benefit from the subjective exemption from corporate income tax,
- does not benefit from income tax exemption for income from activities covered by the SEZ Permit/ Support Decision,
- incurred no tax loss.
Related entities consolidated using the full or proportional method which are obliged to prepare the local file, attach group transfer pricing documentation to this documentation if they belong to a group of related entities whose consolidated revenues exceeded PLN 200 million in the previous financial year.
The Master File can be prepared in English, also by other group entity (translation will only be required at the request of the tax authorities).
Deadline for the preparation of the Master File – 12 months after the end of the tax year.
Country-by-Country reporting (CbCR) shall be prepared by entities with consolidated revenues exceeding EUR 750 million.
The compulsory element of the documentation for each transaction described in Local File is benchmarking analysis (or an analysis demonstrating compatibility of conditions), which aim is to verify the arm’s length nature of their related party transactions.
The taxpayers are obliged to submit an electronic TP-form within nine months after the end of the tax year;
In the planned structure the TP analysis will likely be needed in relation to shareholder loans interest levels and management fee levels if provided by related parties.
In relation to interest it should be noted that analysis of arm’s length interest level should take into account not only the average level of interest in the market but also the standing of particular entity, its current debt level, acceptable level of leverage etc.
The Corporate Income Tax Act provides safe harbors, which apply no estimation by authorities for transactions involving low value-added services, subject to certain conditions.
The principal rules regarding documentation are as follows:
The rules apply in three areas in which one entity may exert a significant influence on other entities, i.e.:
- influence resulting from ownership, management and control relations;
- influence exerted by an individual even though he or she is not a member of an entity’s governing or supervisory bodies;
- influence resulting from family relations.
Safe Harbor Loans / Poland
Key benefit of safe harbour loans is that they are exempted from obligation to prepare Transfer Pricing documentation. Despite that TP reporting may be still required by completing TPR-C form. Application of safe harbour loan may also require MDR reporting (Mandatory Disclosure Rules).
Safe harbour loans must meet the following conditions:
- the interest rate on the loan on an annual basis as at the date of conclusion of the contract is determined on the basis of the type of base interest rate and the margin specified in the announcement of the minister responsible for public finance as of the date of conclusion of the contract;
- there is no provision for the payment of fees other than interest related to granting or servicing the loan, including commissions or bonuses;
- the loan was granted for a period not longer than 5 years;
- during the tax year, the total level of liabilities or receivables of a related entity in respect of capital loans with related entities, calculated separately for loans granted and taken, is not more than PLN 20,000,000 or the equivalent of this amount;
- the lender is not an entity with a place of residence, seat or management board in the territory or in a country applying harmful tax competition.
Safe harbour interest rates
Safe harbour interest rate shall be defined by the following formula “base interest rate + margin”.
Base interest rate for:
- PLN – is WIBOR 3M
- US dollars: – is the SOFR 3M Compound Rate – may be USD 3M LIBOR – for loans granted before January 1, 2022
- EUR – is EURIBOR 3M
- Swiss francs – is the SARON 3M Compound Rate
- GBP: – is the SONIA 3M Compound Rate, – may be LIBOR GBP 3M – for loans granted before January 1, 2022
Margin for the borrower, it is a maximum of 2.8 percentage points; for the lender, it is at least 2.0 percentage points. In the case where the value of the base interest rate is less than zero margin equals to the sum of the absolute value of the base interest rate and the value 2.8 or 2.0 percentage.
Sanctions connected with transfer pricing:
- Penal fiscal sanctions up to 720 daily rates of fine for:
- Non-submission of statement that Local File has been prepared,
- Non-submission, late submission or submission of false TP-R form,
- The value of the sanction can be from PLN 50 400 to PLN 20 160 000.
- Additional tax liability
- 10% of the amount unduly disclosed or inflated tax loss and taxable income not disclosed in whole amount or in part resulting from decision regarding additional tax liability, which may be;
- Doubled (20%) when certain conditions are met;
- Tripled (30%) when certain conditions are met.
What are the Local File transfer pricing thresholds in Poland?
PLN 100,000 for transactions with entities from “tax havens”; PLN 2 million for transactions in property, plant and equipment; PLN 10 million for financial transactions, service transactions and other.