Deadlines for 2023 transfer pricing documentation are approaching

Taxpayers required to prepare transfer pricing documentation will soon have to fulfill their obligations in this regard for 2023. Below you will find a summary of key deadlines and basic information.

Key deadlines

• October 31, 2024 – This is the deadline for taxpayers to prepare local transfer pricing documentation (the so-called Local File) for the year 2023 
• December 2, 2024 (due to November 30, 2024, falling on a Saturday) – By this date, taxpayers are required to submit transfer pricing information (TPR-C) to the tax authorities 
• December 31, 2024 – This is the deadline for preparing the group transfer pricing documentation (the so-called Master File) for 2023 and attaching it to the Local File. 

Local File – documentation thresholds

According to CIT Law, local transfer pricing documentation is prepared for a controlled transaction of a homogeneous nature*, the value of which, excluding VAT, 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 any other transaction not specified in the above points.

* NOTE | a controlled transaction of a homogeneous nature is also considered to be a set of transactions that should be aggregated for the purpose of determining their value due to their homogeneous nature

Therefore, to verify whether the documentation threshold has been exceeded, for example, in the case of the provision of similar services by one entity in the group to other entities in the group, the values of such transactions carried out by that entity with individual group entities must be summed up.

Determining the value of controlled transactions

To correctly determine the value of a controlled transaction, the following must be specified:

• capital value – in the case of a loan or credit 
• nominal value – in the case of a bond issuance
• guarantee sum – in the case of a surety or guarantee
• value of assigned revenues or costs – in the case of allocating income (or loss) to a foreign establishment 
• appropriate value for the specific controlled transaction – in the case of other transactions. 

The documentation thresholds are determined separately for: 

• each controlled transaction of a homogeneous nature, regardless of its classification as a goods, financial, service, or other type of transaction
• the cost side and the revenue side. 

The value of a controlled transaction is determined based on: 

• invoices received or issued for the given tax year, or 
• contracts or other documents – in cases where no invoice has been issued or for financial transactions, or 
• payments received or made – in cases where it is not possible to determine the value using the methods mentioned above. 

The value of a controlled transaction expressed in a foreign currency is converted into Polish zloty according to the average exchange rate announced by the National Bank of Poland, applicable on the last business day preceding the date of the economic operation or the signing of the contract. 

NOTE | For transactions conducted with entities from so-called “tax havens”, lower documentation thresholds apply

Definition of related entities

According to CIT Law, related entities are defined as: 

• entities where one entity has significant influence over at least one other entity, or
• entities that are influenced by:
  • the same other entity, or
  • a spouse, relative, or in-law up to the second degree of an individual who exerts significant influence over at least one entity, or
• companies without legal personality and their partners, or
• taxpayers and their foreign establishments, and in the case of a capital group for tax purposes – the capital company within the group and its foreign establishment.

Analogously, related party relationships are defined as the connections mentioned above that exist between related entities

Significant influence (as defined in Article 11a(2) of the CIT Act) is understood to include:

a) direct or indirect ownership of at least 25% of: 
– shares in the capital, or 
– voting rights in supervisory, decision-making, or management bodies, or 
b) shares or rights to share in profits or assets, including participation units and investment certificates, or 
c) actual ability of an individual to influence key economic decisions made by a legal person or an organizational unit without legal personality, or 
d) marriage or family ties up to the second degree. 

Exemptions from the obligation to prepare Local File

The CIT Act (Article 11n) provides several exemptions from the obligation to prepare the Local File in specific cases. For example, the obligation to prepare the Local File does not apply to transactions between entities that have their residence, registered office, or management in Poland, do not benefit from tax exemptions, and have not incurred a tax loss.

Master File

The group transfer pricing documentation (Master File) must be attached to the Local File if the group of related entities prepares consolidated financial statements and the group’s consolidated revenues exceeded PLN 200,000,000 or its equivalent in the previous financial year.

TPR-C information

The TPR-C form is submitted to the tax office responsible for the taxpayer. It includes detailed information about transactions conducted by the taxpayer with related entities or entities from so-called “tax havens,” covering aspects such as the value of the transactions, the method used to verify the prices, or profitability indicators. 

Importantly, the TPR-C includes a declaration that the transfer pricing documentation has been prepared in accordance with the actual state of affairs, and that the transfer prices covered by this documentation are set on terms that would be agreed upon by unrelated parties (i.e. on market terms). 

The TPR-C form must be signed by: 

• the head of the entity; if the entity is managed by a multi-person body, by a designated member of that body
• an authorized representative of the foreign branch in Poland
• an individual if the entity is a sole proprietorship. 

Alternatively, the TPR-C can be signed by an authorized representative who is an attorney, legal advisor, tax advisor, or certified auditor. 

How we can help

Fulfilling transfer pricing obligations is a complex process. We will be pleased to assist you in this area, specifically in:

• preparation of transfer pricing documentation: we can help either with drafting or adapting transfer pricing documentation to meet Polish tax regulations requirements (both Local File and Master File)
• preparation of comparative analyses, and / or compatibility analyses 
• TPR-C preparation and assistance in submission.