Why review your transfer pricing documentation for 2019?

by Aleksandra Galczak

17 March 2021

Further modifications to transfer pricing regulations were introduced on 1 January 2019. Thorough changes have been made to the concept of associated enterprises, sanctions for failure to comply with the obligations under transfer pricing regulations, transfer pricing principles and transfer pricing documentation components.

 
We recommend that you review transactions carried out in 2019 for their compliance with documentation obligations, including both transactions carried out with associated enterprises and with entities from tax havens.

Sanctions for non-arm’s length pricing

Sanctions for non-arm’s length pricing effective from 1 January 2019 are:

1. basic rate – 10 per cent of the value of the understated income or overstated tax loss;
2. increased rate of 20 per cent

• if the basis for calculating additional tax liabilities exceeds 15,000,000 zloty;
• if the taxpayer fails to submit transfer pricing documentation (however, if it delivers complete TP documentation within the period specified by tax authorities, no longer than 14 days, failure to submit the documentation will not apply);

3. increased rate of 30 per cent – joint fulfilment of the conditions specified above.

Other cases subject to penalties

In addition, the Fiscal Crime Code specifies a fine of up to 720 day-fine units in the following cases:

• failure to submit a statement on having transfer pricing documentation ready within the statutory deadline, submission of an untrue statement  or failure to submit a statement;
• failure to submit a TP-R information return within the statutory deadline, submission of an untrue TP-R return or failure to submit a TP-R return.

Review of fulfilled obligations for 2019

As penalties are severe and transfer pricing audits are becoming more frequent, we encourage you to review the fulfilled obligations imposed by transfer pricing regulations for 2019.This will also allow you to avoid possible errors in the following years.

The 2019 transfer pricing obligations review includes:

1. review of identified transactions to be documented;
2. review of the available transfer pricing documentation, including a thorough formal review for compliance with the CIT Act;
3. review of the local transfer pricing analyses attached to the TP documentation, including in particular the adequacy of the selected transfer pricing methods, the completeness of the selection process of a comparable group and the correctness and completeness of the available appendices;
4. review of the submitted TP-R return and statement;
5. review of the fulfilment of other obligations:

• verification of the obligation to have a master file;
• review of the available master file;
• verification of country-by-country reporting obligations.

For carrying out the aforesaid review or obtaining additional information, please contact Rödl & Partner experts.

Please be also reminded that pursuant to the MP amendment to the draft act amending the Excise Duty Act and certain other acts, the deadline for preparing transfer pricing documentation for 2020 by taxpayers whose financial year corresponds to the calendar year expires on 31/12/2020. The bill is at the final stage of the legislative process. On 26/02/2021, it was passed to the President and the Speaker of the Senate.