Increased controls in the area of transfer pricing

The Ministry of Finance has announced that tax authorities are going to increase controls in the area of transfer pricing. Data shows that in the first nine months of 2023, tax authorities conducted over 12,800 tax and over 7,000 combined customs and tax audits.

In the face of globalization and increased trade among companies belonging to the same capital group, issues related to transfer pricing and their supervision are significant both economically and from a tax perspective. Transfer pricing mechanisms can be used to reduce taxes or even completely avoid them, instead of serving the proper valuation of transactions.

Currently, transfer pricing is the most frequent area subject to scrutiny. Transactions concluded in periods that have not yet expired may be subject to analysis. Transfer pricing becomes time-barred after 5 years, counting from the end of the tax year in which the transfer pricing related transaction occurred.

Entities for controls are increasingly selected more meticulously due to the accumulation and analysis of a greater amount of data (especially from the TPR form). Currently, entities are selected for control where there is a higher probability for determining income than it has been the case a few years ago.

Transactions between companies within the same capital group are being scrutinized more frequently. Most frequently verified are transactions concerning intangible services, especially those with low added value. Additionally, transactions related to the provision of trademarks or other intangible assets and rights, difficult to assess in terms of value, are particularly closely examined. It is worth noting that in the past, such transactions were used by taxpayers for aggressive tax optimization, which explains the increased interest from tax authorities.

Tax authorities are also particularly interested in transactions concluded with related entities that have their headquarters or management boards in countries applying harmful tax competition. Favourable tax rates, tax preferences, or even the lack of taxation of certain incomes in these countries encourage taxpayers to transfer their incomes there. Therefore, in the case of transactions with related entities domiciled in so-called tax havens, special caution should be applied.

It should be noted that, in addition to the obligation to settle tax arrears, payment of penalty interest, and additional financial penalties, there are several other negative consequences associated with irregularities in the area of transfer pricing. Entrepreneurs, representatives of companies, and members of the management boards of capital companies may also incur personal criminal liability for such irregularities. The penalty rates specified in the Fiscal Penal Code are systematically increasing, and potential fines can reach out to millions of Polish zlotys.

If you have any further questions or require additional information, please contact your business relationship person or use the enquiry form on the HLB Poland website.

***

This publication is non-binding information and serves for general information purposes. The information provided does not constitute legal, tax or management advice and does not replace individual advice. Despite careful processing, all information in this publication is provided without any guarantee for the accuracy, up-to-date nature or completeness of the information. The information in this publication is not suitable as the sole basis for action and cannot replace actual advice in individual cases. The liability of the authors or getsix® are excluded. We kindly ask you to contact us directly for a binding consultation if required. The content of this publication iis the intellectual property of getsix® or its partner companies and is protected by copyright. Users of this information may download, print and copy the contents of the publication exclusively for their own purposes.