Penalties for failure to comply with transfer pricing obligations
2 January 2024
We would like to remind you about the obligation to submit transfer pricing information for the year 2022. The deadline for submitting information for entities whose tax year coincides with the calendar year is January 31, 2024. For other taxpayers, the statutory deadline is the end of the 11th month after the end of the tax year.
Sanctions for failure to comply with transfer pricing obligations
The current regulations of the Fiscal Penal Code (KKS) impose severe sanctions for failure to comply with transfer pricing obligations.
Actions that are subject to sanctions include:
- Failure to prepare documentation
- Failure to include group documentation
- Preparation of transfer pricing documentation inconsistent with the actual facts.
According to the current provisions of the Fiscal Penal Code, violation of obligations related to informing the competent tax authority about transfer pricing (in the form of the TPR form) or submitting data in such information that is inconsistent with local transfer pricing documentation or the actual situation is currently subject to a fine of up to 720 daily rates. Delayed submission of information is subject to a fine of up to 240 daily rates.
Penalties imposed in accordance with the provisions of the Fiscal Penal Code are not the only sanctions that threaten taxpayers for non-compliance with the documentation obligation. The regulations (Tax Ordinance) provide for the possibility of imposing additional sanctions in the case of negligence related to transfer pricing that leads to a reduction in tax or an increase in loss.
The rate of additional tax liability depends on the type of violation and is:
- 10% on improperly understated income or overstated loss resulting from improper application of transfer pricing, with the requirement to settle the tax and interest due for delay.
- 20% on failure to submit transfer pricing documentation or submission of incomplete documentation or when the basis for additional tax liability exceeds PLN 15 million.
- 30% in case of failure to submit transfer pricing documentation when, at the same time, the value of the basis for determining additional tax liability exceeds PLN 15 million.
If the taxpayer completes incomplete tax documentation within the period specified by the authority, not exceeding 14 days, they will not be penalized with additional tax liability.
Additional tax liability cannot be imposed on an individual who is responsible for an offence or fiscal crime in this case.
Statistics show that the number of conducted tax and customs audits related to transfer pricing is increasing from year to year. There is also a noticeable upward trend in the effectiveness of audits, which means a higher number of audits completed with an estimate of income. Tax authorities have advanced tools at their disposal, that enable them to effectively review of the terms of transactions entered into by taxpayers with related entities. Transfer pricing will continue to be a priority for the Ministry of Finance, as it involves significant financial values, is difficult to assess, and can lead to state revenue losses.
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.
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