Page 48 - Central and Eastern European Transfer Pricing Review

48 | CEE Transfer Pricing Review

the documentation, although there Other than complying with a To satisfy the requirement and/or
have been observed attempts to penalize requirement per the previous obtain the benefts, are there any
persons responsible for the companys question, describe the benefts, if requirements on when the transfer
tax compliance under the penal-fscal any, of preparing and maintaining pricing study must be prepared and
code for not submitting required tax a transfer pricing study? submitted?
information. Transfer pricing documentation strongly Transfer pricing documentation must
A taxpayer is required to provide the decreases the eagerness of the tax be provided in Polish, within 7 days of
tax authorities with transfer pricing authorities to investigate related the tax authorities request, which is a
documentation, within 7 days of party transactions and eliminates the very short period, especially with regard
receiving the request (statutory possibility of applying the 50 percent CIT to transactions concluded a few years
documentation required under Article rate to assessed income instead of the earlier. It is strongly recommended
9a of the Polish CIT Act does not usual 19 percent rate. that such documentation is prepared
have to include benchmarking study As statutory transfer pricing in advance. At the moment of fling the
demonstrating that the transfer price documentation does not require contemporaneous CIT return, the taxpayer
complies with the arms length standard). the inclusion of a benchmarking must submit information, regardless of
Such transfer pricing documentation analysis, the tax authorities should whether the obligation to prepare transfer
should be prepared for transactions verify the arms length nature of the pricing documentation exists.
concluded by a taxpayer with a related transactions during the tax audit. It When a transfer pricing study is
party which exceed, in the given tax year, is therefore highly recommended to prepared, should its content follow
the following thresholds: supplement the documentation with Chapter V of the OECD Guidelines?
EUR30,000 for transactions involving a study demonstrating that the pricing Yes. However there are specifc
intangibles and services is compliant with the arms length requirements to be met.
standard. It will force the authorities
EUR50,000 or 100,000 (if a to prepare stronger arguments if The mandatory transfer pricing
transaction does not exceed they intend to challenge the pricing documentation requires a functional
20 percent of a companys share methodology accepted by the taxpayer. analysis identifying.
capital) for transactions involving
goods and tangibles. Transfer pricing documentation and a functions performed, risks borne, and
benchmarking study help to mitigate assets employed in the given type of
Additionally, each transaction exceeding risk of personal responsibility under transaction
EUR20,000 should be documented if the penal-fscal code for decreasing a
concluded with an entity operating in a companys tax liability (it can become determination of anticipated types of
country listed by the Ministry of Finance an issue if the tax authorities assess costs associated with the transaction
as a tax haven. additional income to the company). description of the method adopted to
If the transfer pricing documentation Transfer pricing documentation prevents calculate transaction price
is not presented to the tax authorities the tax authorities from shifting the information regarding terms and form
within 7 days following the request and burden of proof to the taxpayer and of payments for each transaction
the price is successfully challenged, the makes challenging the established (e.g. currency of payments, due date
tax authorities may apply the penalty tax prices more diffcult. of payments, manner of transferring
rate of 50 percent instead of a standard money, periods in which the invoices
CIT rate of 19 percent to the amounts are issued, etc.)
adjusted. Obviously penalty interest for
late payment of the outstanding tax is data on value of the transaction
due as well.

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