Transfer Pricing in Poland: Essential Regulations and Requirements

Poland’s transfer pricing framework governs transactions between related entities, ensuring they reflect market conditions and comply with domestic tax rules. With increasing scrutiny from tax authorities, Multinational Enterprises (MNEs) must carefully manage documentation, reporting, and industry-specific risks. 

In this article, we explore transfer pricing regulations in Poland, associated entities, accepted methods, documentation obligations, compliance requirements, APAs, safe harbor provisions, and penalties.

Overview of Transfer Pricing in Poland

While Poland is not a formal signatory to the OECD Transfer Pricing Guidelines, these guidelines serve as a crucial interpretative tool for both taxpayers and the tax authorities. The legal foundation for transfer pricing in Poland is established under the Corporate Income Tax Act (CIT Act), the Personal Income Tax Act (PIT Act), and regulations issued by the Ministry of Finance. 

These laws outline the application of the arm’s length principle in Poland, define related entities, and specify documentation requirements. The Ministry of Finance’s regulations further detail the procedures for assessing compliance and the criteria for comparability.

Transfer Pricing Rules and Regulations in Poland

Getting a transfer pricing certificate in Poland simply means following domestic tax legislation. Here are some crucial transfer pricing rules and compliance in Poland to follow:

Legal Basis

• CIT Act: Chapter 1a of the CIT Act (Articles 11–11j) establishes the legal foundation for TP in Poland, incorporating the arm’s length principle and defining related party transactions. 
• PIT Act: Articles 23o–23zc of the PIT Act mirror the provisions of the CIT Act, applying the same TP rules to individuals and partnerships.
• Minister of Finance Ordinances: These ordinances provide detailed procedures for TP assessments and documentation.

Arm’s Length Principle

Poland adheres to the arm’s length principle, requiring that intercompany transactions be priced as if they were between unrelated entities. This principle is enshrined in both the CIT and PIT Acts and is further elaborated in the Minister of Finance’s regulations.

Definition of Associated Enterprises in Poland

Polish tax legislation recognizes entities as related or associated when:

• Ownership or Voting Rights: One entity directly or indirectly holds at least 25% of the shares, voting rights, or rights to participate in profits of another entity. This includes situations where control is exercised through intermediary entities.
• Significant Influence: An entity has the actual ability to influence key economic decisions of another entity, such as through board representation or contractual agreements.
• Family or Personal Connections: Individuals or entities that are related through family ties up to the second degree, or through marriage or similar relationships, can also be considered associated enterprises.

Methods for Determining Arm’s Length Price in Poland

Polish tax authorities accept all five OECD-recognized transfer pricing methods, such as:

• Comparable Uncontrolled Price (CUP) Method: Compares the price charged in a controlled transaction to the price charged in a comparable uncontrolled transaction. 
• Resale Price Method: Determines the arm’s length price by subtracting an appropriate gross margin from the resale price charged to an independent party. 
• Cost Plus Method: Adds an appropriate markup to the costs incurred by the supplier of goods or services in a controlled transaction. 
• Transactional Net Margin Method (TNMM): Evaluates the net profit margin relative to an appropriate base, such as costs, sales, or assets, earned by a taxpayer in a controlled transaction. 
• Profit Split Method: Allocates the combined profits from controlled transactions based on the relative value of each party’s contribution. 

Transfer Pricing Documentation Requirements in Poland

Poland’s transfer pricing documentation obligations ensure that related-party transactions are conducted at arm’s length and are adequately documented for tax compliance purposes.

Key Documentation Components

• Local File: Taxpayers must prepare a Local File that includes detailed information about intercompany transactions, the financial and economic analyses supporting the transfer prices, and the selection of the transfer pricing method. This file must be maintained and made available to the tax authorities upon request.
• Master File: The Master File provides a comprehensive overview of the multinational tax planning and transfer pricing in Poland, including organizational structure, financial statements, and a description of the group’s business activities. While Poland does not mandate the proactive submission of the Master File, it must be prepared and available for inspection.
• Country-by-Country Reporting (CbCR): Multinational groups with consolidated revenues exceeding €750 million are required to file a CbCR. The Ultimate Parent Entity (UPE) based in Poland must submit the CbC report within 12 months after the fiscal year-end. Additionally, every Polish constituent entity must submit a CbCR notification by the last day of the fiscal year, indicating the designated filer.

Filing Deadlines

• Local File: The Local File must be prepared and maintained within 10 months after the end of the fiscal year. However, it does not need to be submitted to the tax authorities unless requested.
• Master File: Similar to the Local File, the Master File must be prepared within 12 months after the end of the fiscal year and be available upon request.
• CbCR: The CbC report must be filed within 12 months following the end of the reporting financial year of the group. The CbCR notification is due within 3 months following the end of the reporting financial year.

Compliance and Reporting Obligations in Poland

It’s important to follow Poland’s transfer pricing rules to ensure meeting compliance and reporting obligations: 

TP-R Reporting

Taxpayers are required to submit a Transfer Pricing Report (TP-R) to the tax authorities by the end of the 11th month following the end of the tax year. The TP-R form includes:

• A written statement confirming that transfer pricing documentation has been prepared and that prices meet market conditions.
• Details of controlled and uncontrolled transactions subject to pricing regulations.
• Information on business restructurings and transfer pricing in Poland, intangible asset transfers, and joint ventures.
• Partner contributions in partnerships and relevant contractual arrangements. 

As of 2023, only members of the board are authorized to sign the TP-R form, ensuring corporate responsibility for transfer pricing compliance. 

Compliance Deadlines for 2025

For taxpayers with a calendar-year tax year, the following deadlines apply:

• 31 October 2025: Preparation of the Local File.
• 30 November 2025: Submission of the TP-R form to the tax office.
• 31 December 2025: Preparation of the Master File (for capital groups with consolidated revenues exceeding PLN 200 million).

For companies whose tax year does not coincide with the calendar year, the deadlines are by the end of the 10th, 11th, and 12th month, respectively, after the end of the tax year.

Risk Factors and Common Challenges in Poland

Poland’s TP presents several risk factors and challenges for businesses. Here are some transfer pricing challenges to be wary of:

• Loss-Making Entities and Low-Risk Profiles: Entities that consistently report losses, especially those with low-risk profiles, are at heightened risk of tax authority scrutiny. Such situations may prompt tax authorities to question the nature of intercompany transactions.
• Significant Management Fees and Royalties: Companies paying substantial management fees or royalties for the use of IP are often subject to increased scrutiny. The tax authorities may examine whether these payments are justified and consistent. 
• Averaging of Financial Results: Polish regulations require that transfer pricing documentation and the TP-R reflect data specific to the reporting year. 
• Transactions with Tax Haven Entities: Engaging in significant transactions with entities based in jurisdictions identified as tax havens can attract the attention of Polish tax authorities. Such transactions may be scrutinized to ensure that profits are not improperly shifted to low or no-tax jurisdictions, potentially leading to tax base erosion.
• Inadequate Transfer Pricing Documentation: Failure to prepare comprehensive and accurate transfer pricing documentation can result in severe financial penalties. If the tax authorities determine that a taxpayer has not adhered to the principle, they may impose adjustments to taxable income and additional tax liabilities. 

Advance Pricing Agreements (APAs) and Safe Harbor Rules in Poland

Poland’s transfer pricing framework offers mechanisms such as Advance Pricing Agreements (APAs) and Safe Harbour provisions to provide taxpayers with clarity and reduce compliance burdens.

Industry-Specific Transfer Pricing Considerations in Poland

Below is an overview of how TP considerations manifest in key industries operating within Poland.

E-commerce & Digital Services

E-commerce platforms, especially those operating cross-border (e.g., Amazon FBA, eBay), must understand complex TP rules related to digital goods, royalties, and intercompany service charges. 

Challenges:

• Determining the appropriate allocation of profits for digital services and intangible assets.
• Ensuring compliance with local TP documentation requirements, including the Local and Master Files.

Manufacturing & Industrial Sectors

Manufacturers must assess the arm’s length nature of intercompany transactions involving tangible goods, raw materials, and semi-finished products. Proper allocation of costs and profits among related entities is crucial, especially when dealing with cross-border operations.

Challenges:

• Establishing reliable comparables for cost-plus or resale price methods.
• Managing TP documentation for complex supply chains and multi-jurisdictional transactions.

Financial Services & Banking

Financial institutions must ensure that intercompany financing arrangements, such as loans and guarantees, adhere to arm’s length principles. Interest rates and terms should be benchmarked against market standards to avoid adjustments by tax authorities.

Challenges:

• Determining appropriate interest rates for intra-group financing.
• Compliance with TP documentation requirements for financial transactions.

Impact of Digital Economy on Transfer Pricing in Poland

The rise of digital services and intangible assets has necessitated a reevaluation of traditional TP methods and compliance strategies.

1. OECD Guidelines and Poland’s Alignment

The OECD has recognized the complexities introduced by the digital economy, particularly concerning the allocation of profits related to intangible assets and the location of value creation. Poland considers these guidelines when assessing TP compliance, though they are not directly incorporated into Polish law.

2. Challenges in Valuing Intangible Assets

The digital economy often involves significant intangible assets, such as IP, data, and user-generated content. Determining the arm’s length value of these intangibles poses challenges due to the lack of comparable uncontrolled transactions. This difficulty can lead to disputes with tax authorities over the appropriate allocation of profits and the risk of Base Erosion and Profit Shifting (BEPS).

3. Increased Scrutiny and Enforcement

Polish tax authorities have intensified their focus on TP compliance, particularly in sectors heavily influenced by digitalization. There has been a marked increase in targeted audits, data-driven risk profiling, and cross-border coordination. This heightened scrutiny aims to prevent tax base erosion.

Dispute Resolution Mechanisms in Poland

Here’s an overview of the primary mechanisms available:

• Advance Pricing Agreements (APAs): Proactive agreements between a taxpayer and the tax authority to determine the transfer pricing methodology for specific transactions over a set period.
• Mutual Agreement Procedure (MAP): A process through which tax authorities of two or more countries resolve disputes regarding the interpretation or application of tax treaties, including issues related to transfer pricing.
• Judicial Review: Taxpayers dissatisfied with administrative decisions can seek judicial review through the administrative courts.
• International Tax Arbitration: Poland has implemented the EU Directive on tax dispute resolution mechanisms, which includes provisions for arbitration in cross-border tax disputes.

Penalties for Non-Compliance in Poland

Poland enforces stringent penalties for non-compliance, encompassing both administrative and criminal sanctions. These penalties are primarily governed by the Fiscal Penal Code (KKS) and the Tax Ordinance.

• Local File:
  • Not preparing the Local Transfer Pricing Documentation, submitting documentation that does not match the actual transaction details, or failing to include the required Master File can lead to fines of up to 720 daily rates (approximately PLN 44 million).
  • Delayed preparation of Transfer Pricing Documentation may result in fines of up to 240 daily rates (approximately PLN 14 million).
• Transfer Pricing Information (TPR-C):
  • Failure to submit the TPR-C form or providing information inconsistent with the Local Transfer Pricing Documentation or actual transaction details can incur fines of up to 720 daily rates (approximately PLN 44 million).
  • Late submission of the TPR-C form may attract fines of up to 240 daily rates (approximately PLN 14 million).

Conclusion

From identifying associated enterprises and selecting appropriate pricing methods to maintaining robust documentation and managing industry-specific risks, businesses face complex obligations. Non-compliance can trigger transfer pricing audits and penalties in Poland. 

Commenda, a transfer pricing platform, streamlines transfer pricing compliance in Poland with automated documentation, real-time benchmarking, and expert guidance, helping businesses minimize audit risk and maintain regulatory certainty. 

Schedule a demo with Commenda today to safeguard your operations.

Frequently Asked Questions (FAQs) on Transfer Pricing in Poland

1. What is the deadline for submitting TP documentation?

• Local File: Prepared by the end of the 10th month following the fiscal year-end.
• Master File: Prepared by the end of the 12th month following the fiscal year-end.
• CbCR Notification: Submitted within 3 months after the end of the reporting financial year.
• CbCR: Submitted within 12 months after the end of the reporting financial year.

Additionally, the TP-R form must be filed by the end of the 11th month following the fiscal year-end.

2. What are the penalties for non-compliance?

Non-compliance with TP documentation requirements can result in:

• Fines: Up to 720 daily rates (approximately PLN 44 million) for failure to prepare or submit documentation.
• Late Submission: Fines up to 240 daily rates (approximately PLN 14 million).
• Additional Tax Liability: A standard 10% penalty tax rate, which can increase to 20% if the basis for additional tax liability exceeds PLN 15 million or if documentation is not submitted. The penalty can triple to 30% if both conditions apply.

3. What is the TP-R form, and who must sign it?

The TP-R form is a declaration confirming the preparation of TP documentation and adherence to the arm’s length principle. It must be signed by a member of the Management Board or a designated person within the Management Board; proxies, except for attorneys, legal advisers, tax advisers, or certified auditors, are not permitted to sign.

4. Are there any exemptions from TP documentation requirements?

Yes, exemptions include:

• Transactions between Polish-related entities that have not incurred a tax loss.
• Certain financial transactions and low-value-adding services, subject to safe harbour conditions.
• Certain cost allocations with unrelated parties are made without a profit markup.

5. How should TP documentation be stored?

TP documentation must be prepared and stored in electronic form, as required by current regulations.