Changes in transfer pricing

Since 2022, taxpayers have been dealing with a substantial number of changes in taxes, though these are unfortunately not advantageous in many cases. Nevertheless, among all these new amendments, there are some that can be regarded as positive developments. Such favourable tax changes have been introduced in the area of transfer pricing documentation.

For the record, transfer prices are used in transactions between or among related parties. Related parties should determine their prices under terms and conditions that would have been made between non-related parties (transactions carried out at arm’s length).

To be considered at arm’s length, a transaction must be supported by detailed documentation, also including market research into existing market prices, known as a benchmarking analysis.

Which changes are the most important?

First of all, the deadlines for preparing local transfer pricing documentation (a Local File) and filing information on transfer pricing (TPR) have been extended permanently – not only during the Covid-19 pandemic.

Additionally, it is no longer necessary either to submit an additional statement on preparing a local file or to inform the tax authority about adjusting the transfer prices in tax returns, meaning there is no need to file several documents. Currently, the statement forms an integral part of the TPR.

Importantly, under a new law passed in April 2022, new deadlines for filing a TPR and for preparing the transfer pricing documentation also apply to documentation prepared for 2021.

The new filing requirements, which become effective from 2022 and apply to documentation prepared for 2022, are:

• a Local File must be prepared by the end of the 10th month from the end of the fiscal year (previously this was nine months);
• information on transfer pricing must be submitted by the end of the 11th month from the end of the fiscal year;
• at the request of the tax authority, a Local File must be submitted within 14 days (previously this was seven days).

Taxpayers whose fiscal year is the same as the calendar year must prepare their transfer pricing documentation for 2021, including a TPR form, by 31 December 2022.

What are the other changes?

It is worth mentioning that a Local File must be prepared electronically. In addition, the catalogue of transactions exempt from the documentation obligation has been extended and now includes transactions:

• between Poland-based establishments of foreign non-resident related parties  and between such an establishment and its Polish related party;
• covered by a tax agreement and an investment agreement;
• regarding settlements using clean re-invoicing; and
• Safe harbour transactions for low-value-added services, loans, credits and bonds.

It is also worth noting that certain transactions executed by micro- or small enterprises, as well as transactions other than controlled transactions executed with residents of tax havens, or those in which the beneficial owner is a resident of a tax haven, do not have to be documented in the full scope and do not have to include a benchmarking or compliance analysis.