Criminal, penal, fiscal and tax liability in connection with transfer pricing documentation

4 min.

As of 1 January 2022, new deadlines apply to comply with transfer pricing obligations for 2022 which means that related parties are required to:

  1. prepare local transfer pricing documentation by the end of the tenth month after the close of the tax year;
  2. submit transfer pricing reporting (TPR) to the tax office by the end of the eleventh month after the close of the tax year; and
  3. hold group documentation by the end of the twelfth month after the close of the tax year.

Consequently, an entity for which the financial year coincides with the calendar year should meet the above obligations by (section 1) 31 October, (section 2) 30 November and (section 3) 31 December 2023, respectively.

Liability for failure to comply with transfer pricing documentation obligations arises at two levels, both for the company and for individuals authorised to represent and manage the company’s business, who are most often members of the management board.

In practice, all of the members of the taxpayer’s management board are responsible for the timely submission and the content of a transfer pricing report, and face the risk of liability under the applicable criminal, criminal fiscal and tax laws. What will the liability likely be?

Criminal liability in transfer pricing

Sanctions for the lack of transfer pricing documentation under the Polish Criminal Code may be imposed:

  • For perjury in the documents submitted by members of the taxpayer’s management board. However, the sanction can be much more severe if perjury was committed with the intent of achieving a pecuniary or personal benefit. In such case, the sanction increases from six months to eight years’ imprisonment.
  • In connection with white-collar crimes. Any person required to manage the property or business of a given entity, by abusing the powers conferred upon him or her, or by failing to fulfil his or her duty, causes substantial material damage to the company, shall be punished by deprivation of liberty for one year to ten years.

Additional penalties are provided for in the Fiscal Criminal Code, where it is stipulated that anyone who, contrary to their duty, fails to prepare local transfer pricing documentation or fails to attach group transfer pricing documentation to local transfer pricing documentation, is subject to a fine of up to 720 daily rates. The same penalty is imposed on anyone who prepares the documentation contrary to the actual state of affairs.

On the other hand, anyone who, contrary to the obligation, prepares the documentation after the deadline is subject to a fine of up to 240 daily rates.

In addition, anyone who, contrary to the obligation, does not file transfer pricing information with the competent tax authority or, when filing this information, provides data inconsistent with the local transfer pricing documentation or with the actual state, is liable to a fine of up to 720 daily rates, and anyone who, contrary to the obligation, files the information after the deadline is liable to a fine of up to 240 daily rates.

It means that failure to have transfer pricing documentation or to prepare it late or inconsistently with the actual state is punishable, as well as failure to submit a TPR return or to submit it late.

Failure to comply with the transfer pricing documentation obligation may also expose the taxpayer to the payment of an additional tax liability.

The basic amount of this surcharge is 10% on the reported or overstated loss as a result of incorrect transfer pricing.

In the event that the basis of the additional tax liability exceeds the amount of PLN 15 million, the rate may be increased to 20%. This sanction is applied if the taxpayer fails to submit or submits incomplete transfer pricing documentation. He is then given an additional 14 days to complete the documents. If he does so, the higher sanction rate for non-submission of documentation will not be applied.

The sanction may increase up to 30% when the tax documentation is not submitted and the value of the basis for determining the additional tax liability exceeds PLN 15 million.

An additional tax liability may not be imposed on an individual who, in such a case, is liable for an offence or a fiscal offence.

Download “Newsletter No. 2 | 2023” as PDF

Contact us:

Attorney trainee in Poland
Agata Wleklińska
Tax advisor
ECOVIS Legal Poland
+48 22 400 45 85

More info:

This article is part of the Newsletter No. 2 | 2023.