Documentation obligations in the field of transfer pricing for a foreign branch in Poland
However, some taxpayers are not aware that, under Polish transfer pricing regulations, a company and its foreign branch are considered related parties. So what is worth knowing?
Undoubtedly, transfer pricing regulations have evolved over recent years, and the subject itself has become an increasingly visible focus for tax authorities. This is particularly evident in the number of tax audits, which reached 209 in 2025. Tax authorities are increasingly using specialized Big Data tools that verify in real time data from TPR-C forms, JPK, KSeF, and financial statements. Specialized units have also been established to detect potential irregularities in this area, such as the Aggressive Tax Planning Task Force and the National Revenue Administration’s Competence Centre. Although the number of customs and fiscal audits has slightly decreased year by year, their effectiveness is growing—estimated income adjustments in such audits increased from approximately PLN 760 million in 2024 to around PLN 856 million in 2025.
As a rule, transfer pricing regulations apply to individuals and companies conducting business activity in Poland once specific statutory conditions are met, but this is not the only scenario. Particular attention should be paid by foreign entities that operate in Poland solely through a separated part of their business in the form of a Polish branch. The same applies to Polish companies with branches in other countries.
Transfer pricing
A foreign branch in Poland as a related party
The concept of a foreign branch in Polish legislation is defined as:
- A fixed place of business through which an entity with its registered office or management in one country conducts all or part of its activities in another country, including in particular a branch, representative office, office, factory, workshop, or place of natural resource extraction;
- A construction site, building project, assembly, or installation carried out in one country by an entity with its registered office or management in another country;
- A person acting on behalf of and for the benefit of an entity with its registered office or management in one country, operating in another country and having (and actually exercising) authority to conclude contracts on its behalf.
The definition of related parties is set out in Article 11a of the CIT Act and clearly states that, in addition to the main criterion of exercising significant influence, a taxpayer and its foreign branch must also be treated as related entities.
Although a foreign branch is explicitly listed as a related party, taxpayers often overlook transactions with branches when verifying documentation obligations. Only during a thorough analysis of all intra-group transactions and review of financial statements does it become apparent that such transactions must also be considered. This may stem from the fact that prior to regulatory amendments, foreign branches were not treated as related entities and thus were not of interest to tax authorities. Importantly, the concept of a foreign branch is not limited to entities operating in Poland and managed from abroad; it also applies to entities operated by Polish companies in other countries.
Transfer pricing
How to document transfer pricing for a branch in Poland?
Although it may seem somewhat abstract, a foreign enterprise’s establishment (including a branch) should be treated, for transfer pricing purposes, as a separate and independent entity. This approach has been adopted in Polish regulations and tax authority practice to enable the recognition of a foreign branch as a related party.
Accordingly, profits should be attributed to the branch as if it were a distinct and independent enterprise carrying out similar activities under similar conditions, in line with OECD guidelines. The allocation of revenues and costs to the branch is therefore crucial, as it determines whether the branch is required to prepare and report transfer pricing documentation.
A documentation obligation arises when the branch’s revenues or costs exceed PLN 2 million (or the equivalent). Importantly, such transactions are often incorrectly presented in transfer pricing documentation. They are typically classified as “other transactions” and should not be documented as goods or service transactions based solely on accounting records. Regardless of the type of internal transactions between the parent company and the foreign branch, they should be reported as “other transactions” or “transactions with a foreign branch” and properly described.
The arm’s length principle
It is also essential to remember the fundamental arm’s length principle, under which related parties must structure their commercial relations on market terms, regardless of materiality thresholds or documentation obligations (as per Article 11c(1) of the CIT Act). This is particularly important for branches, whose financial result - based on a chosen profitability indicator for the “overall activity” - should not deviate from market conditions. Proper allocation of profits to the branch at a balanced level, supported by benchmarking analysis, ensures compliance with the arm’s length principle and minimizes the risk of transfer pricing adjustments by tax authorities.
A separate issue concerns the exemption from preparing a benchmarking analysis for micro or small enterprises. In this area, inconsistencies in tax authority approaches can be observed. While a foreign branch is treated as an independent entity for transfer pricing purposes, when determining micro or small enterprise status, it must consider data for the entire enterprise (the parent company and branch combined).
In simplified terms:
- for transfer pricing, the branch is treated as a separate entity,
- for enterprise classification, it is treated as an integral part of the parent company.
This inconsistency arises because the definition of related parties is set out in the CIT Act, while the definition of a micro or small enterprise is governed by the Entrepreneurs’ Law. As a result, the regulations are not fully consistent and may be disadvantageous for taxpayers.
Transfer pricing
Approach of tax authorities
The definition of a related party evolved over time and only after the 2019 amendments did it include foreign branches. Subsequently, tax authorities began issuing interpretations clarifying how such transactions should be understood and documented:
- Interpretation of the Director of the National Tax Information (29 April 2020) – a branch is recognized as a separate (related) entity
- Interpretation (23 August 2024) - revenues and costs allocated to a branch constitute a separate controlled transaction
- Interpretation (14 April 2022) - transaction value should be determined based on allocated revenues or costs
Summary
Given the increasing effectiveness of tax audits in the transfer pricing area, taxpayers should devote greater attention and exercise due diligence in setting prices for transactions between a company and its foreign branch, as well as ensuring consistency in transfer pricing policy. If a company has a foreign branch, it is good practice to review applicable regulations in advance and carefully comply with documentation obligations. Implementing proper procedures and standardizing the approach can effectively prevent disputes with tax authorities.
Frequently Asked Questions (FAQ)
Yes. The obligation to submit the TPR form is independent of the obligation to prepare local transfer pricing documentation.
From the moment actual operations begin and the first revenues or costs are allocated—even if this occurs during part of the year.
Yes. Tax neutrality does not eliminate transfer pricing obligations if the definition of a controlled transaction is met and thresholds are exceeded.
Thresholds must be converted into PLN according to CIT rules, which can be significant in periods of exchange rate fluctuations.
No formal requirement exists, but it is advisable to clearly define allocation rules within the group policy.
Primarily through functional analysis (FAR) and benchmarking against market data.
Not always, but it significantly increases the risk of income adjustments, penalty tax rates, and potential fiscal liability.
