How to prepare your company for a transfer pricing audit?
Tax authorities are increasingly effective in identifying businesses for transfer pricing audits, and available data indicates that a significant portion of completed transfer pricing audits result in income being overestimated. In practice, this means that reliable documentation is no longer sufficient. Comprehensive tax risk management and ongoing verification of related-party transactions are becoming crucial. We explain why transfer pricing remains a priority area of interest for the National Tax Administration (KAS) and how proper preparation can help mitigate the risk of corrections and penalties.
To prepare a company for a transfer pricing audit, it is necessary to verify the compliance of documentation, TPR, contracts and financial data, check the market nature of the settlements and collect evidence confirming the actual course and business justification of the transaction.
Transfer pricing audits are becoming less frequent, but much more effective
Just a few years ago, many entrepreneurs assumed that the risk of a transfer pricing audit was relatively low. Today, this approach could prove to be a costly mistake.
The latest data demonstrates a clear shift in the National Tax Administration's strategy. Tax authorities are conducting fewer audits than before but are significantly better at selecting entities for verification. The result? According to data cited in the report "Transfer Pricing Audits in 2025," 63% of the analysed audits resulted in income adjustments, with the total value of adjustments reaching PLN 875.7 million.
This is a clear signal to entrepreneurs that transfer pricing has become one of the priority areas of tax audits.
Why are transfer prices the focus of the National Tax Administration?
Transfer pricing applies to transactions concluded between related entities, such as companies belonging to the same capital group. The regulations require that the terms of such transactions comply with the arm's length principle, meaning they are comparable to those that would be agreed upon between independent companies.
For the tax administration, this is one of the most important mechanisms to counteract profit shifting and aggressive tax optimization.
The tax authorities currently have significantly greater analytical capabilities than they did just a few years ago. Data from CIT returns, TPR forms, financial statements, and group reporting are analysed together, allowing for more effective identification of higher-risk entities.
What does transfer pricing control look like today?
During an audit, tax authorities may analyse not only the documentation itself, but also the consistency of the assumptions described therein with the actual course of the transaction. In practice, auditors pay attention to, among other things:
- the actual division of functions between related entities, i.e. who makes decisions, performs key tasks and is responsible for the outcome of the transaction,
- assets used, including intangible assets, know-how, technologies, trademarks and financial resources,
- economic risks incurred, e.g. market, credit, inventory, product liability or exchange rate risk,
- economic justification of the transaction, in particular the business purpose, expected benefits and the validity of the adopted settlement model,
- compliance of remuneration with market conditions, based on comparative or compliance analyses,
- consistency of contracts with business practice, i.e. whether the method of executing transactions corresponds to the contractual provisions,
- settlement of intangible services, financing, licensing and restructuring, as areas that particularly require strong justification and documentation.
What errors increase the risk of a transfer pricing audit?
The risk of disputes with tax authorities often stems not from intentional action, but from a lack of consistency between documentation, reporting, and actual settlement methods. Common problems include:
- preparation of documentation only formally, without checking whether the transaction description corresponds to reality,
- discrepancies between Local File, TPR, books and financial statements, e.g. in terms of transaction value, margin or result,
- outdated comparative analysis that does not take into account market, economic or business model changes,
- lack of evidence of the performance of intra-group services, such as reports, analyses, correspondence, work schedules or service results,
- insufficient justification of the economic advantage, especially in the case of management, consulting and licensing services,
- incorrect description of functions, assets and risks that does not reflect the actual division of responsibilities,
- failure to update the transfer pricing policy following business changes, e.g. restructuring, change of distribution model or financing method,
- mechanical application of the benchmark, without checking whether the entities and conditions being compared are actually comparable,
- lack of control over transfer pricing adjustments, including their basis, timing and tax treatment.
How to reduce the risk of income control and reassessment?
There is no way to completely eliminate audit risk. However, you can significantly increase your tax security. In practice, it is worth:
What consequences can result from transfer pricing irregularities?
The consequences of challenging transfer pricing go far beyond the need to pay additional tax. A business may be required to:
- income adjustments,
- payment of overdue tax plus interest,
- submitting corrections to the declaration,
- incurring liability arising from the provisions of the Fiscal Penal Code in the event of a breach of documentation or reporting obligations.
Additionally, the audit may involve the organization's resources for many months and affect the ongoing functioning of the enterprise.
Why is it worth preparing before the inspection?
The increasing effectiveness of audits demonstrates that tax administrations are increasingly leveraging data and analytical tools. Audits are no longer random and are preceded by detailed risk analysis. Therefore, a preventative approach is becoming increasingly important:
- risk identification,
- organizing documentation,
- ongoing transaction monitoring,
- adapting transfer pricing policy to the changing business environment.
Such actions often help not only reduce the risk of disputes with tax authorities but also streamline internal processes and increase the security of the entire capital group.
How do Crowe Poland experts support entrepreneurs?
Preparing for a transfer pricing audit requires a combination of tax and economic knowledge, as well as familiarity with tax authority practices. This is why many companies seek the support of specialized advisors.
Crowe Poland experts' experience shows that during inspections, authorities most often request not only transfer pricing documentation but also contracts, fee calculations, and proof of service provision. In practice, inconsistencies between these documents are one of the most common reasons for additional questions from auditors.
Crowe Poland experts provide comprehensive support to clients at every stage of transfer pricing management, including:
- preparation of local and group transfer pricing documentation,
- development of comparative analyses (benchmarks),
- verification of the transaction's compliance with the arm's length principle,
- preparation of TPR forms,
- developing and updating transfer pricing policies,
- reviews of existing settlements,
- support during tax audits and proceedings before authorities,
- advice on restructuring and new business models.
As part of the review, experts collate local documentation, TPR, contracts, accounting data, and the actual execution of transactions. This allows them to identify discrepancies that could lead to additional questions or disputes during an audit.
Transfer pricing control – frequently asked questions
Preparations should begin by verifying the consistency of local transfer pricing documentation, TPR information, contracts, accounting records, and financial statements. It is also important to verify whether the adopted fee calculation method reflects the actual division of functions, assets, and risks, and whether the company has evidence confirming the transaction and its business justification.
No. Complete documentation reduces formal risk, but it does not guarantee that the authority will accept the accepted settlements. During an audit, it may be examined whether the transaction terms correspond to those that would have been agreed upon between independent entities, and whether the documentation reflects the actual course of the cooperation. The purpose of the regulations is to ensure that income is reported and taxed where it actually occurred.
Transactions that may be more difficult to prove as a market-based transaction or as a result of actual execution typically require special attention. This includes intangible services, management fees, intra-group financing, guarantees, licenses, the use of intangible assets, restructurings, and transactions generating recurring losses. This does not mean that every such transaction will be questioned. However, the company should have documents confirming its business purpose, the method of calculating remuneration, and the benefits received by the recipient.
It is best to conduct a review regularly, not just after receiving an audit notification. It is particularly advisable before preparing documentation and a TPR, after a change in business model, a new transaction, a restructuring, a change in financing method, or a deterioration in the financial performance of one of the entities. A pre-audit review allows for early detection of discrepancies between documentation, financial data and the actual course of the transaction.
