Transfer prices 2023 – key changes

Under the Act of 7 October 2022 amending the Corporate Income Tax Act and certain other acts and the Ordinance of the Minister of Finance on corporate income tax transfer pricing information of 29 August 2022, and as a result of the cancellation of the epidemic emergency in Poland:

• the TPR-C form and the deadlines for its preparation have been changed,
• the documentation thresholds have been raised,
• the documentation obligation for indirect haven transactions is abolished.

Changes to local transfer pricing documentation submission, i.e. TPR-C in a new way

Changes to the deadlines and preparation of local transfer pricing documentation mean that in 2023:

• the addressee of the TPR-C changes - one reports to the competent Head of the Tax Office and not to the Head of the National Tax Administration (KAS) as before;
• reporting deadlines change:
  • by 31 October 2023 - time to prepare electronic local transfer pricing documentation (by the end of the 10th month after the end of the tax year),
  • by 30 November 2023 - time to submit TPR transfer pricing information (by the end of the 11th month after the end of the tax year),
  • by 31 December 2023 - time to attach the group transfer pricing documentation to the local transfer pricing documentation (by the end of the 12th month after the end of the tax year),

• the statement and the TPR-C form have been integrated - the statement is now an integral part of the TPR-C form, so submitting the form is equivalent to submitting the statement,
• the way the TPR-C is signed changes - the transfer pricing information for 2022 requires the signature of the head of an entity or a person designated from among the members of the body or a proxy. If signed by a proxy, the proxy must be a professional attorney, i.e. an attorney, legal counsel, tax advisor or auditor. Furthermore, the proxy must be previously notified to the Tax Office by submitting a separate UPL-1 form.

Moreover, there is also a requirement introduced:

• to allocate the value of transactions to individual countries, i.e. to break down the total value of transactions per contracting party (previously, it was only required to indicate the countries of residence of the contracting parties),
• to report an additional fifth indicator presenting the ratio of operating expenses with related parties to total operating expenses ( previously four indicators were required - operating margin, gross profit margin, return on assets and return on equity),
• to complete the newly added field applicable to restructuring transactions,
• to detail the information on comparability adjustments (if applicable, it will be necessary to indicate whether the adjustment affected the result by more or less than 30% or to indicate that it is not possible to determine such an impact).

Additionally, the legislator has moved the reporting of re-invoices to a separate category 'F'. Taxpayers with the status of a small- or micro-entrepreneur, on the other hand, gained the possibility to indicate their status. If they demonstrate that they meet certain conditions, they will not be subject to the requirement to provide details of the transfer pricing information used and the methods for verifying it.

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Higher documentation thresholds

Under the legislative changes implemented, the regulations on indirect haven transactions have been lifted. However, the regulations for direct haven transactions are still in force. What has changed is the amount of the documentation thresholds.

For controlled transactions and transactions other than controlled transactions with a haven entity or a foreign permanent establishment located in a tax haven, the documentation thresholds amount to:

• PLN 2 500 000 for a financial transaction,
• PLN 500 000 for a transaction other than a financial transaction.

The thresholds apply to transactions for 2021 and 2022. It should be noted that previously the limit was PLN 100 000, regardless of the type of transaction.

Documentation obligation for indirect haven transactions repealed

With retroactive effect from 1 January 2021, the provision repealing the documentation obligation in relation to indirect haven transactions is in force. The lack of obligation covers transactions initiated and not completed before 1 January 2021, and therefore also applies to reporting for 2022.

Transfer pricing 2023 - higher sanctions for non-compliance

In 2023, the certification for documentation that is not in accordance with the actual state, the failure to prepare local transfer pricing documentation, the preparation of documentation after the deadline or the failure to include group documentation, the so-called Master File, is punishable by a fine of 240 to 720 daily rates.

Please note that the daily rate is set against the minimum remuneration in Poland. Due to the fact that the minimum remuneration for work as from 1 July 2023 amounts to PLN 3 600, the maximum daily rate is up to PLN 48 000. Learn more: Tax crimes and offences - fines in 2023 go up sharply

The maximum fine for not preparing local transfer pricing documentation can therefore be as high as PLN 34 million. It is therefore advisable to start preparing for transfer pricing reporting obligations much earlier and to take advantage of expert assistance to avoid unnecessary risks.

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