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Transfer pricing documentation is mandatory for many taxpayers

Transfer pricing documentation is mandatory for many taxpayers

8/27/2021
Transfer pricing documentation is mandatory for many taxpayers
The obligation to have prepared transfer pricing documentation applies to all taxpayers who carry out controlled transactions with their dependent entities. At present, the transfer documentation is governed by the Guideline of the Ministry of Finance of the Slovak Republic no. MF/019153/2018-724 on determining the content of the transfer pricing documentation.

Last year, the Financial Administration performed several tax audits focused directly on transfer pricing. In addition to the content of the documentation, the Tax Authority also checks whether the taxpayer has adjusted his tax base in accordance with the difference by which his tax base was reduced during the year by applying non-market prices. The Financial Administration additionally levied a tax of EUR 5 262 523 only on transfer pricing tax audits, which were completed in 2020.

The obligation to have prepared transfer pricing documentation applies to taxpayers, both natural and legal entities, who carry out significant transactions with their dependent entities. In exceptional cases, insignificant transactions must also be documented.

The guideline of the Ministry of Finance of the Slovak Republic determines only the minimum scope of transfer pricing documentation that the taxpayer must have prepared for a specific transaction, depending on the significance and type of transaction. The scope of the transfer pricing documentation that the taxpayer needs to have prepared depends on the size of the transaction. In the past, the scope of the transfer pricing documentation was determined by the size of the taxpayer.

The taxpayer is obliged to keep the transfer pricing documentation for each tax period separately. In the case of a request from the Tax Authority, he is obliged to submit the prepared transfer pricing documentation to the Tax Authority within 15 days from the date of delivery of the request from the Tax Authority or the Financial Directorate. Failure to comply with the obligations threatens the taxpayer with a fine of up to EUR 3 000, even repeatedly.

In order to prevent additional taxation, it is necessary to have prepared detailed transfer pricing documentation, which contains all the requirements and explains in detail the method of setting prices between dependent entities.

If you need to prepare transfer pricing documentation, do not hesitate to contact us. We will be happy to prepare the transfer pricing documentation for you and advise you on determining the correct scope.