Transfer pricing, i.e., the rules for setting prices in transactions between related entities, has for years been an important element of tax policy in many countries. In Poland, this topic has gained particular importance in light of legislative changes introduced to regulate relationships between affiliated companies more precisely.
From the perspective of Vinci & Vinci, these changes represent both a significant challenge and an opportunity to highlight how crucial proper transfer pricing is in the context of international business transactions.
What Is Transfer Pricing?
Transfer prices are the prices set by related entities (e.g., subsidiaries, branches, affiliated companies) in transactions involving the exchange of goods, services, or assets between them.
The guiding principle adopted by most tax systems, including the Polish system, is the arm’s length principle. This means that transfer prices must be set at a level that would have been applied in transactions between independent entities.
This principle is essential because it prevents price manipulation aimed at reducing the tax base or shifting profits to jurisdictions with more favorable tax rates.
Transfer Pricing Rules in Poland
As of January 1, 2021, amendments to transfer pricing regulations entered into force, introducing a number of new requirements and obligations for entrepreneurs. From the perspective of Vinci & Vinci, the key changes include:
1. Documentation Obligation
Entrepreneurs conducting transactions with related entities are required to prepare transfer pricing documentation in accordance with specific rules.
The introduction of documentation in the form of a Local File and, in certain cases, a Master File, requires companies to more precisely document how transfer prices are determined and to demonstrate their compliance with market conditions.
2. Categorization of Enterprises
The new regulations differentiate documentation obligations depending on the size of the enterprise.
Companies exceeding specified revenue thresholds (over EUR 2 million for local documentation purposes) are required to prepare more detailed transfer pricing documentation. For smaller companies below this threshold, the obligation is more limited.
3. Reporting of Related-Party Transactions
Companies must report transactions with related entities if their value exceeds PLN 500,000.
This means that any transaction exceeding this threshold must be included in the annual report, and entrepreneurs must demonstrate how transfer prices were determined and which method was applied in their calculation.
4. Taxpayer Responsibility
Under the new regulations, responsibility for proper transfer pricing lies with the entrepreneur.
If tax authorities question the level of transfer prices, the entrepreneur must prove that the applied method and price comply with market conditions. Otherwise, they may face tax sanctions, including increased tax liabilities and financial penalties.
5. Increased Control and Sanctions
In cases of improper documentation or incorrect transfer pricing practices, entrepreneurs may expect intensified scrutiny from tax authorities.
Sanctions may include additional taxation of profits as well as fines for missing or incomplete documentation.
What Challenges Do Transfer Pricing Rules Present?
The regulations pose several challenges for entrepreneurs. Above all, companies must adapt their internal procedures to meet the requirements for documenting related-party transactions.
Proper implementation requires both appropriate tools (e.g., reporting software) and in-depth knowledge of complex legal provisions.
The amendments aim to increase transparency and combat aggressive tax optimization. Consequently, non-compliance exposes businesses to significant financial risk.
How Does Vinci & Vinci Support Entrepreneurs?
From the perspective of Vinci & Vinci, comprehensive advisory support is a key element of successful implementation.
Entrepreneurs can rely on assistance in preparing appropriate documentation, clarifying transfer pricing methods, and representation before tax authorities in the event of audits.
Our firm provides support at every stage of the process—from transaction analysis to the preparation of required documentation.
Thanks to our experience in transfer pricing, we help companies avoid pitfalls related to improper pricing practices and ensure full compliance with applicable legal regulations.