Increased controls in the area of transfer pricing
The Ministry of Finance has announced that tax authorities are going to increase controls in the area of transfer pricing. Data shows that in the first nine months of 2023, tax authorities conducted over 12,800 tax and over 7,000 combined customs and tax audits.
In the face of globalization and increased trade among companies belonging to the same capital group, issues related to transfer pricing and their supervision are significant both economically and from a tax perspective. Transfer pricing mechanisms can be used to reduce taxes or even completely avoid them, instead of serving the proper valuation of transactions.
Currently, transfer pricing is the most frequent area subject to scrutiny. Transactions concluded in periods that have not yet expired may be subject to analysis. Transfer pricing becomes time-barred after 5 years, counting from the end of the tax year in which the transfer pricing related transaction occurred.
Entities for controls are increasingly selected more meticulously due to the accumulation and analysis of a greater amount of data (especially from the TPR form). Currently, entities are selected for control where there is a higher probability for determining income than it has been the case a few years ago.
Transactions between companies within the same capital group are being scrutinized more frequently. Most frequently verified are transactions concerning intangible services, especially those with low added value. Additionally, transactions related to the provision of trademarks or other intangible assets and rights, difficult to assess in terms of value, are particularly closely examined. It is worth noting that in the past, such transactions were used by taxpayers for aggressive tax optimization, which explains the increased interest from tax authorities.
Tax authorities are also particularly interested in transactions concluded with related entities that have their headquarters or management boards in countries applying harmful tax competition. Favourable tax rates, tax preferences, or even the lack of taxation of certain incomes in these countries encourage taxpayers to transfer their incomes there. Therefore, in the case of transactions with related entities domiciled in so-called tax havens, special caution should be applied.
It should be noted that, in addition to the obligation to settle tax arrears, payment of penalty interest, and additional financial penalties, there are several other negative consequences associated with irregularities in the area of transfer pricing. Entrepreneurs, representatives of companies, and members of the management boards of capital companies may also incur personal criminal liability for such irregularities. The penalty rates specified in the Fiscal Penal Code are systematically increasing, and potential fines can reach out to millions of Polish zlotys.
If you have any questions regarding this topic or if you are in need for any additional information – please do not hesitate to contact us:
CUSTOMER RELATIONSHIPS DEPARTMENT
ELŻBIETA NARON
Head of Customer Relationships
Department / Senior Manager
getsix® Group
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