The Guidelines set by the Organization for Economic Co-operation and Development (OECD) are not enshrined in Poland’s transfer pricing laws, rather they are referred to for explanatory purposes. Currently, the transfer pricing rules are governed by the Corporate Income Tax Act, the Minister of Finance Act on TP Assessments Procedure, and the Minister of Finance Act on TP Documentation.
Arm’s Length Principle
In Poland, the application of the arm’s length principle means that related parties must set prices for their transactions—both domestic and cross-border—on terms that would apply between independent, unrelated entities in comparable conditions.
Related Party Definition
Associated enterprises are defined broadly to make sure that transactions between them reflect market conditions. A key threshold is 25% direct or indirect ownership in equity, participation units, or investment certificates. Relationships based on personal connections also qualify if one person can influence major business decisions. Additionally, tax authorities can define entities as related in case they confirm that ownership structures are manipulated without solid reasoning; such structures include entities like foundations, trusts, or investment funds.
Transfer Pricing Methods
The methods that can be used to determine the arm’s length price in Poland are in alignment with OECD Guidelines, and include the following:
- Comparable Uncontrolled Price Method
- Resale Price Method
- Cost Plus Method
- Transactional Net Margin Method
- Profit Split Method
In certain circumstances, the taxpayers can use an additional method, different from the mentioned, in particular, the valuation techniques method (the so-called sixth method).
Comparability Analysis
When comparing transactions, Poland prefers to use domestic comparables over foreign ones. The analysis is used to confirm that the conditions set in controlled transactions match those that would be agreed upon in an open market. While Polish regulations include only a general rule about applying the arm’s length principle, they do allow for the use of arm’s length ranges. The OECD Transfer Pricing Guidelines are used as a reference. Comparability analysis must be updated at least every three years, or sooner if significant changes in the market or economy occur that impact the analysis. Secret comparables are not allowed.
Documentation Requirements
Transfer pricing documentation requirements in Poland are based on the three-layer approach that requires multinational groups to submit the following documentation to the Poland tax authorities:
- Master File;
- Local File, and
- Country-by-Country (CbC) report.
Local File. It must show that transactions between related parties follow the arm’s length principle. It includes a transfer pricing analysis that compares the transaction with market data or provides another justification for pricing. Entities that need to submit the local file include those who meet the following criteria:
- The value of commodity or financial transactions exceeds 10 million PLN, or
- The value of service or other transactions exceeds 2 million PLN (net amounts, excluding VAT).
Exemptions apply to micro-entrepreneurs (less than 10 employees and under €2M revenue/assets); small-entrepreneurs (less than 50 employees and under €10M revenue/assets); and domestic transactions without tax loss or exemptions.
Master File. It is required for taxpayers who are part of a group with consolidated revenue of over 200 million PLN in the previous year. It gives an overview of the group’s global business, transfer pricing policies, and allocation of income and functions. It must be submitted within 12 months of the end of the tax year and may be provided in English.
Both the local file and master file must be submitted to tax authorities within 14 days if requested.
Country-by-Country Reporting. It is required for multinational enterprise (MNE) groups with consolidated revenue of over €750 million (or 3.25 billion PLN if financials are prepared in PLN) in the previous year. Rules allow for a Polish entity to act as a surrogate parent to file the CbC report on behalf of the group. The reporting included information on global revenue, profit/loss, taxes paid/accrued, capital, earnings, employees, and tangible assets by country. The filing needs to be submitted within 12 months after the year-end.
Advance Pricing Agreements (APA) and Mutual Agreement Program (MAP)
Advance Pricing Agreements (APA)
Issued by the Minister of Finance, confirming the transfer pricing method a taxpayer will use in dealings with related entities. Once granted, the taxpayer must apply the agreed method, and in return, the tax authority cannot later challenge it. APAs can cover both current and future transactions, and they are valid for up to five years, with the option to extend for another five. APAs can be unilateral, bilateral, or multilateral, depending on how many tax authorities are involved.
Mutual Agreement Program (MAP)
A taxpayer can submit a Mutual Agreement Procedure (MAP) request if they believe that tax actions taken by Poland or another country result in taxation that goes against the terms of an applicable tax treaty or the EU Arbitration Convention. For non-residents with a permanent establishment in Poland, the MAP request must be filed in their home country, not in Poland. A MAP can be carried out separately or alongside an APA, as both procedures can run in parallel.
Penalties
In Poland, using prices that don’t follow the arm’s-length principle in transactions with related parties can lead to penalties between 10% and 30% of the amount of the overstated loss or understated income. Additional penalties may apply for providing false information in the transfer pricing statement or submitting required forms late, such as Form TPR.
Taxation at a Glance
In Poland, taxes are levied at national and local levels. Corporate & personal income taxes, VAT, and excise duty are imposed at the national level only, while local authorities collect taxes imposed on real estate and vehicles.
In Poland, the currency is the Polish zloty. The official name of the Polish tax authority is the National Revenue Administration.
The table below provides a summary of the main taxation rates related to businesses:
Tax Type | Tax Rate |
Corporate Tax | 19% |
VAT | 23% |
Withholding tax on dividends to non-residents | 19% |
Withholding tax on interest to non-residents | 20% |
Withholding tax on royalties to non-residents | 20% |
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