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Fundamental changes in documentation of transfer pricing


In line with a new draft of amendments to the Acts on PIT and CIT of 21 July 2015, soon we may expect significant changes to the laws regulating the documentation obligation for the purpose of transfer pricing. These changes result most of all from the need to implement a code of conduct for tax documentation, announced in the Resolution of the EU Council and the guidelines of OECD. The proposed amendments revolutionise and organise the current rules concerning tax documentation. The most important changes were presented below.


The first of the proposed amendments increases the threshold of equity links from 5% to 25% which is aimed at eliminating from this range the so-called portfolio investments. It is undoubtedly a welcome change as the present 5% threshold applicable in Poland, reliable for classifying entities as affiliates, is one of the most rigorous in the world.

Documentation obligation

If the proposed laws come into force unmodified, the obligation of drawing up tax documentation will not depend anymore exclusively on value of transactions, but most of all on the turnover generated by taxpayers. It will be possible to distinguish several groups of entities depending on the level of their revenue or expenses in a relevant or previous tax year, which documentation obligations or the manner of determining the limit obliging to draw up the documentation will differ:

  • turnover up to 2 million EUR: exempt from the obligation of drawing up tax documentation,
  • turnover above 2 million EUR: an obligation to document transactions between affiliates and other events posted in tax books that significantly affect the amount of their income. Such transactions or other events are deemed to be transactions or events of a single type which value exceeds in a tax year the equivalent of 50,000 EUR increased by 5,000 EUR for every 1 million EUR of revenue over 2 million EUR.

Taxpayers commencing activity will be obliged to draw up the documentation from the month following the month in which their revenue or expenses exceed 2 million EUR,

  • turnover above 10 million EUR: the documentation obligation as for entities with turnover over 2 million EUR, additionally, an obligation to work out a comparative analysis and append to a tax return a simplified statement on transactions with affiliates or other events taking place between affiliates or in relation with which payment of amounts due is made directly or indirectly to an entity having place of residence, registered office or the management board in a tax haven,
  • turnover above 20 million EUR: the documentation obligation as for entities with turnover exceeding 10 million EUR. Transactions or events which value exceeds in a tax year a sum being an equivalent of the amount of 140,000 EUR increased by 45,000 EUR for every 10 million EUR over 20 million EUR are deemed to be significant transactions or other events of a single type obliging to draw up tax documentation. Additionally, apart from a comparative analysis and a simplified statement on transactions with affiliates, these entities will be obliged to work out documentation on the group level (master file), including in particular information on transaction price policy in their group, description of used intangible fixed assets, group’s organisational structure and financial situation,
  • turnover above 100 million EUR: the documentation obligation as for entities with turnover exceeding 20 million EUR, where transactions or events of a single type giving rise to the obligation of drawing up documentation for these entities will be determined on the basis of the limit of the equivalent of 500,000 EUR,
  • consolidated revenue over 750 million EUR, domestic entities meeting the criteria of the parent company and consolidated financial statement within the meaning of the provisions of the Accounting Act, which have a facility or subsidiaries in the area of the Republic of Poland: additionally, obliged to work out statement on the amount of income, paid tax and places of subsidiaries’ business activity (in tabular form), within 12 months from the end of a tax year for which the statement is submitted.

Furthermore, regardless of the above regulations, the obligation of drawing up tax documentation will also arise in the year following the year in which taxpayer was obliged to draw up tax documentation.

It is also predicted that the obligation of drawing up the documentation will also arise with respect to every partner of company which is not a legal entity and which revenue or expenses exceed 2 million EUR. Every partner will be obliged to work out tax documentation, subject to the possibility of transferring this obligation onto a designated partner having its registered office or place of residence in the area of Poland.

Moreover, as it was previously, articles of association of company not being a legal entity in which the value of contributions made exceeds 50,000 EUR as well as joint venture agreements and similar agreements in which the value set forth in the agreement or expected exceeds 50,000 EUR will be deemed a transaction or other event significantly affecting the sum of taxpayer’s income or loss and will oblige all entities with revenue or expenses over 2 million EUR to draw up the documentation.

The laws concerning transactions or events for domestic entity engaging in harmful tax competition will not be subject to change, and, regardless of generated turnover, taxpayers will be obliged to draw up the documentation in case total sum of payments due exceeds the amount of 20,000 EUR in a tax year.

The right to request documentation for other transactions

However, the introduction of the above limits does not mean that when making transactions or events of lower value taxpayers will completely avoid the risk of drawing up tax documentation. The amending laws entitle tax authorities to request to work out and submit the documentation within 30 days from the date of delivering the request to taxpayer – for transactions not exceeding the limits outlined above, in case circumstances occur that make it likely that their value is understated by taxpayers in order to avoid the documentation obligation.

Scope of documentation

An equally important change will consist of expanding the scope of documentation of transfer pricing. Correctly drawn up documentation will include: description of taxpayer, description of transactions carried out with affiliates and other events (which will include, among others liquidity management agreements, cost-sharing agreements, joint venture agreements, etc.), and taxpayer’s financial information supplemented with its financial statement. Specific provisions, apart from the previous scope of documentation, will provide, among others, for an obligation to present group’s organisational and management structure, characteristics of competitive environment, restructuring processes within group or indicate type of transaction and its financial details. A detailed description of elements and information which should be contained in local and group’s documentation will be laid down in a regulation.

Dates of drawing up documentation

The draft of the Act provides also for introduction of a law obliging taxpayers to work out local and group’s documentation by the date of submission of tax return for a relevant tax year. The statement on meeting the requirement of drawing up local documentation will be submitted by an authorised person together with tax return. Furthermore, already worked out documentation should be updated on an annual basis, while comparative analysis should be updated at least once every 3 years, unless economic conditions substantially change within this time. The seven-day term for submission of tax documentation upon authority’s request will not be changed.

Irrespective of the form in which the aforementioned laws come into force, their implementation confirms the growing interest of tax authorities in the issues of transfer pricing which will probably translate into quality and thoroughness of inspections in this regard. The amended laws will apply from the beginning of the tax year commencing after 31 December 2016, hence they will not apply to events and transactions began before 1 January 2017. The laws on reporting by country (for taxpayers with consolidated revenue over 750 million EUR) are an exception and this obligation will apply for the tax year commencing after 31 December 2015. However, it already is worth analysing the proposed laws in terms of the risk of extending the documentation obligations.

We will inform you on an on-going basis about progress in legislation works in this matter.