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Burdensome master files


As of 1 January 2017, significant amendments were introduced to the regulations on the obligation of drawing up transfer pricing documentation. One of the many novelties is the necessity to prepare so-called ‘master file’ by selected taxpayers.

Entities obliged to have master files.

Pursuant to art. 9a sec. 2d of the CIT Act (and respectively art. 25a sec. 2d of the PIT Act), if the taxpayer’s revenues or costs exceeded the equivalent of 20 million EUR, tax documentation should include information about the group of associated entities. However, it does not mean that each and every time taxpayers will have to prepare master file by themselves. On the basis of  OECD guidelines, it may be concluded that the file should be prepared by one of the entities being part of the specific group, ideally by a parent entity, having sufficient knowledge about the group. The role of other entities, assuming that the received file complies with local requirements, should be limited to add the master file to the local file prepared by the specific entity.

Scope of information  

The Polish legislator stated in CIT Act and PIT Act that the master file should include in particular: details of the entity that prepared the information, the group’s organisational chart, the group’s transfer pricing policy, description of operations run by the group, description of major intangible assets used by the group along with the consolidated statement, and description of income tax arrangements between the group entities and tax authorities of other states that the Republic of Poland, including prior unilateral price arrangements.

Detailed guidelines on the components of master file are to be found in executive regulations. It follows from the draft regulations published already in November 2016 by the Minister of Finance and Development on information included in tax documentation regarding the personal and corporate income tax that the scope of the required information is very broad. For instance, the master file should include information about the largest suppliers and recipients of the group, the level of competitiveness in the sector, the group’s market share, acquisitions and takeovers in the group, the group’s strategy for intangible assets, information on R&D centres. Taxpayers will also have to present a list of major intangible assets owned by the group entities, a list of significant contracts or arrangements between the associated entities relating to intangible assets, and even a list of major credits or loans received from the group entities along with a description of terms and conditions of granting them. Drafts of the aforesaid regulations are in the phase of consultations.

The scope of information which the taxpayer will have to disclose in the master file is very extensive. The Polish legislator, although basing on OECD guidelines under BEPS (action 13 relating to transfer pricing documentation and country-by-country reporting), in some areas requires more detailed information from taxpayers, e.g. in the scope of group’s management structure.  

Possible problems

If in the specific group of associated entities, the master file is prepared by an entity not subject to the Polish jurisdiction, the Polish taxpayer should verify whether the scope of information included in the master file is in line with the requirements imposed by the Polish legislator. It is possible that in other countries, less detailed solutions have been adopted. In such a case, the file will have to be supplemented accordingly.

If the master file has been drawn up in a foreign language, it should be translated into Polish.

A problem may also follow from a longer time for preparing the master file in another country of the entity’s seat than Poland. If this is the case, it is advisable to start preparing the file well in advance, so that it is possible to comply with the applicable Polish regulations. Pursuant to the Polish law, the file must be prepared within 3 months from the end of the fiscal year (i.e. within the time limit for submitting the tax return).   

It should also be noted that the regulations governing the discussed matter, also draft regulations, are rather imprecise in the apparently key issue: there is no definition of a group of associated entities for the purposes of preparing the master file. For smaller groups it will not be a problem, but for consortiums operating in many different sectors or branches of industry, it will be of the key importance – adopting a broad definition of the group (i.e. including all the associated entities, even personally), will cause the necessity to prepare the file covering information which is often insignificant from the perspective of the specific taxpayer, because it will relate to sectors which are unfamiliar to them. It seems to be more justified to assume that a group of associated entities is a group operating within the same chain of supplies. Such an approach results from the draft regulations, which mention e.g.  the necessity of indicating ‘key functions, risks and assets being a major contribution to the chain of added value by specific associated entities in the group’. In the final OECD report concerning action 13, it was pointed that as a rule, the taxpayer should present information for the entire group. However, it is admissible to present information for the specific line of business if this is justified, e.g. when the specific lines of business of the specific groups of entities operate independently, or have been recently acquired. In such a case, pursuant to OECD guidelines, it should be ensured that the master file includes information on centralised functions and transactions between specific lines of business. At the same time, there should be a complete master file, i.e. the one covering all the sectors, available in each of the countries. It should be hoped that the Minister of Finance will make the regulations more precise (or at least clarify them) in the above scope.

Due to a very detailed scope of information which should be included in the master file and the necessity to develop it in cooperation with other entities in the group, it is recommended that the entities covered by the obligation of having a master file start work sufficiently well in advance.


Barbara Otrzonsek, Tax Consultant, ATA Finance