Transfer pricing in Poland
In 2019, a new law on reporting transactions with related entities and preparing transfer pricing documentation came into force. The Polish regulations are in line with the relevant OECD guidelines of 2017. The reporting obligation applies to so-called uniform (revenue and cost) transactions with all related entities after exceeding the following thresholds:

2 million PLN for services
10 million PLN for goods.

(the threshold does not include transactions with related entities that are subject to exemption under Article 11n)

For such transactions, transfer pricing documentation and a comparative analysis taking into account the competitive environment – a so-called local file – are prepared.

Related entities
Relations should be examined very generally and broadly. What is taken into account is capital, personal and family relations, as well as relations arising from artificial ownership structures. The reporting obligation covers transactions with entities related both directly and indirectly. In the case of capital relations, the threshold of 25% of shares or voting rights in the governing bodies is relevant. In the case of personal relationships, the actual ability of a natural person to influence decision-making processes in the company is sufficient.

Powers of the tax office
If the tax office finds that, in comparable circumstances, unrelated entities would not have entered into the transaction under examination, or would have performed another act, the tax office determines the income of the entity undergoing inspection by establishing the conditions of the transactions on an arm's length basis. The tax office may also disregard income or costs from the transaction under examination if it considers it to have been carried out under conditions other than arm's length conditions.

Determination of additional tax liability
If, as a result of the conducted inspection, the tax office finds that the related entities have incorrectly established prices in transactions between them and, as a result, the tax office increases income or reduces costs, then the tax office determines an additional tax liability in the amount of 10% above the regular income tax rate (higher sanctions for larger companies).

Liability of the company's management board
ZThe person responsible for the management of the company is always liable for any failure to comply with the obligation to report and document transfer pricing. In such cases, penal and fiscal regulations apply, hence a failure to submit a statement on the preparation of said documentation constitutes a fiscal crime. Penalties for failure to comply with the obligation may reach tens or even hundreds of thousands of zlotys and more (taking into account the financial position of the offender). This obligation cannot be ceded to anybody else (an attorney cannot make such a statement).

Documentation
Local transfer pricing documentation should include the following:

1. 1. a description of the related entity
   
2. 2. a description of transactions, including analysis of functions, risks and assets,
   
3. 3. a transfer pricing analysis, including:
   
4. a) an analysis of data concerning unrelated entities or transactions entered into with unrelated entities, or
   
5. b) an analysis demonstrating that the terms of the transaction under examination are consistent with those that would be agreed upon by unrelated entities
   
6. 4. financial information.

Exemptions
Related domestic entities transacting with each other are exempt from the obligation to prepare local transfer pricing documentation if they both report taxable profit (Article 11n).
For service transactions characterized by so-called low added value (cost plus markup of at least 5%), no transfer pricing analysis is made (see section Documentation 3.a) i 3.b)).

Deadlines
Information on transactions with related entities should have been filed by the end of 2020. The same deadline applied to the management board's obligation to submit a declaration of maintained transfer pricing documentation.
Entities benefiting from exemptions submit only information without a declaration.
In the event of a delay, information has to be sent along with a notice of failure to comply with the obligation by the established deadline.