As you are dealing with your transfer pricing documentation for 2024, please note that you may also be required to update your transfer pricing analysis from previous years.
In accordance with Article 11c of the CIT Act, related entities are required to establish transfer prices on such terms as would be agreed between unrelated entities. If this requirement is not satisfied, tax authorities may estimate or even recharacterize related party transactions to arrive at values that would be considered to be at arm’s length, and use such values for their tax assessments.
To ensure your tax matters are in compliance with those requirements and so you are protected against having additional tax imposed, each controlled transaction that is above TP reporting thresholds and does not qualify for exemptions must be supported by what is called a transfer pricing analysis, which is attached to the transfer pricing documentation.
A transfer pricing analysis typically takes the form of a proper comparability analysis or, alternatively, can involve what in Polish law is called a conformity description. Comparability analyses are usually contracted with data analytics providers with access to commercial databases who use such data to recreate publicly reported results of comparable entities which engage in similar transactions on the market.
A conformity description, on the other hand, involves economic expert reports or opinions describing how the transaction is settled and supporting a conclusion that the adopted settlement methods and terms are sufficiently similar to the general market practice in such transactions.
Article 11r of the CIT Act requires each comparability analysis and conformity description to be updated at least once every 3 years, except in the event of changes in the business environment whose effect is significant enough to warrant an update in the year of the change. In practice, this requirement is understood to mean that a completely new analysis should be prepared “from scratch” at least once every three years, but if it is based on financial data or other data that change over time, it is worth updating the analysed financials once a year to determine if the market has changed to such a degree as to make it necessary to issue a completely new analysis.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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