Statement on transfer pricing documentation – what you should know as statutory deadlines near

The deadlines for meeting transfer pricing obligations for 2023 are fast approaching, especially for taxpayers whose fiscal year aligns with the calendar year:

• by October 31, local transfer pricing documentation must be prepared.
• by November 30, transfer pricing information must be submitted using form TPR-C.

In this post, we address common questions surrounding the submission of the transfer pricing documentation statement. We invite you to read on.

Who files the statement and what should it include?

Under current regulations, the statement must be submitted by related entities obliged to prepare local transfer pricing documentation. In this statement, the related party:

• declares that the local transfer pricing documentation has been prepared,
• confirms that the transfer prices in controlled transactions covered by the documentation are set on terms and conditions that independent entities would agree upon.

Learn more about local documentation obligation and how to correctly prepare local file in our post: Local Transfer Pricing Documentation. What the Local File should contain | MDDP

However, if during the tax year:

• you engage in transactions with an entity domiciled, registered, or managed in a so-called tax haven, and
• you are required to prepare transfer pricing documentation for these transactions,

How to file a transfer pricing statement?

Until 2022, the statement was a separate document signed by the head of the entity and submitted with tax authorities using electronic means of communication. Transfer pricing information, however, was submitted as a separate file.

The statement is now an integral part of the transfer pricing information (the TPR form). Additionally, the content has been expanded to include confirmation of the marketability of prices, which is crucial in terms of liability and potential sanction.

To confirm that the documentation complies with the arm’s length principle, check the appropriate box in Section F of the TPR form:

• OSW1: for controlled transactions, including those with entities in tax havens,
• OSW2: for transactions other than controlled transactions.

If the enterprise has engaged in both controlled transactions and other transactions (uncontrolled transactions with tax havens), you must check both boxes.

Statement on preparation of transfer pricing documentation – sanctions for failure to comply with the obligation

The statement confirming the preparation of transfer pricing documentation is an integral part of the transfer pricing information. Therefore, the penalties for failing to submit it are governed by the regulations related to filing TPR information.

 Article 80e of the Fiscal Penal Code specifies that:

• failure to submit TPR information,
• submission after the deadline, or
• providing transfer pricing information that is inaccurate or inconsistent with the actual documentation

may lead to criminal-fiscal liability for a crime or fiscal offense. Fines in such cases can reach up to 720 daily rates, or as much as PLN 41 million (!).

So what is worth keeping in mind?

The statement is part of the transfer pricing information, so the TPR form must be signed by the head of the entity or a designated member of a multi-member body (typically a board member).

While a board member in Poland generally has the authority to represent the company, in this case, they must also have a power of attorney (UPL-1) to sign the declaration submitted electronically.

Summary

With the deadlines for submitting the statement fast approaching, it’s essential to carefully prepare the documentation and ensure full compliance with current regulations.

It is important to note that, according to Article 11c of the CIT Act, related parties are required to set transfer prices on terms that would be agreed upon by unrelated parties. This means that all transactions between related parties should adhere to the arm’s length principle.

To mitigate the risks associated with filing a TPR form that includes a statement on transfer pricing documentation, it is essential to prepare qualitative benchmarking analyses. These analyses will serve as a key argument in demonstrating, also in case of an audit, that the transactions comply with the arm’s length principle.

Now is the time to take action to minimize risks and fulfill your transfer pricing obligations. If you need support or have questions, we encourage you to reach out to us. Our experts are here to help you avoid potential sanctions and assist you in the proper preparation of TPR information and local documentation.