Transfer prices are becoming increasingly popular, among others due to new regulations that will enter into force on the day 1 January 2017 However, this theme is also becoming popular due to the increasing frequency of tax checks, which are carried out precisely in terms of the regularity of transactions with related parties.
What could threaten the taxpayer if tax authorities or tax authorities do not provide tax transfer pricing documentation? Contrary to appearances, this may result in quite serious consequences, also against a criminal-tax background.
First of all, if tax authorities or tax authorities do not submit tax transfer pricing records, the taxpayer's income may be estimated. It also involves second the consequence, i.e. the tax penalty rate of 50%.
Article 19(4) Act of 15 February 1992 on corporate income tax (i.e.
Journal of Laws of 2014, item 851, as amended, (hereinafter referred to as "updop") it follows that if tax authorities or tax authorities determine, on the basis of Article 11 updop, taxpayer income of higher/loss than the taxpayer’s declared in connection with a transaction with a related entity, and the taxpayer will not provide those authorities with the required provisions of tax documentation, in which case the difference between the income declared by the taxpayer and the rate determined by those authorities will be taxed 50%.
A similar provision is included in the Act of 26 July 1991 on income tax on individuals (i.e. Journal of Laws of 2012, item 361 as amended, hereinafter referred to as updof), i.e. Article 30d(1).
However, an estimate may also be made on the basis of the Act of 11 March 2004 on tax on goods and services (i.e. Journal of Laws of 2011, item 1054 as amended, hereinafter referred to as: VAT Act). According to Article 32(1) VAT Act if there is a link between the purchaser and the supplier of goods or services referred to in Article 32(2) VAT Act, and where remuneration is:
- • lower than the market value and the purchaser of goods or services does not have the full right to reduce the amount of tax due by the amount of input tax,
- • lower than the market value and the supplier does not have the full right to reduce the amount of tax due by the amount of input tax,
- • and the supply of goods or services is exempt,
- • higher than the market value and the supplier does not have the full right to reduce the amount of tax due by the amount of input tax
- - the tax authority shall determine the taxable amount in accordance with the market value if it appears that this relationship had an impact on the determination of the remuneration for the supply of goods or services.
It is also worth adding that according to Article 32(2) The VAT Act, the relationship between the buyer and the supplier of the goods, exists ‘when there are family or capital, property or employment relationships between counterparties or persons with counterparties. This relationship also exists where any of these persons combines the management, supervisory or control functions of counterparties.’
As I mentioned earlier, criminal-tax sanctions may also be threatened for not submitting transfer pricing tax records. According to Article 80(1) Act of 10 September 1999 the tax penalty code Journal of Laws of 2013, item 186 as amended, hereinafter referred to as: kks) ‘Who, contrary to the obligation to submit the required tax information within the time limit to the competent authority, is liable to a fine to 120 daily rates’.
All of these sanctions may have negative consequences for taxpayers, especially financial ones. It is therefore very important that entrepreneurs prepare themselves adequately for the possible control of tax authorities. There are a few solutions. The entrepreneur can draw up the tax documentation for transfer prices himself, preferably if he employs people specialising in this subject. He may also order such documentation to be drawn up by a law firm, or a tax consultancy firm.