The subject matter of transfer prices is inseparable from the obligations imposed on taxpayers, i.e. documentation and information obligations. If the taxpayer fails to comply with these obligations, he will be punished. How severe are they, and how have they changed over the years? The following article will answer these questions.
The simplified documentation obligation is to examine for which transactions should be drawn up tax records of transfer prices together with a comparative analysis or a compatibility analysis. second The information obligation is to send transfer pricing information to the office within the prescribed time limit, i.e. the corresponding forms.
Penalties for failing to fulfil the duties of TP in Tax Ordinance
Applicable until end 2018 recipe (exactly Article 19(4) The Corporate Income Tax Act) imposed a fairly severe penalty on the taxpayer in the event of no transfer pricing tax documentation being submitted. According to the above provision, if the tax authority has determined the taxpayer's income at a higher rate or a loss of less than that declared by the taxpayer in relation to the transaction or the inclusion of other events in question under Article 9a Corporate Income Tax Act and the taxpayer did not submit the tax documentation to that authority – the difference between the income declared by the taxpayer and the tax rate determined by that authority was taxed at 50%.
Specialised transfer pricing team Russell Bedford Poland Sp. z o.o. provides professional support not only in examining the scope of the documentation obligation, but also in preparing tax transfer pricing documentation and filling out TPR forms. Feel free to contact us.
This sanction was repealed with the amendment of the transfer pricing provisions in force from 1 January 2019 However, this does not mean that the penalty for failing to comply with the transfer pricing obligations has been waived.
For the current sanctions, see Chapter 6a Tax Ordinance. According to Article 58a(1)(4) the abovementioned law, if the authority makes a decision pursuant to Chapter 4b of the branch 2 Income Tax Act on Individuals or Chapter 1a of the branch 2 Corporate Income Tax Act, at the same time it will establish an additional tax liability.
According to Article 58b section 1 This additional tax liability is 10% the sum of an undue or excessive tax loss and not wholly or partly taxable income in respect of the decision of the authority.
But that's not all. This additional tax liability may be doubled once it has been fulfilled one with the following conditions:
where the basis for establishing an additional tax liability exceeds 15,000,000 PLN – in excess of that amount,
where the party has not submitted the tax documentation to the tax authority, to that part of the basis for determining the additional tax liability resulting from the application of the provisions indicated under Article 58a section 1 point 4 Tax Ordinance and concerns a transaction for which no tax documentation has been submitted.
At the same time, if these conditions are met together, the ten% additional tax liability rate will be tripled.
However, the party may avoid liability under the above conditions concerning the non-submission of transfer pricing tax documents, namely in the event of completion of the missing documentation in full within the time limit specified by the tax authority, no longer than 14 days.
Penalties for failing to fulfil the duties of TP in the Tax Penal Code
Not only Tax Ordinance regulate penalties relating to incorrect compliance with the documentation obligation. Such penalties, also severe, can also be found in the Tax Penal Code. Here, first of all, it is worth paying attention to Article 56c(80e).
According to Article 56c section 1 The Tax Penal Code, which, contrary to the obligation, does not draw up the local transfer pricing documentation, or does not attach group transfer pricing documentation to the local transfer pricing documentation, shall be fined to 720 daily rates.
Equally important, the same penalty is also to be imposed on the entity that draws up the above tax records in breach of the real state. In turn Under section 3 the above provision is referred to as a penalty for drawing up tax documentation after the deadline – here the fine may be fined until 240 daily rates.
On the other hand, under Article 80e The Tax Penal Code, there are penalties for breaching the obligation to submit transfer pricing information, i.e. TPR-C (for legal persons) and TPR-P (for natural persons) forms.
According to section 1, who, contrary to the obligation, does not submit transfer pricing information to the competent tax authority, or who submits data in it incompatible with the local transfer price documentation or with the real state, is subject to a fine to 720 daily rates. According to section 2, it is also punished to submit the above document after the deadline - the fine may be fined until 240 daily rates.
How to avoid these penalties? Quite obvious answer is – to fulfil the documentation obligation. But how do we do that? And how do we find out who is involved in this obligation? In this respect, we help. Specialised transfer pricing team Russell Bedford Poland Sp. z o.o. provides professional support not only in examining the scope of the documentation obligation, but also in preparing tax transfer pricing documentation and filling out TPR forms.
Feel free to contact us.
Author: Michał Zdanowski. Project manager.
Graduate of the Faculty of Law and Administration of the University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Studies of the University of Warsaw, Graduate of the Postgraduate Accounting and Finance Studies of the Warsaw School of Economics. Since September 2013 is associated with the law firm Russell Bedford Poland. Specializes in transfer pricing. Together with an experienced team, he supports leading companies in fulfilling tax obligations in terms of transfer prices.