Breaching the arm’s length principle in transactions between affiliated entities exposes the entities to a tax audit risk, additional estimation of income by tax authorities, and thus, the emergence of tax arrears, accruing interest on these arrears, long-term and burdensome disputes with tax authorities, sanctions imposed on the entity, as well as penal and fiscal sanctions for board members obliged to apply market prices. In the latter context, please bear in mind the annual duty of board members to file a TRP declaration together with a statement confirming that the prices are compliant with market levels. Therefore, it is extremely important to make sure that the prices applied in transactions between affiliated entities correspond to the arm’s length principle, and the transfer pricing policy of a given group is consistent and compliant with the actual involvement of entities in the value chain.
The services we offer in this regard involve:
- studying and assessing the exposure of a given company or an entire capital group to a tax risk related to transfer pricing, through verifying the employed settlement principles and price levels, in transactions between affiliated entities within a given capital group in terms of their compliance with the arm’s length principle;
- verifying the benchmark studies of a given entity in terms of them being adequate to a given transaction, their validity and correctness in relation to the requirements set out by Polish legislation in this regard;
- verifying the impact of the COVID-19 pandemic and other crisis factors in the years 2022-2023 on transaction terms, transfer pricing calculation methods, economic environment and the validity of comparative analyses;
- verifying functions, contractual agreements with affiliated entities and their actual implementation;
- estimating a potential tax risk;
- indicating actions recommended to limit identified risks;
- developing and implementing strategic solutions that enable limiting transfer pricing risks.
