Transfer pricing information – transactions between related parties in a nutshell

This is one of the key tools tax authorities use to verify transactions between related parties. With the TPR form deadline approaching, here’s a reminder of the essentials of transfer pricing reporting:

• What transfer pricing information is,
• What data it includes,
• Who is required to submit it,
• Who is liable for failure to submit,
• What the consequences of non-compliance are.

What is TPR form?

Transfer pricing information (TPR form) is a detailed report submitted to tax authorities by related parties that engage in:

• Controlled transactions requiring transfer pricing documentation,
• Controlled transactions exempt from documentation requirements.

Additionally, transactions with unrelated parties located in tax havens must also be reported.

Filing the TPR form is just one of several transfer pricing obligations a taxpayer faces. The Finance Ministry explicitly states that “the purpose of TPR reporting is to help tax authorities analyze the risk of income understatement in transfer pricing, as well as to conduct economic or statistical analyses”.

Authorities use the TPR form to identify targets for transfer pricing audits. With access to extensive data on related-party transactions, the Ministry of Finance can efficiently compare information and quickly detect irregularities. This enables the tax administration to spot unusual cases and assess potential risks.

What data do you report in your transfer pricing information?

In the transfer pricing information, you must provide detailed data on concluded transactions, including the type and subject of the transaction and its annual value. Most importantly, you must report the level of profitability associated with the transaction, referencing the results of the benchmarking analysis. If you are reporting financial transactions, you should also include the value of the debt, as well as the amounts of principal and interest accrued and paid.

In the TPR form you also report four indicators that show the overall economic situation of the taxpayer:

– operating margin,

– gross profit margin,

– return on assets,

– return on equity.

The ratios are calculated based on the approved financial statements. Taxpayers often treat this part of the TPR form automatically, which can lead to mistakes. Remember, these ratios allow tax authorities to easily compare the taxpayer’s financial condition against that of other entities. It is not uncommon for transactions reported in the TPR form to be classified as marketable, while the entity’s overall profitability ratios are negative.

As of 2022, there is no longer an obligation to submit a separate statement regarding:

• The preparation of local transfer pricing documentation,
• Its compliance with actual conditions, and
• Whether the transaction aligns with the arm’s length principle.

The statement is an integral part of the transfer pricing information, so submission of the TPR form is equivalent to submission of the TP statement.

When and to whom do I submit TPR form?

You must submit the TPR form to the appropriate head of the tax office by the end of the eleventh month after the end of the tax year. For example, a taxpayer whose tax year aligns with the calendar year has until the end of November 2024 to send transfer pricing information for 2023.

Transfer pricing information must be submitted within the deadline and exclusively through electronic means in accordance with the Tax Ordinance. In practice, this means submitting the TPR form for 2023 on the dedicated website of the Ministry of Finance. You fill out the required data directly on the site, and submitting the form is considered equivalent to signing it by the person responsible for submission.

Who signs the TPR form and how?

The TPR form must be signed by the head of the entity, which is typically a member of the management board or another governing body. If the entity is led by a multi-member board, the form is signed by a designated individual from the management board.

The information cannot be signed by an attorney unless they are a qualified attorney, legal adviser, tax adviser, or auditor. It is important to note that designating a member of a multi-member board to sign the form does not exempt other board members from liability for failing to file transfer pricing information.

To file the TPR-C form, you must register a special power of attorney for electronic filing with the tax office using form UPL-1. Additionally, a board member authorized to represent the company must also have a registered UPL-1 power of attorney.

What are the consequences of not submitting TPR form?

In Poland, legal entities are required to file transfer pricing information using form TPR-C, while sole proprietors must use form TPR-P.

1. sanctions under the fiscal penal code

Persons required to submit transfer pricing information may face fiscal penalties under the following circumstances:

• Failing to submit the TPR form for 2023,
• Providing data that is inconsistent with local transfer pricing documentation or actual conditions,
• Failing to submit the form on time.

Fiscal criminal liability extends beyond members of an entity’s governing body; individuals responsible for managing the financial affairs of the enterprise are also at risk.

According to the Fiscal Penal Code, a person is liable for fiscal crimes or offenses in the same manner as those who manage the economic affairs—specifically financial affairs—of a natural person, legal entity, or organizational unit without legal personality based on legal provisions, authority decisions, contracts, or actual performance.

In practical terms, this means that individuals such as the chief accountant or chief financial officer may be held accountable for fulfilling transfer pricing obligations, including the submission of the TPR-C form.

2. risk of questioning the marketability of inter-entity settlements

This may occur as a result of an audit, which will end up increasing the tax base. Hence, it is very important to complete transfer pricing information on the basis of reliably prepared: documentation and transfer pricing analysis.

What else should you pay attention to?

First and foremost, transactions that qualify for a documentation exemption must still be reported in a simplified manner on the TPR form. This includes:

• Transactions covered by the safe harbor simplification,
• Transactions conducted between entities that meet the criteria for exemption for domestic transactions.

Make sure they are not left out.

Summary

Take care of your peaceful sleep with us. Contact our tax consultants who know everything about TP-R forms. We will help you make sure you are fully compliant and observe the deadline.

The TPR form is a crucial tool for tax authorities to monitor related-party transactions. To avoid potential issues and financial repercussions, ensure that you submit the form on time, provide data that aligns with your transfer pricing documentation, and conduct a thorough qualitative comparative analysis.

For peace of mind, contact our tax consultants, who are experts in TPR forms. We are here to help you ensure full compliance and navigate the complexities of transfer pricing.