As a general rule, the documentary obligation arises if the following two criteria are fulfilled:

• The taxpayers who enter into the transaction fit the definition of related entities.
• The transaction exceeds the defined documentary thresholds.

The information on the entities which may be defined as related entities and the transactions which fit the definition of controlled transactions can be found in the glossaries contained in income tax legislation, in the chapters concerning transfer pricing.

Irrespective of the above, proper verification of the documentary obligation frequently poses a big challenge. It stems from the fact that when establishing if the documentary obligation arises, it is necessary to look for information in more sources than the provisions of tax statutes or related secondary legislation. It is also necessary to take into consideration the explanations of the Polish Ministry of Finance posted on its website, the recommendations of the Transfer Pricing Forum and also the answers of the Minister of Finance provided in the form of general tax rulings as well as interpellations or parliamentary questions.

Polish legislation sets out the following scope of reporting obligations:

1. Preparing local documentation (local file) – The obligation to prepare local file arises when the value of a controlled transaction exceeds the documentary thresholds.
2. Filing a transfer pricing report (TPR) – The obligation to file a TPR arises when the value of a controlled transaction exceeds the documentary thresholds.
3. Preparing group documentation (master file) – The obligation to prepare master file arises if the consolidated group revenue exceeds PLN 200 million.
4. Country-by-Country Reporting (CbC) – The obligation to prepare a CbC-R arises if the consolidated group revenue exceeds EUR 750 million or PLN 3.25 billion*.

* The threshold in PLN applies to groups preparing consolidated financial statements in PLN; the threshold in EUR applies to groups preparing consolidated financial statements in a currency other than PLN.

The documentary thresholds apply to the net value of a transaction and are conditional on the transaction type (subject):

1. Commodity transactions – The documentary threshold is set at PLN 10 million.
2. Financial transactions – The documentary threshold is PLN 10 million.
3. Service transactions – The documentary threshold is set at PLN 2 million.
4. Other transactions – The documentary threshold is PLN 2 million.
5. Tax haven transactions*
   1. The documentary threshold is PLN 2.5 million for financial transactions;
   2. The documentary threshold is PLN 500 thousand for transactions other than financial transactions.

*Note! These thresholds refer to transactions conducted with both related and unrelated entities. 

The documentary thresholds should apply separately for every controlled transaction of a homogeneous nature and separately for the expense and revenue side.

To establish if a transaction is of a homogenous nature, the most important factors to take into account are the following:

• the uniformity of the subject of the transaction in the economic context (a similar nature of services, goods, or other considerations)
• the comparability criteria (including similar functions performed by the parties to the transaction, similar assets engaged in the transaction, and risks incurred)
• the price verification method.

The homogeneity of the transaction is not affected by the number of accounting documents, payments made or received, or related entities which enter into the transaction.

The most common exemptions are provided for:

• transactions between domestic related entities (subject to additional conditions);
• transactions which do not permanently constitute revenue or a tax-deductible cost (with exceptions);
• re-invoicing transactions (subject to additional conditions);
• safe harbour transactions (subject to additional conditions).

It should be noted that some transactions, despite being exempted from the obligation to prepare local file, have to be included in the transfer pricing report (TPR-C/TPR-P).

Safe harbour transactions refer to low value-added services and to loan, credit, and bond issuing transactions. After the conditions set out in income tax legislation are fulfilled, the tax authorities refrain from establishing the taxpayer's income (loss) for these transactions. In that case, the taxpayers are also not obliged to prepare transfer pricing documentation for the said transactions.

Transfer pricing analysis (benchmark analysis or compliance analysis) is an obligatory element of every local file.

Exceptions are controlled transactions conducted by micro or small enterprises as well as transactions other than controlled transactions with entities from the so-called tax havens.

A benchmark analysis or compliance analysis should be updated at least once every 3 years. More frequent updates may be required due to changes in economic environment which significantly affect the previously prepared analysis. (Changes can be caused for instance by armed conflicts, e.g. the war in Ukraine).

Tax havens are countries and territories which apply harmful tax competition in income tax.

Tax authorities are of the view that the tax regimes of such countries and dependent territories which are beneficial for non-residents create favourable conditions for profit shifting to these countries (territories).

The list of countries and territories applying harmful tax competition is set out in regulations issued by the Minister of Finance.

The deadlines for the fulfilment of reporting obligations by taxpayers vary depending on the scope of documents required:

1. Local file with transfer pricing analysis – to be prepared by 31 October 2026 (entities whose tax year corresponds to the calendar year)
2. TPR-C/TPR-P report (including the statement on the preparation of local file and application of the arm’s length principle with related parties) – to be submitted by 30 November 2026 (entities whose tax year corresponds to the calendar year)
3. Master file – to be prepared (or delivered by another entity from the group) by 31 December 2026 (entities whose tax year corresponds to the calendar year)
4. CBC-P notification – to be submitted by 31 March 2026 (groups whose consolidated financial statements are prepared for the year corresponding to the calendar year)
5. CBC-R report – to be submitted by 31 December 2026 (groups whose consolidated financial statements are prepared for the year corresponding to the calendar year)

Even though there are no explicit regulations specifying the language of local file, taking into consideration the provisions of the Polish Constitution (and the Polish Language Act), it is easy to come to the right conclusion that local file should be prepared in Polish.

A taxpayer belonging to a group of related entities whose consolidated revenues exceeded PLN 200 million and whose financial statements are consolidated or proportionately consolidated, is obliged to attach master file to local file. However, the master file can be prepared by another entity from the group. It is important to include in the master file all the elements specified in the provisions of Polish income tax legislation. The obligation to verify the master file and, if necessary, supplement it with missing information lies with the Polish taxpayer in this case.

The tax authorities may request a Polish translation of master file prepared in English (the time limit for its delivery is 30 days from the service of the official request).

No, it doesn’t. The transfer pricing legislation currently in force in Poland does not impose on the taxpayer the obligation to sign transfer pricing documentation.

Drafting adequate transfer pricing documentation which fulfils all the requirements of Polish legislation is a difficult and time-consuming activity. Therefore, it is advisable to engage specialists with many years of experience and regularly updated knowledge in this field.

By using the services of professional advisors, we reduce the risk of errors and misstatements, and in case of a potential tax inspection, we gain certainty that the documentation provided will not be treated by the tax authorities as inadequate and we will avoid penalties.

Inadequate transfer pricing documentation is such that shows the relations between related entities in a way that does not match the reality or does not include all the elements required by the regulations. It is worth noting that submitting inadequate tax documentation does not protect the taxpayer from fiscal penal liability and penalties in the form of an additional tax liability.

The tax authority which carries out an income tax inspection is authorized to summon the taxpayer to submit transfer pricing documentation. The time limit for submitting the documentation is 14 days (from the service of the official request). The documentation should be submitted personally or sent by post to the address of the appropriate tax office (date as postmark).

The submission of the documentation alone may be insufficient. The tax authority may demand additional explanations and supporting documents, for example a certified translation of the contracts underlying the transaction or a translation of the master file.

The taxpayer is obliged to deliver the documentation on the tax authorities’ request and has to do it within 14 days from the service of the request by the authorities. This rule refers to the documentation for the years 2022, 2023, 2024, and subsequent. With reference to the transfer pricing documentation for the preceding years, this time limit is 7 days.

No, it can’t. Extension of the time limit is not provided for in Polish legislation.

The taxpayer who fails to submit transfer pricing documentation on the tax authorities’ request within the statutory time limit may face penalties in the form of an additional tax liability and fiscal penal liability.

The additional tax liability, in general, is 10% of the wrongly reported amount or overstated tax loss and wholly or partly unreported taxable income. Furthermore, there is the possibility of:

• doubling the rate – in case the basis for determining the additional tax liability exceeds PLN 15 million (regarding the excess over this amount) or the taxpayer failed to submit tax documentation;
• tripling the rate – in case the basis for determining the additional tax liability exceeds PLN 15 million (regarding the excess over this amount) and simultaneously the taxpayer failed to submit tax documentation.

In practice, this system of penalties means that the taxpayer – regardless of the financial result achieved – will be obliged to pay the additional tax liability. It should be also noted that these penalties can be applied not only to transactions subject to the documentary obligation, but to all transactions in respect to which the obligation to adopt the arm's length principle applies.

Properly prepared transfer pricing documentation should contain all the elements required by income tax legislation. Otherwise, it can be treated by the tax administration authorities as incomplete and defective. In such a case, the taxpayer may face penalties in the form of an additional tax liability and fiscal penal liability. Thus, the consequences may be the same as in the case of complete absence of documentation.

Tax authorities can impose an additional tax liability if the agreed-upon terms of controlled transactions between related entities are different from those which would be applied between unrelated entities, i.e. when the transfer price is not an arm’s length price.

An arm’s length price is a price that, under comparable economic conditions for a similar transaction, would be set between unrelated entities.