It seems that Polish tax authorities still perceive the area of transfer pricing as a field for tax optimization. This may be indicated by the fact that in the first half of 2020 alone Polish tax authorities selected 102 entities for a tax control due to potential irregularities with respect to transfer pricing and tax optimization (in comparison, 175 entities were selected for TP controls in the whole of 2019).

It is worth remembering that as of 2019, tax authorities may consider the overall conditions of business activities conducted by related entities and recognize that, under certain conditions, the transaction would not have been concluded (non-recognition), or could have been replaced by another transaction (recharacterization). In such situations tax authorities can determine the income of the taxpayer without taking into account the non-recognized transaction or, if justified, the income from the appropriately recharacterized transaction.

It is also worth noting that board members of Polish companies will soon be obliged to sign a statement on the arm’s length level of transactions and prepare local transfer pricing documentation. The deadline to submit the statement was postponed due to the COVID-19 pandemic, but it may be worth taking this extra time to verify not only 2019, but also previous years’ settlements.