Avoiding a ‘delayed time bomb’: how master file documentation impacts Polish WHT

Poland has adopted a three-tiered transfer pricing documentation structure in line with OECD guidelines. This includes:

• The master file, which contains standardised information relevant for all members of the multinational enterprise (MNE) group;
• The local file, which refers to material transactions of the local taxpayer; and
• The country-by-country report, containing information on the global allocation of income, taxes paid, and economic activity indicators within the MNE.

The master file must be finalised within 12 months following the end of the tax year.

While the master file has traditionally been prepared by the central company and then provided to the local entities, it is becoming increasingly critical to ensure that the master file is also aligned with Polish regulations.

Some companies may have treated the master file as supplementary to local transfer pricing documentation, as it was rarely scrutinised by tax authorities in Poland in the past. However, its role is becoming more critical in Poland, especially regarding withholding tax (WHT) compliance. Polish tax authorities are increasingly requesting both local and group transfer pricing documentation, including the master file, during WHT audits to obtain useful information such as:

• Ownership and organisational structure;
• Key intangible assets;
• Centralised financing models;
• Main intercompany transactions; and
• Consolidated financial and tax data.

What are the potential risks associated with master file errors? Why local consultation is key? What are the key takeaways?

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#MORE in the article at International Tax Review by Magdalena Marciniak and Gniewomir Parzyjagła > > Avoiding a ‘delayed time bomb’: how master file documentation impacts Polish WHT | International Tax Review