Do price adjustments trigger tax risks?
Theoretically, a price change mechanism is simple: in plus, in minus, retroactive or on an ongoing basis – these concepts are well-known to a person dealing with accounting.
Having said that…
Our many years of experience show that adjustments, including transfer pricing adjustments, are one of the most complex challenges taxpayers face.
The matter is vague for both taxpayers and tax authorities, which is also evidenced by the inconsistent case-law.
Invoice adjustments raise the following questions:
Should the settlement be included on a reverse or ongoing basis for CIT and VAT purposes?
What conditions must be met for the adjustment to be included in the tax settlement?
Is it always necessary to issue an invoice when the price changes?
Does the VAT on the adjustment have to be shown on an ongoing basis or in the adjusted period?
Will the customs value of imported goods change?
Is the invoice adjustment a transfer pricing adjustment to be reported?
That is why a verification, and a comprehensive review, are so important to help determine whether the adjustments are a topic you need to deal with and if so, to what extent. Your next step should be to determine how to secure adjustments in terms of Transfer Pricing / CIT / customs / VAT.
How can we help?
Risk analysis and identification
Along with the review:
- identifying the essence of price adjustments in the company,
- identifying and analyzing possible risks related to price adjustments,
- a review report highlighting areas where adjustments should be analyzed or situations where adjustments should be applied,
- an indication of how to eliminate/minimize the risks, including a recommendation to possibly apply for an individual interpretation.
Drafting contracts and procedures
Depending on the needs:
- drafting contracts that summarize the proposed solutions,
- preparing a reporting manual and/or
- internal procedures in the form of a policy for price adjustment and/or
- a practical checklist – a sequence of actions matching specific facts of a case or
- a template for calculating adjustments.
Implementation assistance
Support in the proper implementation and structuring of processes and documents in the execution phase.
Support in the form of regular reviews whether the applied solutions have been properly implemented.
Support in the form of regular reviews whether the applied solutions have been properly implemented.
Why us?
- We will comprehensively verify your company processes and show how to arrange them and how to effectively secure your tax settlements following price adjustments.
- We will advise how to label the adjustment, what is the tax authorities’ approach, what are the statutory requirements and what may be the practical impact on CIT, VAT, customs and transfer pricing.
- We will show you how to shift the approach to make it right.
- We will signal the timing for taking the first steps to prepare the price change process (e.g. recommended flow of information between entities) and brief you on how to approach already started processes in this respect.
The benefits of our services related to the adjustments:
greater control over price adjustment processe;
reduced tax risk and minimized negative impact of potential errors;
aligning the approach with applicable regulations and positions of tax authorities and administrative courts;
faster adjustments;
informed decisions at key stages of business operations.
Our comprehensive price adjustment experience includes:
Preparing opinions on whether an adjustment is a TP adjustment and meets the conditions under Article 11e of the CIT Act.
Assessing adjustments from the perspective of the effects on transfer prices and VAT (mainly in terms of selecting the appropriate accounting document and the taxation method).
Preparing a price adjustment policy.
A detailed analysis of adjustment settlements made between the company and related entities in connection with transactions from the perspective of Article 11e and Article 15 of the CIT Act.
Preparing and implementing models for handling adjustments in companies.
Representing the taxpayer during inspections made by tax authorities in the area of adjustments, including TP adjustments.
Drafting and filing applications for individual interpretations regarding the effects of adjustments.
Consultation with foreign advisors and reviewing how an adjustment may be treated by other jurisdictions.
Analyzes of the impact of adjustments on the customs value and statistical value of goods traded across the EU border.
Contact persons:
Customs and excise
Agnieszka Kisielewska
Partner | Tax adviser | Head of the customs and excise team E: agnieszka.kisielewska@mddp.pl T: (+48) 600 097 363
VAT | Tax controversy and litigation
Jakub Warnieło
Manager | Tax adviser E: jakub.warnielo@mddp.pl T: (+48) 600 816 431
International Taxes | Real Estate
Katarzyna Kozakowska
Senior Manager | Tax adviser E: katarzyna.kozakowska@mddp.pl T: (+48) 608 581 583
VAT
Marek Przybylski
Manager | Tax adviser | Attorney at Law E: marek.przybylski@mddp.pl T: (+48) 509 567 231
Transfer Pricing
Marta Klepacz
Senior Manager E: marta.klepacz@mddp.pl T: (+48) 533 889 036