What’s new in transfer pricing – an amendment to the Polish Deal

The amendment to the Polish Deal, which has recently come into force, has brought favourable changes for taxpayers in the area of transfer pricing. The provisions introduced consist in changes in the area of transactions with tax havens, including, most notably, the repeal of controversial provisions concerning indirect tax haven transactions and the increase of documentation thresholds for direct tax haven transactions.

Why did the Ministry of Finance decide to introduce the changes? 

It has been a long time since anything caused such a stir in the advisory, trade and business community as the introduction of mandatory verification of indirect tax haven transactions. For more than a year and a half, we have been trying to convince the Ministry of Finance that the proposed provisions are incomprehensible and impose many unnecessary administrative obligations on taxpayers. In practice on the basis of these provisions, in extreme cases, businesses had to verify the status of up to several thousand largely unrelated counterparties. And while in the case of a clear and measurable fiscal objective of the regulations introduced, they could be deemed acceptable, in this case, both the fiscal objective and the benefits that the tax administration would achieve with their introduction were completely incomprehensible.

It turned out that it made sense to take part in public consultations and discussions with the Ministry of Finance. The regulations on indirect tax haven transactions have been repealed in their entirety!

Does this mean that taxpayers can forget about tax haven transactions? Not so much. It should be remembered that direct tax haven transactions are still subject to transfer pricing obligations. Starting from 2021, both revenue and expense transactions must be verified in this context.


What do the changes concern? 

The repeal of the rules on indirect tax haven transactions 

The amendment to the legislation involves complete repeal of the obligations for indirect tax haven transactions. This means that taxpayers will no longer have to verify their counterparties as to whether they are the beneficial owners of the payments arising from their transactions with them, which has been a considerable challenge.

The repeal has made both advisers and taxpayers very pleased, especially those who have not yet started working on identifying indirect tax haven transactions. 

The amended Act also clarified the provisions on the application of the arm’s length principle, restoring its essence, i.e. comparing related-party / direct tax haven transactions to the terms that unrelated parties (non-tax haven domiciled entities) would have agreed between themselves.

The change should be assessed favourably, as the previous version of the provisions caused many inconsistencies and ambiguities, including the possibility for the tax authorities to verify the market level of prices in the case of unrelated parties that were not aware of the obligations in this respect.

Direct tax haven transactions – raising the documentation thresholds 

The documentation thresholds for transactions carried out directly with entities from tax havens have been raised and amount to:

  • PLN 2.5m – in the case of financial transactions,
  • PLN 500k – in the case of non-financial transactions.

The same threshold applies to tax haven transactions carried out with both related and unrelated parties.

The Ministry’s proposal in this respect should be appreciated, especially in the context of the documentation threshold for financial transactions. The value of the transaction compared to the threshold for these transactions is determined in a specific way (loan principal, guarantee sum, etc.) and does not reflect the real income generated in the transaction (interest, guarantee fee). The Ministry of Finance stressed that if the thresholds were equalised and the value of financial transactions were set at PLN 500k, the potential tax reduction would be too small to be of interest to the tax authorities.

A reference to a foreign permanent establishment located in a tax haven has also been added to the provisions on direct tax haven transactions. It has been clarified that in such a case also the documentation obligations should be verified, and a possible transfer pricing documentation should be prepared.

Example 1

In 2021 Entity X purchased raw materials for the manufacture of cosmetics with a total value of PLN 1 million from an unrelated party in Hong Kong.

  1. Is Entity X required to comply with transfer pricing obligations for this transaction? – YES
  1. What are the obligations of Entity X?

Entity X should:

  1. prepare transfer pricing documentation for such transaction containing additional elements, i.e. the economic justification of the transaction, in particular a description of the expected economic benefits, including tax benefits,
  2. report such transaction in the TP-R form (omitting the transfer pricing analysis fields, in 2021 this should be done by selecting the “not applicable” option), and
  3. declare in the statement on preparing transfer pricing documentation submitted to the tax authorities, that the prices in the transaction have been set at arm’s length level.

Example 2 

In 2021, Entity Y received a loan of PLN 4 million from a related party located in the Republic of Panama. 

  1. Is Entity Y required to comply with transfer pricing obligations for this transaction? – YES
  1. What are the obligations of Entity Y?

Similar to the obligations presented in Example 1, but with the difference that in this case Entity Y is required to prepare a transfer pricing analysis verifying the arm’s length level of the transaction.

As of 1 January 2021, in accordance with the changes provided for in the Polish Deal, the transfer pricing documentation for a non-controlled transaction entered into with entities from tax havens may not include a benchmark or compliance analysis. 

Other changes 

The amended provisions also clarify that in the case of transactions with tax havens, there is an exemption from TP obligations if the price or the manner of determining the price of the subject of the transaction results from the provisions of laws or regulations issued on their basis. The previous wording of the regulations did not provide such possibility due to the lack of reference to transactions other than controlled transactions (i.e. tax haven transactions with unrelated parties). It is not reasonable to differentiate the exemptions and apply them only to related parties. The Ministry has recognised this disparity and introduced a change, which should therefore be assessed positively.

The changes to the Polish Deal also involve the ORD-U form. One should remember that related parties submitting the TPR form:

  • obliged to prepare local transfer pricing documentation;
  • carrying out controlled transactions exempt from the documentation obligation but subject to TPR reporting (exempt domestic transactions, reinvoicing and safe harbour),

are exempt from submitting the reporting to the tax office on contracts with non-residents.

Under the regulations, such exemption does not apply taxpayer concluded tax haven transactions.

The change in the provisions introduced by the amendment is systemic. The reference to indirect transactions has been removed (due to their complete elimination). At the same time, an exception has been added, according to which, in the case of an entity whose related party has its registered office in a tax haven and who performs controlled mutual transactions with it, the entity cannot apply the exemption and will be required to submit both a TPR and an ORD-U form.

When do the changes come into effect?


Effective date

Repeal of the indirect tax haven rules

On the date of the announcement, with effect from 1 January 2021.

Changes to the thresholds for direct haven transactions

On the date of announcement, transitional provisions provide for the application of the rules until fiscal year 2021 and 2022

Consideration of transactions with a foreign permanent establishment located in a tax haven

The amended provision is expected to take effect on 1 January 2023.


The amended provision is expected to take effect on 1 January 2023.


A reminder of the changes that have already been enacted in the Polish Deal 

As a reminder, the previous version of the Polish Deal introduced a broad package of transfer pricing changes as of 1 January 2022. Below is a summary of selected changes. The latest amendment to the Act has not brought any changes to these provisions.



Change description

Effective date

Exemption from the documentation obligation

Extension of the possibility of exemption from the obligation to prepare transfer pricing documentation in the case of transactions:

Ø  between foreign permanent establishments located in Poland whose parent entities are related parties,

Ø  between a foreign permanent establishment located in Poland of a related party that is a non-resident and a related party with tax residency in Poland,

Ø  transactions covered by a tax treaty and an investment agreement,

Ø  transactions covered by the safe harbour mechanism concerning low-value-added services,

Ø  transactions covered by the safe harbour mechanism concerning loans, borrowings and bonds,

Ø  pure reinvoicing transactions where related parties pass through costs on to each other on a 1:1 basis.

With that said, taxpayers could take advantage of the exemption provided the following conditions are met:

Ø  no added value arises, and the settlement takes place without taking into account a margin or profit mark-up,

Ø  the settlement is not connected to another controlled transaction,

Ø  the settlement takes place immediately after the payment to the unrelated party,

Ø  the related party is not an entity resident, established or managed in a territory or country practising harmful tax competition.

From 1 January 2022

No need to prepare transfer pricing analyses


Extension of the possibility to waive the preparation of a comparative analysis for the following transactions:

Ø  controlled transactions, concluded by taxpayers that are micro or small entrepreneurs within the meaning of the Enterprise Law,

Ø  other than controlled transactions, concluded by taxpayers and companies that are not legal entities with an entity from a tax haven.

1.       micro-entrepreneurs – from 1 January 2021

2.       Other provisions – from 1 January 2022


Taxpayers fulfilling in 2023 transfer pricing reporting obligations for 2022 will need to:

Ø  prepare local transfer pricing documentation within 10 months after the end of the fiscal year


Ø  send the TPR transfer pricing reporting (in a combined form with the statement) to the relevant tax office within 11 months after the end of the fiscal year.

From 1 January 2022 – the first deadline will be in 2023 for the 2022 documentation.

Statement on the preparation of transfer pricing documentation

The statement on the preparation of transfer pricing documentation and the arm’s length nature of the prices has been included within the TPR form. Previously, it was submitted as a separate document. In addition, for the 2022 documentation, the taxpayer will have to declare that it has been prepared in accordance with the actual state.

The TPR will be able to be submitted by:

Ø  an individual – in the case of a related party that is an individual,

Ø  a person authorised by the foreign trader to represent it in a branch,

Ø  the head of the entity – or, in the case of a multi-member management board, by one or more persons authorised to represent it,

Ø  a proxy who is a barrister, legal advisor, tax advisor or auditor.

Transfer pricing reporting may not be signed by proxies other than those named. In this aspect, it is worth noting that commercial proxies [prokurenci], despite being entitled to represent the taxpayer, are not allowed to sign the statement due to the fact that a commercial power of attorney [prokura] is a special type of power of attorney.

From 1 January 2022


If Local File fails to be prepared, or the group transfer pricing documentation fails to be attached, the taxpayer faces a fine of up to 720 daily rates. The same penalty applies to a taxpayer who prepares the documentation contrary to the actual state of affairs.

Preparing the documentation after the deadline will incur a penalty of up to 240 daily rates.

Similar sanctions are to be imposed on a taxpayer who fails to prepare / submit after the deadline the transfer pricing reporting (TPR).

From 1 January 2022


We view the above changes favourably, as they have made it possible to reduce taxpayers’ obligations especially with regard to transactions that are less relevant to them from a business perspective (e.g. re-invoicing). At the same time, however, they provide for the modification of the Fiscal Penal Code and the extension of liability in relation to transfer pricing obligations. Liability has been extended, among other things, to the failure to attach group documentation to local documentation and the preparation of local transfer pricing documentation not in accordance with the actual state of affairs, which is certainly bad news.

Future regulations

The Ministry of Finance is currently working on updating the Transfer Pricing Documentation Regulations and the TPR form for 2022. The changes will aim to bring the Regulations in line with the amended regulations (primarily removing the reference to indirect arm’s-length transactions), but also to take into account the previous changes provided for in the TPR. As announced, the schema and the Regulation will be subject to consultation.

Hopefully, the changes envisaged in the Polish Deal are the last such major changes in the context of transfer pricing regulations in the near future. Taxpayers could use a moment of respite, time to adapt to the current regulations and be able to apply them unchanged for the coming years. Complying with the obligations (submitting the TP form, updating / preparing transfer pricing documentation) should itself be a simple and repeatable process. However, it has so far been disrupted by changes occurring practically every year. The attention of taxpayers in the context of transfer pricing should be focused on the development of an appropriate transfer pricing policy, the arm’s length level of profit allocation between related parties or the verification and proof of the arm’s length level of prices, rather than on following the constant technical and substantive changes prepared by the legislator.