In certain situations, related entities are required to prepare a master file for transfer pricing documentation.
Master file – who is required to prepare it?
The master file is a component of transfer pricing documentation that provides information about the entire group of related entities to which the taxpayer belongs.
If you want to learn more about who is required to prepare transfer pricing documentation and in what circumstances, we encourage you to read our article Who is required to have transfer pricing documentation?
Taxpayers conducting transactions with related entities, whose financial statements are consolidated using the full or proportional method, and who are required to prepare local transfer pricing documentation, must also prepare a master file if they belong to a group of related entities that:
- prepares a consolidated financial statement,
- has consolidated revenues exceeding PLN 200,000,000 or its equivalent in the previous financial year.
Only one entity within the group is required to prepare the master file. The taxpayer may submit the master file received from another group entity (even a foreign entity), provided it contains all the elements required by income tax laws. If the master file is prepared in English, the tax authority may request its submission in Polish. Then, the taxpayer has 30 days to translate the master file. However, it’s important to remember that having the master file prepared by another entity does not exempt the taxpayer from responsibility for ensuring that the documentation complies with Polish regulations.
Master file – what should it contain?
The master file should include, among other things:
- a description of the group of related entities,
- a description of the group’s significant intangible assets,
- a description of the group’s significant financial transactions,
- financial and tax information for the group of related entities.
The specific elements that must be included in the master file are regulated by the Minister of Finance’s decree on transfer pricing documentation.
If you’re interested in understanding the step-by-step process of how transfer pricing works and the obligations it imposes on taxpayers, we encourage you to read our article ABC of Transfer Pricing Documentation
Dominika Oszajca