A taxpayer who fails to prepare transfer pricing documentation, despite being required to do so, faces various penalties and sanctions arising both from tax law provisions and the fiscal penal code.
Penalties and sanctions in transfer pricing
A taxpayer who has failed to fulfill the obligations arising from transfer pricing regulations may face the following types of sanctions:
- tax penalties,
- fiscal penal sanctions.
Tax sanctions
In cases where the tax authority determines that a taxpayer has failed to report taxable income in part or in full, has unjustifiably reported income, or has overstated a tax loss, there is a risk of the imposition of a so-called additional tax liability.
According to the provisions of the Tax Ordinance:
- The additional tax liability amounts to 10% of the sum of the unjustifiably reported or overstated tax loss and the unreported income, either in part or in full, as determined by the authority.
- A doubled rate (20%) is imposed when the basis for determining the additional tax liability exceeds PLN 15,000,000—on the excess above this amount, or when the taxpayer has failed to submit the required tax documentation to the tax authority.
- A tripled rate (30%) is imposed when the basis for determining the additional tax liability exceeds PLN 15,000,000—on the excess above this amount and when the taxpayer has failed to submit the required tax documentation to the tax authority.
Fiscal penal sanctions
Under the fiscal penal code, individuals responsible for preparing and submitting transfer pricing documentation may face sanctions in various cases. These taxpayers can be held accountable for:
- failure to prepare local transfer pricing documentation,
- failure to attach group documentation to local transfer pricing documentation,
- preparing local transfer pricing documentation that does not reflect the actual situation,
- failure to submit transfer pricing information (TPR) to the relevant tax authority,
- providing inaccurate data in the transfer pricing information (TPR) that does not align with the local documentation or actual situation.
For the above offenses, the taxpayer may be subject to a fine of up to 720 daily rates.
In cases where the taxpayer prepares local transfer pricing documentation or the transfer pricing information (TPR) but submits it after the deadline, they may be fined up to 240 daily rates.
Who is responsible for committing a prohibited act
Under the fiscal penal code, the party responsible for preparing transfer pricing documentation and the TPR information can be the taxpayer (an individual), and in the case of a company, the person managing its financial affairs (e.g., an accountant, CFO), as well as the head of the entity, as defined by the Accounting Act.
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
Marta Chorzępa-Starosta
Dominika Oszajca