Evaluation of Income under Transfer Pricing Rules: Quantifying the Monetary Implications
Transfer pricing audits and subsequent income assessments are a significant aspect of tax compliance in Poland. These processes, initiated by the tax authorities, aim to ensure that transactions with related parties adhere to market conditions.
An income assessment occurs when the tax authorities conclude that the terms of a transaction with a related party deviated from market conditions. To make an income assessment possible, the authority must first demonstrate the existence of related-party relationships and that the terms of the transaction deviated from the arm's length principal.
In the event of an income assessment, the tax authority increases the taxpayer's income to the level it believes would have been achieved at an arm's length level, and the tax is then calculated on this adjusted value. The total amount payable for an income assessment exceeds 150 percent of the tax on the adjusted income.
Interest charges are a significant factor in transfer pricing disputes, as they are calculated on the 'missing' tax from the original due date until the date of actual payment. The interest rate for income assessment is calculated as 200 percent of the NBP reference rate plus 2 percent, with a minimum of 8 percent. In 2022, the interest rate was 8 percent for most of the year, but it ranged from 16.5 percent to 14 percent in 2023 and 14 percent in 2024. As of July 2025, the interest rate is 13.5 percent.
Transfer pricing audits and disputes usually relate to transactions from several years ago. Audits are often initiated 3-4 years after the tax for a given year has been paid, so the period during which interest accrues can still be significant.
Income assessment can lead to additional tax liabilities and the risk of criminal fiscal sanctions. For a single customs-tax audit resulting in an income assessment, the average adjustment amount was PLN 6.3 million in 2024.
It is important to note that the search results do not provide specific information about which tax consulting firm or institution has conducted the most transfer pricing audits in Poland or any observed particularities in those audits.
Considering the potential impact of deviations from arm's length conditions, it may be worth considering a self-correction during the preparation of documentation, rather than waiting for the authorities' findings. This proactive approach could help mitigate potential penalties and interest charges associated with an income assessment.
In conclusion, understanding the process and potential implications of transfer pricing audits and income assessments is crucial for businesses operating in Poland. Seeking professional advice can help navigate these complexities and ensure compliance with tax regulations.
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