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Transactional net margin method – tax explanatory notes of the Ministry of Finance


by Mateusz Żyła

23 February 2022 ​


The Ministry of Finance Transfer Pricing and Valuation Department published at the beginning of December 2021 the final version of transfer pricing explanatory notes no. 4 concerning the transactional net margin method (TNMM).


Transactional net margin method – tax explanatory notes »

The explanatory notes document the rules of application of the TNMM and the comparability criteria for transactions and entities. They also describe the application of that method and the challenges connected with it.

Consultation with Rödl & Partner experts

The explanatory notes were published as part of a project which was consulted on with, among others, Rödl & Partner experts. Some of our proposals were taken into account so the final version of the document should be more favourable to taxpayers.

In their reservations to draft explanatory notes our experts pointed to, among others:

  • the need to indicate whether the testing of profitability calculated in consideration of all business operations applies to an entity with limited functions and risks (contract manufacturer) or an entity performing extended functions and taking extended risks (fully-fledged manufacturer);
  • the need to specify that an entity for which transfer pricing documentation is prepared may also be a tested party (regardless of the complexity of the functions performed);
  • that is would be justified to add also the following criteria (among others) to the list of factors which affect the comparability of entities:
    - type of consumer goods offered (luxury/popular goods),
    - revenues earned or costs incurred.

The remarks concerned the document’s coherence and the anticipated problems with following the explanatory notes in practice, which we as tax advisers experience in our day-to-day support provided to our clients.

If you make transactions with associated enterprises or if you have questions regarding transfer pricing and transfer pricing documentation, you are welcome to contact our experts.


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