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Why review your 2020 transfer pricing documentation?


by Michał Sojka

17 March 2021 


The COVID-19 pandemic has affected the financial position of many enterprises. This has often necessitated an adjustment to the accounts of intra-group transactions and a change in the transfer pricing method.

Revise the terms of transactions between associated enterprises

The terms of transactions between associated enterprises should always be revised in line with the arm's length principle.

According to OECD guidelines, any changes affecting transfer pricing calculation and amounts should be reflected in transfer pricing documentation and based on transfer pricing analysis.

Thus, it may turn out that taxpayers who prepared their 2018-2019 transfer pricing analyses, i.e. before the pandemic, are now required to update them, despite the fact that three years have not passed since the analysis was prepared.

So, it is worth conducting a detailed analysis and review of the terms of transactions carried out with associated enterprises, and taking a look at the transfer pricing documentation held whether it is still valid for 2020.


What to look for when reviewing transfer pricing

You should start the review of your transfer pricing analysis by checking if you made any changes in the accounting method used for associated enterprises in 2020. Please remember that not every change is caused by the pandemic – modifications may result from typical changes occurring within the group, which would have happened regardless of the crisis caused by SARS-COV-2. Additional factors that may suggest the need for a review are changes in contractual terms of transactions with associated enterprises, as well as a significant difference between the actual financial performance of the company and the forecast results. The fact of receiving state aid or incurring extraordinary expenses and their impact on pricing of transactions between enterprises may also be important.

The above situations may indicate the need to revise the applied transfer pricing and to update the existing documentation.


Deadlines and sanctions

Transactions or other dealings between associated enterprises made after exceeding statutory documentation thresholds require the preparation of transfer pricing documentation, supported by an up-to-date transfer pricing analysis.

Associated enterprises are required to prepare their documentation and analysis by the end of the 9th month after the end of the taxpayer's financial year. This deadline can be extended by three months. Thus, for taxpayers whose tax year corresponds to the calendar year, the deadline for preparing transfer pricing documentation, a statement on having transfer pricing documentation ready and the arm’s length nature of transactions and a TPR form is 31 December 2021.

The purpose of preparing the documentation and transfer pricing analysis is to prove to tax authorities that the applied transfer pricing is at arm’s length. If tax authorities find that the terms of a controlled transaction differ from the terms that independent enterprises would agree, they may assess the taxpayer's income. In addition, lack of documentation or failure to timely file information on having it ready results in tax or fiscal crime sanctions.


How can we help

Proper transfer pricing of transactions involving associated enterprises, documenting them properly and proving their arm's length nature can be particularly problematic during the pandemic. Due to the complexity of the matter, it is better not to leave it until the last minute. Information on transfer pricing adjustments should be disclosed in the CIT-8 return and by that time it should be reviewed whether the company has made or should make the adjustment.

Properly set and revised prices of transactions between associated enterprises will allow you to avoid severe tax or fiscal crime sanctions, as well as inconveniences related to a possible tax audit.

As we are aware of a number of obligations imposed on enterprises during the pandemic, and the complexity and range of transfer pricing in transactions between associated enterprises, including the analysis of changes that may affect the documentation held, we offer you to take advantage of the expertise and experience of tax experts at Rödl & Partner. We provide helpful advice on transfer pricing analysis:


  1. Did you apply arm's length transfer pricing in 2020?
  2. Were the changes in accounts justified, were they a transfer pricing adjustment and how to properly account for income tax?
  3. How to prepare for a 2020 transfer pricing audit?
  4. How to prepare your 2020 transfer pricing documentation?
  5. How to comply with transfer pricing reporting obligations?


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Dominika Tyczka-Szyda

Tax adviser (Poland)


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