If a tax payer fails to present the TPD within 7 days from request he may face a risk of 50% penal income tax rate (versus 19% standard rate) to be applied to any extra income assessed during the tax inspection. This is as far as the tax book goes.
However the most important questions are between the lines. They are:
Are the services really being performed
How are they adapted to the needs and requirements of the structure of the Polish entity?
Is a verification process in place?
Do you know what you are paying for? Does the services contribute to your business?
Would unrelated parties enter such transaction?
Are you aware how the price of the transaction was determined?
If the tax documentation of your transactions does not provide a fair answer to these questions you may not have reached a safe tax haven. In the background a suspicion hangs: perhaps the transaction serves solely the purpose of transfer of the profit? If this question seems to be to blunt you may ask yourself if your profits would be higher without this transaction.
It is quite obvious that a tax inspector who examines your transfer pricing documentation is nowadays an intelligent and educated person. While evaluating the prices in the mutual financial settlements he is not impressed by the appearances: the description of all known price setting methods, the graphical layout or the thickness of the book
You must be able to present:
- what you pay for,
- do you really need it
- and if it is worth as much, as you pay for it.
During our work we focus on answering these essential questions.