Transfer prices are the prices which related entities use in transactions between them. These relations may take different forms – from familial, personal, to capital. This category also includes prices in transactions with entities located in countries with harmful tax competition (the so-called “tax havens”).
A practical example of the use of transfer prices are all kinds of services provided, e.g. by the owners of the legal person on behalf of that entity or the movement of goods between the two agencies of the same enterprise. The right use of transfer prices mechanisms allows significant tax savings.
It is, of course, subject to tax authorities control which obliges to keep transfer prices documentation. It appears in the case of executing the transaction between the abovementioned related entities. Details of the transaction limits are specified in the relevant provisions of the PIT Act and CIT Act.
Lack in preparing such documentation, or failure to provide it within 7 days from the start of fiscal control may result in the imposing financial sanctions. Such sanctions take form of tax rate at the rate of 50% tax in the relation between the income declared by the entrepreneur and income estimated by the tax authorities. Therefore, it is necessary to prepare appropriate tax documentation in a timely manner, in order to run business without interference.
CGO Legal Law Firm advises on the use of transfer prices. Our specialists will assist You in preparing the proper documentation for the purpose of fiscal control.
If You want to learn more feel free to contact us.