Transfer Pricing

Transfer pricing has increasingly dominated tax planning issues within corporate groups in recent years, primarily due to the frequency of audits conducted by tax authorities.

In recent years, transfer pricing has become a particular focus of tax administrations in many countries, including Poland, due to its role in aggressive tax planning strategies employed by corporate groups. In Poland, transfer pricing has become a priority issue for the tax administration, leading to a significant increase in related audits.

Recognizing the risks to economic development posed by transfer pricing, international organizations such as the Organisation for Economic Co-operation and Development (OECD) and the European Union have taken various actions to prevent the use of transfer pricing for aggressive tax optimization that leads to base erosion and profit shifting. The outcomes of these institutions’ work on transfer pricing have been reflected in legislative changes in Poland, particularly regarding transfer pricing documentation requirements.

Changes to the CIT Act and PIT Act, effective January 1, 2019, introduced a definition of transfer pricing in both acts. Article 11a(1)(1) of the CIT Act (similarly, Article 23m(1)(1) of the PIT Act) states that transfer pricing refers to the financial result of conditions determined or imposed due to existing relationships, including price, remuneration, financial outcome, or financial ratio. The legislator thereby established a broad framework for understanding the concept of transfer pricing.

As of January 1, 2019, the legislator decided to regulate the concept of “transaction” by creating a broad definition of “controlled transaction.”

The CIT/PIT Act, as amended from January 1, 2019, introduces the definition of “controlled transaction” for transfer pricing purposes.
According to this definition, a controlled transaction refers to economic activities identified based on the actual behavior of the parties involved, including the allocation of income to a foreign branch, where the conditions have been established or imposed due to relationships between the parties. The introduction of this broad definition aims to cover events that might not be considered transactions in everyday language, such as:

• • Restructurings
  • Cost Sharing Agreements (CCA)
  • Partnership agreements
  • Cooperation agreements
  • Liquidity management agreements

Determining whether entities are “related” under income tax laws is crucial for identifying documentation requirements and the potential for income adjustment or loss reduction by tax authorities.

According to the definition effective from January 1, 2019, related entities are:

1. 1. Entities where one entity exerts significant influence over at least one other entity, or
   2. Entities influenced by:
      • The same other entity, or
      • A spouse, relative, or in-law up to the second degree of an individual exerting significant influence over at least one entity, or
   3. An unincorporated partnership and its partners, or
   4. A taxpayer and their foreign branch.

• Significant influence includes, among other factors:

1. 1. Directly or indirectly holding at least 25% of the shares or interests in the capital (expanded to include shares in capital, voting rights in supervisory, governing, or managing bodies, units of participation, certificates, or other rights related to participation in profits or assets or their expectations);
   2. The actual ability of an individual to influence key economic decisions made by an entity; or
   3. Marital relationships or relationships of kinship or affinity up to the second degree.

• The new regulations do not consider the following relationships (compared to the previous legal state):

1. 1. Establishing an unincorporated partnership (except when such agreements are made with entities from “tax havens”), though the broad concept of “controlled transaction” still encompasses this event;
   2. Entering into joint venture agreements (except when such agreements are made with entities from “tax havens”), though the broad concept of “controlled transaction” still encompasses this event;
   3. Employment relationships;
   4. Property relationships.

• Particular attention is drawn to the new circle of related entities arising from an individual’s actual ability to influence key business decisions. This refers to individuals who can significantly impact the key business decisions made by an entity, even without formal authorization within its governing or supervisory bodies.
  Additionally, entities are considered related if their relationships are not established or maintained for valid economic reasons, including those aimed at manipulating ownership structures or creating circular ownership structures (to address situations where entities were not considered related due to “artificial” ownership structures or entities placed in the structure to break the chain of relationships).

From January 1, 2019, documentation thresholds have been increased and set at a “fixed” level (regardless of the entity’s revenue, as was previously the case).

With the new transfer pricing regulations, the legislator abandoned the approach of linking transaction thresholds to entity revenue and opted for “fixed” limits for different categories of transactions. This represents a “return” to the principles that were in place before January 1, 2017, but the thresholds have been set at a significantly higher level.

Local transfer pricing documentation (Local File + benchmark study) must be prepared for:

1. 1. Controlled transactions of a homogeneous nature,
   2. where the net value exceeds the following thresholds in a tax year:
      • 10,000,000 PLN for commodity transactions,
      • 10,000,000 PLN for financial transactions,
      • 2,000,000 PLN for service transactions,
      • 2,000,000 PLN for other transactions,

• Documentation thresholds are determined separately for:

1. 1. Each controlled transaction of a homogeneous nature, regardless of whether it is classified as a commodity, financial, service, or other type of transaction.
   2. Both the cost side and the revenue side.

• In assessing whether a controlled transaction is of a “homogeneous” nature, the following factors are considered:

1. 1. The economic uniformity of the controlled transaction.
   2. Comparability criteria, including characteristics of goods, functions performed, assets involved, risks borne, transaction conditions, and economic strategy.
   3. Transfer pricing verification methods.
   4. Other relevant circumstances of the controlled transaction.

• It should be noted that the concept of a “homogeneous transaction” is similar to the concept of a “transaction of the same kind” under the regulations that were in effect before January 1, 2019.

The tax authority can request the preparation of local documentation for transactions not subject to documentation requirements within 30 days of receiving the request.

Documentation requirements also apply to transactions with entities based in “tax havens.”

Following OECD guidelines, the legislator has exempted certain transactions from documentation requirements, even if thresholds are exceeded.

1. Domestic Transactions

The obligation to prepare local transfer pricing documentation (Local File + Benchmark Study) does not apply to transactions conducted exclusively between related entities with their registered offices in Poland, in a tax year where each of these related entities collectively met the following conditions:

• • Does not benefit from entity-level exemptions,
  • Does not benefit from subject-matter exemptions (such as from Special Economic Zones (SEZ) or support decisions for new investments (PSI)),
  • Has not incurred a tax loss.

2. „Safe harbours”

a) Loans

An entity is not required to prepare local documentation (Local File + Benchmark Study) for an intra-group loan, and the authority refrains from determining the taxpayer’s income (loss) concerning the interest rate if the following conditions are met:

• The loan’s interest rate on the agreement date is based on a benchmark interest rate and margin specified in a Ministry of Finance announcement (published at least annually) applicable on the agreement date.
• No fees other than interest are charged for the loan’s provision or servicing, including commissions or premiums.
• The loan term does not exceed 5 years.
• During the fiscal year, the total level of liabilities or receivables from intra-group loans, calculated separately for granted and received loans, does not exceed 20 million PLN or its equivalent (loans in foreign currencies are converted at the average NBP exchange rate on the last business day before the loan disbursement).
• The lender is not based in a country or territory applying harmful tax competition.

These regulations also apply similarly to credits and bond issues.

b) Low-Value-Added Services

An entity is not required to prepare local documentation (Local File + Benchmark Study) for low value-added services, and the authority refrains from determining the taxpayer’s income (loss) concerning the markup on the costs of these services if the following conditions are collectively met:

• The transaction concerns services listed in the annex to the act (e.g., accounting, auditing, HR management, IT, legal services) that collectively meet the following conditions:
  • they are of a supportive nature to the business activities of the service recipient;
  • They are not the main activity of the group of related entities.
  • The value of these services provided by the service provider to unrelated parties does not exceed 2% of the total value of services provided to both related and unrelated entities.
  • The services are not further resold by the recipient, except for resale of services purchased in the recipient’s name but for another related entity (re-invoicing).
• the markup on the costs of these services has been determined usingthe cost-plus method or the transactional net margin method and amounts to:
  • No more than 5% of costs for purchased services.
  • No less than 5% of costs for provided services.
• The service provider is not based in a country or territory applying harmful tax competition.
• The service recipient has a calculation that includes:
  • the type and amount of costs included in the calculation,
  • he method of application and justification for the selection of allocation keys for all related entities benefiting from the services;
  • a description of the transaction, including an analysis of functions, risks, and assets.

c) Reinvoicing

An entity is not required to prepare local documentation (Local File + Benchmark Study) for transactions exclusively involving the settlement of expenses incurred for the benefit of an unrelated entity (“reinvoicing“) if all the following conditions are met:

• no added value is created, and the settlement is made without including a margin or profit markup;
• the settlement is not directly related to another controlled transaction;
• the settlement occurred promptly after payment to the unrelated entity;
• the related entity is not domiciled, registered, or managed in a jurisdiction that applies harmful tax competition.

Tax documentation may consist of up to three types of documentation: the “Local File,” transfer pricing analyses (benchmark study), and the “Master File.” In addition to these documentation requirements, there may also be other obligations related to transfer pricing.

These obligations may include up to three types of documentation along with the preparation and submission of transfer pricing information. Additionally, there may be non-documentation-related obligations that are still connected to the area of transfer pricing:

• • “Local File” – documentation concerning controlled transactions conducted by an entity with related parties. The obligation to prepare arises when the net value of a “homogeneous” transaction exceeds the applicable threshold.

Deadline for preparation: by the end of the 9th month after the end of the tax year.

• • Transfer Pricing Analysis (Benchmark Study) – a part of the local documentation aimed at demonstrating that the terms of controlled transactions are “at arm’s length.” The obligation to prepare arises when the net value of a “homogeneous” transaction exceeds the applicable threshold (every local documentation must include a benchmark study);

Deadline for preparation: by the end of the 9th month after the end of the tax year.

• • “Master File” – group documentation containing information about the entire group of related entities, including the entity in question. The obligation to prepare arises when a related entity required to prepare “local” documentation is consolidated using the full or proportional method and belongs to a group of related entities that:
    • for which a consolidated financial statement is prepared;
    • for which consolidated revenues exceeded 200,000,000 PLN or its equivalent in the previous financial year.

Deadline for preparation: by the end of the 12th month after the end of the tax year.

• • “TP-R” – transfer pricing information containing detailed data (a summary) regarding transactions conducted with related entities. It must be submitted even if exempt from documentation requirements for “domestic” transactions, or when applying “safe harbor” or “pure reinvoicing” exemptions. It also includes the entity’s statement confirming that the local transfer pricing documentation has been prepared in accordance with the actual state of affairs and that the transfer prices covered by this documentation are determined under conditions that would be agreed upon by unrelated entities.

Deadline for Submission: By the end of the 11th month following the end of the tax year,

in electronic form, to the head of the tax office.

• Other obligations related to the area of transfer pricing

• • “Country-by-Country Reporting (CbCR)” – a report on the income, taxes paid, and locations of business activities of related entities. Generally, the obligation to prepare arises when consolidated revenues exceed PLN 3.25 billion or the equivalent amount (applicable to parent companies based in Poland).

Submission deadline: 12 months from the end of the reporting financial year, electronically to the Head of the National Revenue Administration.

• • • CBC-P – notification regarding the obligation to provide information about the group of entities. The obligation to submit this notification arises when an entity is part of a group that submits “Country-by-Country Reporting.” The entity must indicate whether it is the parent company submitting CBC-R or specify the reporting entity and the country where CBC-R will be filed.

Submission deadline: within 3 months from the end of the group’s reporting financial year, electronically to the Head of the National Revenue Administration.

The documentation obligation arises for controlled transactions with entities that have residence, headquarters, or management in a jurisdiction or country applying harmful tax competition (“tax havens”) when the value of the transaction is equal to or greater than

• • PLN 2,500,000 – in the case of a financial transaction;
  • PLN 500,000 – in the case of other transactions.

The list of countries/territories recognized as “tax havens” is published through a regulation by the Minister of Finance..

Local transfer pricing documentation for the above transactions—besides the “standard” elements—also includes an economic justification for the transaction, specifically describing the expected economic benefits, including tax benefits. The elements of this justification are:

• • A description of the circumstances leading to the documentation obligation.
  • Benefit test, i.e., a description of the anticipated tax benefits and other economic benefits (e.g., increased profitability, strengthened competitive advantage, enhanced brand recognition, etc.).
  • other economic reasons for the transaction.

Transfer prices are verified using the method most appropriate to the given circumstances, selected from the methods specified in the CIT/PIT Act.

Although there is still no obligation to use specific methods for determining prices between related parties, the new regulations have introduced a statutory requirement for taxpayers to use, in the first instance, five methods for verifying transfer prices. If it is not possible to apply any of these methods, the legislator has explicitly allowed the use of the so-called sixth method—another method deemed most appropriate in the given circumstances. In selecting the most appropriate method for the given circumstances, particular consideration is given to the conditions set or imposed between related parties, the availability of information necessary for the proper application of the method, and the specific criteria for its application.

Transfer pricing methods:

• PCN Method

The Comparable Uncontrolled Price (CUP) method involves comparing the price of a controlled transaction’s subject with the price used in comparable transactions by unrelated entities and determining the market value of the controlled transaction’s subject based on this comparison.

The CUP method can only be applied if a suitable comparable transaction is identified. A comparable transaction is: (i) a comparable transaction between the taxpayer and an unrelated entity (known as internal comparability) or (ii) a comparable transaction between unrelated entities (known as external comparability).
When assessing the comparability of a given transaction, all comparability criteria must be considered, especially the characteristics of the product. If there are no differences between the examined transaction and the comparable uncontrolled transaction that could significantly affect the price of the transaction’s subject in the market, or if reasonably accurate adjustments can be made to eliminate the significant effects of such differences, the CUP method is generally considered the “first choice” of tax authorities during the verification of the market conformity of the examined transaction, where its application is possible.

• The Resale Price Method

The Resale Price Method involves calculating the purchase price of goods or services from a related party by subtracting a resale price margin from the selling price of those goods or services to an unrelated party.
The resale price margin should allow the reseller to cover its direct and indirect costs related to reselling the controlled transaction’s subject and provide a profit appropriate to the functions performed, assets used, and risks assumed by the reseller.
The market value of the resale price margin is determined by referencing the margin level applied by the related party in comparable transactions with unrelated parties or the margin applied in comparable transactions by unrelated parties.
Thus, the resale price method is typically applied in transactions where one related party acts as a distributor that first purchases goods from a related party and then resells them to unrelated parties.

• The Cost Plus Method

Cost Plus Method involves determining the price of the controlled transaction by adding the base cost and a profit margin, calculated relative to the base cost.
The base cost refers to the sum of costs directly associated with or the sum of costs directly or indirectly related to the production or acquisition of the controlled transaction item.
The market value of the profit margin relative to a given base cost is determined by referring to the profit margin that the same entity applies in comparable transactions with unrelated entities with the same base cost, or the profit margin applied in comparable transactions by unrelated entities with a comparable base cost.In the Cost Plus Method, a comparable profit margin is added to the comparable base cost.
In the cost-plus method, a comparable profit mark-up is added to the comparable cost base. Therefore, it is extremely important to take into account any differences in the level and type of expenses resulting from the functions performed and the risks borne by the parties to the transactions being compared.
Similar to the Resale Price Method, comparability in the Cost Plus Method largely depends on the degree of similarity between the functions performed, risks borne, and contractual conditions of the transactions.

• Profit Split Method

The Profit Split Method involves determining the total profit earned by related entities from a given transaction, and then dividing this profit among these entities in a manner that unrelated entities would, taking into account the functions performed, assets employed, and risks assumed by the parties to the controlled transaction.The proportional division of profits, as would be used by independent entities participating in the transaction(s), is achieved by determining the revenues earned by each related entity and the costs incurred in relation to the controlled transaction. If the identified costs exceed the associated revenues, the division will involve a loss.

The profit split is done using:

• • residual analysis, in which the total profits obtained from the given transaction(s) by the related parties involved are divided in two stages:
    • In the first stage, each participant in the transaction is allocated a minimal profit (minimal profit refers to the profit earned by independent entities performing similar functions in such transactions – compensation for the functions performed),
    • In the second stage, any remaining profits (profits after the allocation in the first stage, known as residual profits) are divided among the related entities participating in the transaction according to the rules that independent entities would establish for such a transaction.
  • Contribution analysis – which allocates the combined profit from a transaction among related entities based on the relative value of the activities undertaken by each related entity.

• Transactional Net Margin Method

The Transactional Net Margin Method (TNMM) involves determining a financial ratio that reflects the relationship between the net profit margin obtained by the related party in a controlled transaction and an appropriate base. This base can include revenues, costs, assets, or elements of revenues, costs, or assets.The net profit margin is calculated by subtracting the costs associated with the execution of the controlled transaction from the revenue generated from that transaction.If it is necessary to account for costs that cannot be directly attributed to the specific transaction when calculating the net profit margin, such costs are allocated using a method that best reflects the value creation process in the controlled transaction.The choice of an appropriate financial ratio is made considering the industry specifics and the significant circumstances of the transaction. The market value of the financial ratio is determined by referring to the level of the financial ratio:

• • achieved by a related party in comparable transactions with unrelated parties in relation to the same base, or
  • achieved in comparable transactions by unrelated parties in relation to a comparable base, or
  • achieved by entities conducting activities comparable to the scope of the examined transaction in relation to a comparable base.

• The Transactional Net Margin Method is applied in situations where both parties in a transaction are engaged in a series of transactions, and one of them involves significant intangible assets for which it is difficult to determine the market level of compensation.
  • Valuation technique as the “sixth method”
• If a different valuation technique has been recognized as a method, it should be applied as follows:
  • if the valuation technique requires the analysis to be based on forecasts, forecasts prepared for financial planning purposes should be used first;
  • the amounts or ratios used within the valuation technique should correspond to market value;
  • if the correct application of the valuation technique requires the use of a discount factor:
    • the amounts or ratios used within the valuation technique should correspond to market value;
    • the amount of the discount factor takes into account the level of business risk of the related entity and the level of fluctuations in future cash flows generated by the valued subject of the controlled transaction;
  • the analysis takes into account the level of value of the subject of the controlled transaction expected by each party to the controlled transaction.
• Source: Rozporządzenie Ministra Finansów z dnia 21 grudnia 2018 r. w sprawie cen transferowych w zakresie podatku dochodowego od osób prawnych (Dz. U. 2018 poz. 2491.

Related entities required to prepare local documentation are obligated to submit an appropriate statement.

From the 2022 tax year (for that year and subsequent years), the statement that the local transfer pricing documentation has been prepared in accordance with the actual state of affairs, and that the transfer prices covered by this documentation are determined under “arm’s length” conditions, is part of the TPR information submitted to the head of the tax office by the end of the 11th month after the end of the tax year.

The TPR information (including the statement) is signed and submitted (electronically) by the head of the entity as defined in Article 3(1)(6) of the Accounting Act, and in the case where the entity is managed by a multi-person body, by a designated person who is a member of that body (the designation of a person from the multi-person body does not release the other members of that body from responsibility for failing to submit this information).

The taxpayer may make a transfer pricing adjustment upon the cumulative fulfillment of specified conditions.

Under the regulations, a taxpayer may make transfer pricing adjustments (including adjustments to price, financial results, or financial ratios) by changing the amount of income earned or expenses incurred to generate income, provided that all of the following conditions are met:

• the conditions established in the controlled transactions conducted by the taxpayer during the tax year were those that would have been agreed upon by unrelated entities (the necessity of market-based settlements during the year in accordance with the best available knowledge and experience).
• there have been significant changes in circumstances affecting the conditions established during the tax year (i.e., circumstances that could not have been foreseen when planning transfer pricing levels for the year, such as substantial changes in market prices of raw materials or goods caused by factors beyond the control of the taxpayer and related entity); or the actual costs incurred or revenues earned, which form the basis for calculating the transfer price, are known, and ensuring their compliance with “arm’s length” conditions requires a transfer pricing adjustment.
• at the time of making the adjustment, the taxpayer possesses a statement from the related entity or an accounting document confirming that the related entity has made a transfer pricing adjustment in the same amount as the taxpayer;
• there is a legal basis for the exchange of tax information with the country in which the related entity is domiciled, headquartered, or managed;

In case:

• for an adjustment that decreases the taxpayer’s revenue or increases the taxpayer’s costs, it is necessary to meet all of the aforementioned conditions cumulatively;
• for an adjustment that increases the taxpayer’s revenue or decreases the taxpayer’s costs, it is sufficient to meet the conditions specified in points 1) and 2) cumulatively.

The transfer pricing adjustment should be recognized in the reporting period to which it pertains, rather than in the period when the corrective invoice or other document confirming the adjustment was issued.

It is advisable to refer to the tax clarifications on transfer pricing dated March 31, 2021. The most crucial point of the clarifications indicates that a “negative” transfer pricing adjustment, if the conditions specified in Article 11e(1-4) of the CIT Act are not met (resulting in the inability to account for it as “KCT11e,” i.e., “retroactively”), cannot be made on general terms (i.e., on a current basis). Otherwise, according to the Ministry of Finance, the taxpayer would effectively have the freedom to choose the method and period for making KCT11e, i.e., according to the general rules for adjustments.

TP-R is a tax information form submitted electronically to the Head of the National Revenue Administration by related entities:

• obligated to prepare local transfer pricing documentation or
• engaged in controlled transactions covered by the exemption under Article 11n point 1 of the CIT Act/Article 23z point 1 of the PIT Act (exemption for “domestic” transactions).

TP-R provides a detailed description of transactions carried out by taxpayers with related entities.

• specification of the authority to which it is submitted, the purpose of submitting the information, and the period for which it is submitted;
• identification details of the entity;
• general financial information of the entity;
• information regarding related entities and controlled transactions;
• information regarding the transfer prices applied and the methods used for their verification;
• additional information or explanations regarding the data or information mentioned above;
• a statement by the entity confirming that the local transfer pricing documentation has been prepared in accordance with the actual state of affairs and that the transfer prices covered by this documentation are determined under conditions that would be agreed upon by unrelated entities.

The TPR information is signed and submitted (electronically) by the head of the entity as defined in Article 3(1)(6) of the Accounting Act. In cases where the entity is managed by a multi-member body, the submission is made by a designated member of that body (the designation of a member does not exempt other members of the body from liability for failure to submit the information).

This demonstrates that tax authorities aim to obtain highly detailed data from related entities regarding the execution of controlled transactions. Therefore, it is advisable to ensure the accurate preparation of the TPR information well in advance.

The verification of transfer pricing has recently become a primary focus of tax authority audits.
Transfer Pricing Audits

According to announcements from the Ministry of Finance and published statistics, the verification of transfer pricing has become a key area of tax authority audits.

Most Frequently Audited Transaction Types

In practice, tax audits focus on verifying transactions that are significant due to their value. Below are examples of the most frequently audited transactions—given the frequency of their audits, these transactions should be considered high-risk:

1. 1. Intra-group Services – In this area, the authorities verify:
      • service performance: Authorities examine questions such as who performed the service, what the added value is for the buyer, what evidence exists to confirm the service was performed, and what drives the demand for the service,
      • transfer pricing and justification for acquiring services abroad: During audits, authorities often attempt to challenge the justification for acquiring services abroad—for example, accounting services—when equivalent services on the Polish market are cheaper.
      • cost base: The cost base calculation is audited, and in more detailed inspections, source documents confirming the expenses included in the calculation are also reviewed.
   2. Business Restructuring – In this area, the authorities verify:
      • the price of transferred assets,
      • the method of relocating assets, functions, risks, and profit potential to the restructured entity,
      • the justification for applying an “exit fee” for the transfer of assets, functions, and risks.

• During transfer pricing audits in this area, the authorities are interested in:
  1. understanding the reasons for the restructuring;
  2. examining the structure prior to the restructuring (particularly the nature of settlements between related entities);
  3. understanding the structural changes resulting from the restructuring;
  4. verifying whether the entity taking over certain functions has adequate resources to perform those functions;
  5. assessing the benefits the restructuring brings to the capital group and the entities involved (in the authorities’ view, restructuring is justified if the participating entities gain benefits);
  6. reviewing the calculation of the “exit fee” (authorities scrutinize the assumptions used in the “exit fee” calculation).

3.License Fees for the Use of Intangible Assets (IA) – During transfer pricing audits in this area, the authorities verify:

• • • whether the licensor possesses adequate economic substance and appropriate resources to effectively perform its function, primarily the protection and promotion of the trademark;
    • actual incurrence of costs related to the protection and promotion of the trademark;
    • whether the legal owner of the trademark is also its economic owner, i.e., authorities check whether the entity is genuinely responsible for the strategy of developing and promoting the trademark (if the authority determines that another entity is responsible, it may question the justification for the license fee);
    • the business rationale for group entities incurring the fee (e.g., fees for trademarks paid by a contract manufacturer selling exclusively to the group, or fees for technological know-how paid by a distributor not engaged in product manufacturing, would be deemed unjustified).

• • rules for identifying related parties,
  • verification of the economic substance of related entities,
  • procedures for collecting documentation supporting settlement principles, including, among others, cost base calculations and evidence of service delivery.
• It is also advisable for enterprises within capital groups to:
  • review transactions conducted with related entities in previous years,
  • verify their compliance with market conditions, and
  • implement any necessary adjustments for future settlements.
• Proper preparation for transfer pricing audits can protect taxpayers from severe penalties imposed for non-compliance in this area.

Failure to comply with transfer pricing documentation obligations may result in negative consequences under tax and criminal tax law.

Sanctions related to transfer pricing are broad in scope and may affect both:

• • the taxpayer, and
  • the taxpayer’s governing bodies or individuals responsible for its economic affairs.