Report on a transfer pricing

Table of content

Prerequisite for the obligation to prepare a study on transfer prices

The precondition for the existence of transfer prices refers to transactions between affiliated entities, i.e. a situation where related companies perform transactions with each other.

The price becomes a transfer price at the moment when the obligation arises regarding transactions between affiliated companies.

The difference between the market price and the transfer price

When two independent legal entities, i.e. companies not related by ownership or management structure, perform mutual transactions, they mutually act on the market at market prices. These prices are called market prices as they are being formed in circumstances of free competition and market.

On the other hand, when two affiliated entities operate, the prices formed in conduct between related parties may differ from the actual market prices (at which unassociated companies perform their transactions), which therefore means that they can be the same, lower, or higher than market prices.

Such business relations between affiliated legal entities take place in controlled transactions, i.e. within mutual transactions between these legal entities.

One of the reasons for such transactions between associated legal entities is the reduction of tax liabilities in the countries where they arose, i.e. paying a lower amount of income tax.

Which company is obliged to prepare a study on transfer prices?

Legal entities between which there is a possibility of control or significant influence on business decisions – in case of possession of at least 25% of shares or stocks, or votes in management bodies (Article 59, paragraphs 3 and 4 of the Law);

Legal entities at which the same natural persons or legal entities participate in management and control, or equity (Article 59, paragraph 5 of the Law);

Relatives of the owners of legal entities associated on the basis of ownership of at least 25% of shares or stocks, or votes in management bodies (Article 59, paragraph 6 of the Law);

Legal entities from jurisdictions with preferential tax regimes – the so-called tax havens (Article 59, paragraph 7 of the Law).

Deadline for submission of a study on transfer prices

The deadline for submitting reports on transfer prices for legal entities is 180 days from the end of the tax period and for entrepreneurs until the March 15 of the following year.

If you require a study on transfer prices, you can contact us for more details.

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