Step by step transfer pricing

In this category, we describe in detail the aspects of transfer pricing that are crucial in transactions between entities related by equity, family or partnership. Transfer pricing has an important role in international business relations, and its understanding and proper application is essential for the proper functioning of companies operating in different markets.

We begin by explaining the arm’s length principle, which is the international standard used to determine transfer prices for tax purposes. Then we move on to analyze the concept of controlled transaction, which appeared in the Polish legal order in 2019. In this context, we consider how transfer pricing is considered in a specific transaction and what are the key aspects in its identification and verification. We also focus on transfer pricing obligations, particularly in the context of related party transactions. We explain how important it is to correctly identify relationships between entities to ensure compliance with applicable regulations and avoid tax risks. We also touch on the subject of entities from so-called tax havens, which are defined in Polish law as countries using harmful tax competition.

Finally, we provide a comprehensive glossary of terms related to transfer pricing to facilitate understanding of this complex matter.

Definition of transfer pricing

The price is defined as the value (most often expressed in monetary units) that the buyer must pay to the seller for the goods or services being the subject of the transaction. Transfer pricing, on the other hand, is the price applied to all transactions carried out by entities between which there are capital, family or personal ties. Transfer prices […]

The arm’s length principle

The arm’s lenght principle, also known as the distance or arm’s length principle, is an international standard agreed by OECD member states and should be used by them to determine transfer prices for tax purposes. 1 This rule was included in Art. 9 sec. 1 of the OECD Model Tax Convention, which is the basis for bilateral tax conventions concluded between OECD member […]

Controlled transaction

The concept of a controlled transaction The correct understanding of the concept of a transaction is important because transfer prices are always considered in the context of a specific transaction (or their sum – if the subject of the transaction and their terms are the same). The definition of a controlled transaction appeared for the first time in the Polish […]