Transfer pricing adjustments may result from:

  1. Changes in the economic environment in the year of the transaction, which may include, for example, fluctuations in exchange rates.
  2. Variations between the price algorithm based on historical data and the actual market data for the year in which the transaction is made.

Until 31/12/2018, due to the lack of special provisions governing the recognition of transfer pricing adjustments, general principles were applied, i.e. adjustments were made to the revenues or costs incurred on an ongoing basis in the accounting period without the need to revert to the reporting period, which corrections concern.

From January 1, 2019, in order to take advantage of the possibility of making a transfer pricing adjustment, the conditions set out in Art. 11e of uCIT and art. 23q uPIT

Conditions for applying transfer pricing adjustments
1) In controlled transactions carried out by the taxpayer during the tax year, conditions were established that would be determined by unrelated entities.
2) There has been a change in significant circumstances affecting the conditions set during the tax year or the actual costs or revenues obtained are known to be the basis for the calculation of the transfer price, and ensuring their compliance with the conditions that would be set by unrelated entities requires a transfer pricing adjustment.
3) At the time of the correction, the taxpayer has a declaration of the related entity that the entity has made a transfer pricing adjustment in the same amount as the taxpayer.
4) The related entity referred to in point 3 has its place of residence, seat or management board in the territory of the Republic of Poland or in a country or territory with which the Republic of Poland has concluded a double taxation avoidance agreement and there is a legal basis for the exchange of tax information with this state.
5) The taxpayer will confirm that the transfer pricing adjustment has been made in the annual tax return for the tax year to which the adjustment relates.

Due to the doubts that arose with the new regulations, the Ministry of Finance published on 03/11/2019 clarifications regarding the moment of recognition of adjustments issued in 2019 for transactions / other events carried out in 2018.

The clarification of the Ministry of Finance indicated that the provisions on transfer pricing adjustments in the wording in force from 01/01/2019 applies to controlled transactions carried out after 01/01/2019.

Thus, the transfer pricing adjustments that were issued after 01/01/2019, but they relate to transactions or other events carried out until On 31/12/2018, should be settled in the reporting period on the terms resulting from the provisions in force until the end of 2018. 1

Until the end of 2018, the act did not directly refer to the possibility of applying transfer pricing adjustments. The OECD guidelines indicated the possibility of applying the correction mechanism, but did not regulate the mechanism of its approval. Therefore, the tax authorities in Poland did not accept the transfer pricing adjustments.

The practice of applying transfer pricing adjustments distinguished between two cases:

  • Upward adjustments, which, according to the position of Polish authorities, constitute the company’s income,
  • Downward adjustments which, according to the position of Polish authorities, do not constitute a tax deductible cost.

The case of a downward revision, in which the position of the tax authorities did not allow for the recognition of costs as tax deductible costs, aroused a lot of controversy. The Provincial Administrative Court in Poznań justified them as follows: “ The expenditure on account of the adjustment of the operating margin to the assumed level will not be an expenditure that would have a cause and effect relationship with the applicant’s income. By incurring the expense relating to the alignment of the operating margin downwards to the predetermined level, the applicant is not acting with the aim of achieving, maintaining or securing revenues, but merely of the compensation of the margin to a pre-agreed level. The expenditure under this title cannot be linked to any potential income ” .

Due to the different treatment of transfer pricing adjustments in the EU Member States, the JTPF proposed the following solutions:

1) affiliated enterprises should calculate symmetrically the profits resulting from their mutual relations (using the same price), and

2)   the tax administration should accept the adjustment initiated by the taxpayer under the following conditions:

  • the price has been established before the transaction, in accordance with the arm’s length principle, or reasonable efforts have been made to do so,
  • the taxpayer submitted a correction before submitting the tax return,
  • there is an explanation why the incurred costs and revenues related to the transaction are not as planned,
  • the adjustment is symmetrical by including it in the books of both parties to the transaction,
  • the rules applied by the taxpayer remain unchanged over a long period of time.

1 Judgment of the Provincial Administrative Court in Poznań of October 25, 2018, I SA / Po 508/18, LEX No. 2584835


1 Announcement of the Transfer Pricing and Valuation Department of March 11, 2019; source: .