Transfer prices are considered to be the prices used in transactions between related entities. These relations may take different forms – from familial, personal, to capital. The category of transfer prices 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 when a transaction was executed between the abovementioned related entities. Details of the transaction limits are specified in the relevant provisions of the Personal Income Tax Act and Corporate Income Tax 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 sanction 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 activity without interference.
CGO Legal Law Firm advises on the use of transfer prices and assists in preparing the proper documentation for the purpose of fiscal control.
Feel free to contact us, if you are interested in learning more details.