Good practices for transfer pricing settlements in connection with COVID-19
The Ministry of Finance has published a document pointing out good practices used to settle transactions between related parties. It is about explaining how the COVID-19 pandemic has affected transfer pricing.
The ministerial document is 16 pages long. It sets out principles of good practice related to selected areas of transfer pricing that have been, are being or may be particularly affected by the COVID-19 pandemic. These good practices are intended to provide guidance to tax authorities and taxpayers.
– It is worth recalling that a similar document was issued by the OECD last year. As the MF points out, this document is not binding for Polish authorities and entrepreneurs, but it is certainly a source of knowledge and the department took it into account in its material – points out Cyprian Werykowski, tax adviser, director at Thedy & Partners.
It follows from the MF’s letter that the analysis and assessment of the scope of COVID-19’s impact on industries / enterprises / controlled transactions should be conducted by each entity individually, taking into account the specifics of a given factual state. What then needs to be assessed?
– Whether the entrepreneur, due to the impact of COVID-19, would change the conditions of the transaction performed, including the price agreed and applied in the transaction. As the MF emphasises in the pandemic period, the key principle for determining and verifying/evaluating conditions in controlled transactions remains the ALP principle (arm’s length principle). The point of reference is the behaviour of independent parties in comparable transactions. In the process of analysing and assessing the impact of COVID-19 on an entity participating in a controlled transaction, a detailed analysis of functions, assets and risks taking into account the state before and during COVID-19 is crucial – Cyprian Werykowski quotes.
In the MF’s document, we will find information on, among other things: comparative analysis during the period of occurrence of COVID-19, allocation of extraordinary costs related to the occurrence of COVID-19 between related parties to the transaction, transfer pricing documentation for the period of COVID-19, prior pricing agreements, transfer pricing adjustments.