MF issued new clarification on cost-plus method

As emphasised by the Ministry of Finance, the new Explanatory Notes are intended to allow an even better and, above all, practical understanding of the cost-plus method, so that taxpayers have no doubts when applying it in practice. In addition, the latest document takes into account the recommendations of the Transfer Pricing Forum. It is good that the MF periodically issues, but also updates the issued Explanations in the area of transfer pricing. This allows entrepreneurs to become better acquainted with the applied mechanisms, as well as the way they are used in practice,’ explains Cyprian Werykowski, director at Thedy & Partners.

Let us just recall for the MF that the cost-plus method (previously also referred to as the reasonable margin method) consists in determining the sale price in a transaction with a related party at the level of the sum of the cost base and the profit mark-up, comparable to the values determined between unrelated parties, taking into account the functions performed by the entity, the assets involved and the risk incurred. In other words, the cost-plus method focuses first on an analysis of the costs incurred in the transaction by the selling entity, and the price is determined by adding to those costs a market mark-up that takes into account the functions, risks and assets involved in the transaction by the selling entity. The OECD guidelines classify the cost-plus method as a traditional method.