Polish taxpayers will be able to apply new criteria to
determine whether parties are related or not for tax purposes
from 2019. The new definition of "related parties" has been
extended to include "significant influence".
The outcome may influence not only the scope of transfer
pricing (TP) documentation, but also the tax deductible cost of
Transfer pricing regulations in Poland have been much
stricter than elsewhere in Europe for many years. In most cases
in Europe, only capital relations are reviewed while analysing
Until the end of 2018, Polish taxpayers were obliged to
identify related parties not only based on capital relations
(level of direct or indirect shares at 25%, and 5% until the
end of 2016), but also in respect to control, management and
The new, wider definition seeks to include situations where
structures are established in capital groups involving an
investment fund, for instance, or a foundation or ownership
structure specifically modeled on relations.
The idea of exerting "significant influence" is recognised
if an individual has the actual ability to influence key
business decisions of an entity.
In this respect, relations can also be identified in cases
where a person has no formal authority or control in the
government of an entity (e.g. at the board of directors or
supervisory board level, for instance), and may significantly
influence the strategic economic decisions made by the
Examples stated by the legislator include making a decision
to abandon a part of a business activity, implementing a new
product in the market, taking over a part of a business from a
related entity, and influencing the pricing strategy.
Therefore, "significant influence" can be identified in the
case of an individual who could have a significant impact on
the TP of an entity. The significant impact also exists in the
case of family relations (being married, kinship, affinity, or
In practice, identifying a relation triggered by
"significant influence" could be very challenging,
cost-intensive and time-consuming for each organisation,
particularly regarding cases featuring many departments.
For example, a number of entities that dispose of employees
engaged in making business decisions, or cooperation with
subcontractors, or those engaged in negotiations in business
agreements, can face a dilemma regarding whether such employees
could trigger relations with a subcontractor, for instance.
The new approach employed by tax administrations in new
contexts remains to be seen.
In this respect, taxpayers in Poland should pay close
attention to fulfilling all TP reporting obligations, and when
making tax deductions on a related party's charges.
Transactions exceeding circa €690,000 ($790,000) per
year are tax deductible only up to €690,000 + 5% earnings
before interest, tax, depreciation and amoritisation
Magdalena Marciniak (firstname.lastname@example.org) and Agnieszka