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Modern legal regulations impose numerous obligations on members of corporate groups, particularly in the area of transfer pricing documentation and timely submission of TPR forms. Audits verifying the market nature of transactions between related entities are frequent and stringent. In 2023, the number of income adjustments for companies increased by 123% compared to 2022, highlighting the growing importance of transfer pricing policies.
Transfer pricing policy – what is it? It is a set of documented rules that define how remuneration is determined in transactions between related entities, as well as methods for verifying whether the terms of the transaction are in line with market principles. A well-prepared policy supports proper settlements and reduces tax risks.
In the field of transfer pricing, the principles of setting prices should be clearly defined and based on consistent, market-based comparative data. Proper preparation of transfer pricing documentation forms a solid foundation for transparent risk management.
Transfer pricing policy should be based on:
All these elements must be included in the calculation of transfer prices to ensure compliance with regulations.
Taxpayers' obligations Taxpayers engaged in transactions between related entities must timely prepare local and group documentation that transparently describes the terms of the transaction and the methods of their calculation. Submission of TPR documentation and the preparation of a reliable transfer pricing policy minimize the risk of disputes with tax authorities. The process of preparing transfer pricing documentation is a key step in protecting the company from tax risk.
It should include a detailed description of pricing principles, distribution of responsibilities, and verification methods. This document is voluntary, but it gains importance as a tool that reduces risk and standardizes settlements between related entities. The scope of the transfer pricing policy may also cover transfer pricing adjustments, which is particularly important when market conditions or the structure of the corporate group change.
The transfer pricing policy also considers the valuation used in calculating remuneration, helping to establish the market nature of the transaction. An important element is the use of transfer pricing verification methods, which allow for the assessment of price compliance with market conditions.
There are many methods for determining prices in transactions between related entities, such as the comparable uncontrolled price method, cost-plus method, or resale price method. The choice of the appropriate method depends on the specifics of the transaction and the available comparative data. Pricing principles must be clear and understandable to be effectively applied and verified by tax authorities.
A transfer pricing policy should include:
The process of preparing transfer pricing documentation is an integral part of the operations of every corporate group that conducts transactions between related entities. Proper development of a transfer pricing policy and its implementation allow the company to more easily manage tax risks and ensure compliance with regulations.
A transfer pricing policy is synonymous with transfer pricing documentation in the sense that it serves as a tool to streamline the process of creating the documents required by tax authorities. Although there is no legal obligation to prepare it, a well-developed policy helps companies ensure compliance with regulations and reduce tax risks.
Every company conducting business in the area of economic activities related to corporate groups should consider creating a transfer pricing policy. This document not only facilitates transaction management but also enhances the company's credibility in the eyes of tax authorities. It is also important to remember that appropriate valuation and the use of market conditions in transactions between related entities minimize the risk of financial penalties.
The implementation of a well-thought-out transfer pricing policy aims to impact the financial performance of enterprises. Transparent and market-based price settings ensure that the company can avoid sudden adjustments and effectively manage its finances, regardless of the market situation.
A transfer pricing policy is a tool that enables effective tax risk management, compliance with regulations, and transparency in settlements. It includes pricing calculation principles that help avoid ambiguities and irregularities in internal transactions. With proper preparation of transfer pricing documentation, along with regular reviews and updates, businesses can effectively operate internationally while maintaining compliance with dynamically changing regulations. Developing a transfer pricing policy is a crucial element that ensures compliance with regulations and minimizes the risk of price adjustments by tax authorities.
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