Transfer Pricing Adjustments in 2025 – Key Information and Practical Guidelines

According to Polish tax regulations, for an adjustment to qualify as a transfer pricing adjustment, it must meet the following conditions specified in Article 11e of the CIT Act:

1. In controlled transactions carried out by the taxpayer during the tax year, the conditions must have been established as they would have been by unrelated entities (arm's length principle).
2. There must have been a significant change in circumstances affecting the conditions agreed upon during the tax year, or the actual costs incurred or revenues earned, forming the basis for calculating the transfer price, have become known, and ensuring compliance with the conditions that would have been established by unrelated entities requires making a transfer pricing adjustment.
3. At the time of making the adjustment, the taxpayer must have a statement from the related entity or accounting evidence confirming that the related entity has made a transfer pricing adjustment in the same amount as the taxpayer.
4. There must be a legal basis for the exchange of tax information with the country where the related entity has its residence, registered office, or management.

For ,,in plus” adjustments (increasing taxable income), conditions 1 and 2 must be met, whereas for ,,in minus” adjustments (reducing taxable income), all four conditions must be met.

From our experience, the most challenges arise from fulfilling conditions 1 and 2 and subsequently proving compliance to tax authorities.

According to Article 11e(1) of the CIT Act, the conditions in controlled transactions must be those that would have been agreed upon by unrelated entities (arm's length principle).

This means that the transaction conditions should already be established on an arm’s length basis before the transaction begins (ex ante) in the given tax year. The taxpayer should be able to provide evidence of compliance with arm’s length principles if necessary. Such evidence primarily includes the established transfer pricing calculation method, a comparative analysis conducted accordingly and a transfer pricing policy.

Tax authorities often verify whether the establishment of transaction conditions was preceded by an appropriate comparative analysis and whether the price calculation was consistent with the adopted methodology. It is advisable to include these aspects in an agreement signed between the transaction parties, specifying the calculation method as well as the frequency and conditions for making transfer pricing adjustments.

In summary, a transfer pricing adjustment involves aligning the terms of a transaction with market standards. This applies to transactions initially compliant with arm’s length conditions (assessed ex ante) but which later became non-compliant (assessed ex post).

According to condition 2 (Article 11e(2) of the CIT Act), there has been a significant change in circumstances affecting the conditions agreed upon during the tax year, or knowledge of actual costs incurred, or knowledge of actual revenues earned has been obtained;

According to Transfer Pricing Guidelines No. 2 issued by the Ministry of Finance on March 31, 2021 ,,significant circumstances from a transfer pricing perspective, which could not have been anticipated when planning transfer pricing levels for a given year, may include, for example, substantial changes in market prices of key raw materials or goods, fluctuations in currency exchange rates, changes in interest rates, or significant variations in the demand or supply for a given product caused by factors beyond the control of the taxpayer and the related entity. Differences between the planned profitability level and the actual profitability may also result from a model where historical cost data was used for determining transfer prices during the year, and the taxpayer was unable to adjust to actual costs during the year while significant circumstances affecting the transfer price level changed. In such cases, at the end of the year, a difference may arise from the comparison between historical and actual costs."

When referring to changes in raw material costs, tax authorities may require evidence, such as documentation of price changes throughout the year and corresponding accounting records. Mere declarations may not suffice, especially in the case of disputes with tax authorities.

Taxpayers should also remember that transfer pricing adjustments cannot be used to rectify errors in budgeting costs or revenues. Planning inaccuracies, even if they affect results, do not justify making adjustments. In such cases, tax authorities may deem the adjustment non-compliant with tax regulations and disallow it.

If you have questions regarding transfer pricing adjustments, our experts can help assess whether your adjustment complies with the applicable transfer pricing regulations and prepare the necessary documentation to support your position effectively.