2015 Transfer Pricing CEE Overview Czech Republic | Hungary | Poland | Romania | Slovakia

2015 Transfer Pricing CEE Overview

Country / Regulation Czech Republic Hungary Poland Romania Slovakia

Arm´s length principle

Yes Yes Yes Yes Yes

Legislation Income Tax Act No. 586/1992 Coll. (Section 23/7) Double Tax Treaties

Act LXXXI of 1996 on Corporate Income Tax (Section 4/23; Section 18; Section 31/2) Act XCII on Tax Procedures (Section 1/8; Section 132/B-C; Section 176/A) Act CXXVII on Value Added Tax (Section 67) Double Tax Treaties

Corporate Income Tax Act from 15 February 1992 (Article 9a) Personal Income Tax Act from 26 July 1991 (Article 25a) Double Tax Treaties

Romanian Fiscal Code (Section 11/2) and Methodological Norms Double Tax Treaties OECD TP Guidelines

Income Tax Act No. 595/2003 Coll. (Sections 17/5, 17/6, 17/7, 18) Double Tax Treaties

Controlled parties

Domestic and cross border related parties Income Tax Act No. 586/1992 Coll. (Section 23/7)

Domestic and cross-border related parties; branches and head offices; as of 1 January 2015 entities having common directorship Determined by Act LXXXI of 1996 on Corporate Income Tax (Section 4/23)

Domestic and cross-border related parties Corporate Income Tax Act (Article 11) and Personal Income Tax Act (Article 25)

Domestic and cross border related parties Romanian Fiscal Code (Section 11/2)

Domectic and Cross-border related parties Income Tax Act No. 595/2003 Coll. (Section 2, (n-r)

Applicable TP methods

Both traditional and other TP methods according to OECD TP Guidelines

Transaction-based methods are preferred over profit-based methods. Comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split methods are the designated TP methods. Other methods may only be applied if the arm's lenght price cannot be supported by the designated methods.

Traditional TP methods according to OECD Guidelines (the principle of the best method applies); Comparable uncontrolled price method, resale price method or cost plus method should be applicable. If it is not possible to apply one of these methods, one of the transactional profit methods should be applicable.

Traditional and other TP methods according to OECD TP Guidelines (the principle of the best method applies but Comparable Uncontrolled Price method is prefered and choice of another method should be justified)

Traditional and other TP methods according to OECD TP Guidelines (the principle of the best method applies)

APA Availability and validity

Up to 3 years (if conditions and law are unchanged)

For 3 to 5 years, possible to extend for another 3 years

Up to 5 years with possibility of extension for another 5 years if conditions unchanged

Up to 5 years with possibility of extension in case of long term contracts

Up to 5 years with possibility of extension for another 5 years if conditions unchanged

Application for APA Local Tax Authority Local Tax Authority Ministry of Finance Local Tax Authority Local Tax Authority

Subjects obliged to keep the documentation

All taxpayers engaged in cross-border and domestic transactions with related parties.

Taxpayers engaged in related party transactions with the exception of small and medium sized companies as defined by the Act on Corporte Income Tax. (Individuals are outside the scope.)

Entities performing transactions with related parties; Entities performing transactions with „tax havens”.

Taxpayers engaged in transactions with related parties.

Taxpayers engaged in transactions with related parties.

Language Documentation is required in Czech language.

TP reports are accepted in HU, EN, DE and FR language. If other language is used, the taxpayer is liable to present HU translation upon request of the tax authority.

The documentation has to be prepared in Polish.

Documentation is required in Romanian language.

Documentation is required in Slovak language, however, the tax authority may upon request agree with other language.

Simplified documentation

Yes, simplified documentation as option for selected transactions.

Yes, for law value adding services if certain conditions are met.

Not applicable Not applicable Yes, as option for selected taxpayers e.g. individuals, SMEs. and if certain conditions are met.

Transfer pricing = TP; Advance pricing agreement = APA; Regulation = Secondary legislation; Administrative guidance = Other than law and regulations

2015 Transfer Pricing CEE Overview: Other regulations, fees and penalties

Country / Regulation Czech Republic Hungary Poland Romania Slovakia

Applicable

regulations or

administrative

guidance

Although the OECD TP

Guidelines are not a legally

binding document in regard of the

domestic tax law, the basic

procedures are applicable.

Therefore, the tax administration

issued the guidelines D-332, D-

333, D-334 and D-10 based on

the OECD Guidelines aiming to

ensure a unified procedure for

taxation of transfers between

multinational companies both by

the tax authorities and by the

taxpayers.

Decree No. 22/2009 of the

Ministry of National Economy on

TP Documentation Requirements;

Decree No. 38/2006 of the

Ministry of Finance on Advance

Pricing Agreements

Decree of Minister of Finance on:

Corporate / personal income through

evaluation and on manner and procedure

of corporate double taxation elimination in

case of adjustment of income of related

entities;

Decree of Minister of Finance on

determination of countries and territories

applying harmful tax competition in respect

to corporate / personal income tax

Order No. 222/2008 regarding the

content of the TP documentation;

Government Decision No.

529/2007 regarding the advance

pricing agreement;

Fiscal Procedure Code - Ordinance

No. 92/2003

Financial Reporters No. 14/1997,

20/1999, 3/2002 where OECD TP

Guidelines from 1995 and 1997

were published in Slovak language

Financial Reporters No. 1/2009,

8/2014, 5/2015 where

administrative guidance of the

Slovak Ministry of Finance on

content of the TP documentation

were published

Fees for APA 10,000 CZK (approx. 370 EUR)

for one transaction

Unilateral APA - minimum

500,000 HUF (approx. 1,613

EUR), max. 7,000,000

HUF(approx. 22,580 EUR);

Bilateral APA - min. 3,000,000

HUF (approx. 9,677 EUR), max.

8,000,000 HUF (approx. 25,806

EUR);

Multilateral APA - min. 5,000,000

HUF (approx. 16,129 EUR), max.

10,000,000 HUF (approx. 32,258

EUR)

1% of the value of the transaction that is

the object of the agreement, however, in

the case of: 1. a unilateral agreement: that

refers only to domestic entities - it shall

amount to no less than 5,000 PLN

(approx. 1,193 EUR) and no more than

50,000 PLN (approx. 11,938 EUR);

referring to a foreign entity - it shall

amount to no less than 20,000 PLN

(approx. 4,775 EUR) and no more than

100,000 PLN (23,876 EUR); 2. a bilateral

or multilateral agreement - it shall amount

to no less than 50,000 PLN (approx.

11,938 EUR) and no more than 200,000

PLN (approx. 47,753 EUR).

For large taxpayers and other

taxpayers with consolidated value

of transactions higher than

4,000,000 EUR the fee is 20,000

EUR for the initial APA and 15,000

EUR for amending the initial APA.

For other taxpayers and

consolidated value of transactions

lower than 4,000,000 EUR the fee

is 10,000 EUR for the initial APA

and 6,000 EUR for amending the

initial APA.

Unilateral APA - min. 4,000 EUR,

max. 30,000EUR;

Bilateral or multilateral APA - min.

5,000 EUR, max. 30,000 EUR

Penalties

No specific TP penalties, but

adjustment of tax base plus

penalties (20 %) and interest for

late payment (14 % p.a. + REPO

rate).

If the TP modification results in

tax shortage, penalties (50% tax

penatly and late payment interest)

are imposed. In addition, if the

taxpayer fails to present

appropriate TP documentation

default penatly up to 2,000,000

HUF (approx. 6 452 EUR) per

transaction may be levied. This

penalty increases up to 4,000,000

HUF (approx. 12 903 EUR) in

case of repeated violation of TP

documentation requirements and

up to 16,000,000 HUF (approx.

51 613 EUR) if repeated default.

If the revenue is evaluated by tax

authorities in the amount higher (the loss

in the amount lower) than declared by the

taxpayer, and the taxpayer does not

submit the required TP documentation -

the difference between previous and

evaluated amount is taxed 50% tax rate.

Possible responsibility under penal-fiscal

code.

No specific TP penalties, but

adjustment of tax base plus late

payment interest and penalties. For

non-compliance with the transfer

pracing documentation obligations

a penalty between 12,000 - 14,000

RON (approx. 2724 EUR - 3178

EUR)can be levied.

No specific TP penalties, but

adjustment of tax base plus

penalties. For non-compliance with

the transfer pracing documentation

obligations a penalty up to 3,000

EUR for breach of a non-monetary

obligation can be levied.

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