Changes to the Minister of Finance Decree on transfer pricing – part9: Low value adding services – the level of the mark-up


The change of 17 June 2013 to the transfer pricing Decree in Poland introduced the notion of „low value adding services”. This term comes from the Report prepared by the EU JTPF – that is Joint Transfer Pricing Forum established by the European Commission. Unlike OECD Guidelines, which are used as reference practically in all the countries of the world, this Report is addressed only to EU member states.


The Report has made some conclusions about the level of the mark-up for low value adding services.


The Report says, that more important than the level of the mark up, is the proper identification of the cost base for the service. After that, the level of the mark-up can be considered.


The report says that there are situations where no mark-up is justified.


A typical, observed margin is in the range of 3% to 10%. The most often observed mark-up is 5%.


An in-depth analysis of comparability factors and market research may be too exhausting, therefore a simplification is suggested instead: reviewers (taxpayers and tax controllers) may only provide the rationale behind the chosen level of the mark-up and the experience they have, that was used to set this level of the mark-up, eventually they may add some public statistics and cases or data made available by the tax administration.


The changes introduced to the Polish transfer pricing Decree are silent about the level of the mark-up. However, the fact that in the Decree they are called low value adding services implies a modest mark-up.


Taxpayers, in transactions concluded with other EU entities may use the JTPF Report as reference, but its conclusions are not obligatory.


Next week, in our next edition of “Tax Newsletter” , we shall write about the kind of documentation which can be prepared by tax-payers for these low value adding services.


Prepared by Tax Advisory Company TCA Advisers Sp.z o.o. , Konstancin-Jeziorna, Warsaw


NOTE: This material is prepared for information purposes only – care was taken to make it as simple and clear as possible, so it is not complete nor precise enough to be the basis for any action in practice – therefore, in case you need to resolve your particular situation, please seek professional tax advice. 


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