The amendments made to the transfer pricing regulations at the beginning of 2019 seemingly have not substantially influenced the issues connected with the determination of prices in transactions involving intangibles. Yet, a detailed analysis of the regulations and tax authorities’ activities makes it worthwhile to take a closer look at this category of transactions.

What are intangibles?

It should be noted at the outset that the Polish transfer pricing regulations do not define the concept of intangibles but only the concept of intangible assets subject to amortisation. In order to determine the meaning of the term “intangibles”, it is good to refer to the OECD Guidelines which define it as the property right which is not a physical asset or a financial asset, and which is capable of being owned or controlled for use in commercial activities, and whose use or transfer would be compensated had it occurred in a transaction between independent parties in comparable circumstances. Thus, the concept of intangibles should be viewed in the context of transfer pricing quite extensively, and the analysis of regulations requires that special attention be paid each time to whether the legislator used the term “intangible assets” or a broader term “intangibles”.

Intangibles pursuant to new regulations

Pursuant to the transfer pricing regulations effective since 2019, the controlled transactions with their subject matter being intangible assets are treated in a special way. The related entities are obliged to prepare the Local File for each transaction from that category with the value exceeding the statutory threshold equal in this case to PLN 2,000,000.00, even if the value of the controlled transaction does not constitute – permanently and in its entirety – the revenue or tax deductible cost for the taxpayer. In spite of the fact that the amendment to the CIT Act introduced a new catalogue of exemptions from the obligation to prepare the Local File, and that one of the grounds for such exemption is the conclusion of a controlled transaction with its value not influencing the revenues or tax deductible cots for the taxpayer, the regulation excludes the possibility of using the exemption for the transactions which refer – among others – to intangible assets.

The issues connected with intangibles should also be taken into account in the Master File, which has to include the description of significant intangible assets of the group of related entities. Thus, the entity drawing up the Master File has to ensure that the documentation includes, among others, the list of intangible assets or their groups significant in terms of transfer pricing or the description of the transfer pricing policy in the scope of intangible assets.

The issue of intangibles also deserves greater attention in the scope of the obligation to submit the transfer pricing information (“TPR”). The Regulations of the Minister of Finance on transfer pricing information provide for the additional elements which should be shown in the TPR in the case of transactions connected with intangibles. If the subject matter of a controlled transaction is to make intangibles available or to use them, then the TPR should additionally state, among others, the type of the intangible and the manner of calculation of a fee for making it available or for using it. Therefore, when filling in the TPR information, the taxpayers have to be aware of the necessity of including more detailed information in relation to this category of transaction.

It should also be remembered that using the intangibles for a fee under the transactions with related entities may be subject to – based on the CIT Act – the limitation of the tax deductible costs in such a part in which the costs incurred in connection with such use exceed the statutory limit. In such a case, the taxpayers may consider the submission of the request that an individual interpretation of the tax law regulations be issued or the request that an advance pricing arrangement (APA) be concluded. Such an individual interpretation gives the possibility of applying the exemption provided for in Article 15e (11) of the CIT Act. If a positive interpretation is issued, it is possible for the taxpayer to have the costs which are directly connected with the production or acquisition of the goods or provision of services by the said taxpayer excluded from the limitation rule. In the case of APAs, the aforementioned limitation is not applicable to the transaction covered by the concluded arrangement.

Tax authorities’ approach to intangibles

The interest of tax authorities in the issue of transfer pricing continues to grow, while the transactions concerning intangibles are increasingly often subject to assessment during tax proceedings and inspections or customs-tax inspections.

It should be remembered that the subject matter of such an assessment may not only be limited to the amount of the transfer price but it may also include the ability of the transaction parties to fulfil a given function and to assume the risk related to making intangibles available. For it is not so that the legal owner of a given intangible is – in each case – the only entity entitled to receive the profits relative to its exploitation – the entities performing the functions, engaging the assets or assuming the risks which may contribute to the growth of the value of such an intangible (i.e. economic owners) should also receive a part of the profits generated as a result of using a given intangible. The aforementioned principle is reflected in the provisions of the regulations on transfer pricing which stipulate that the process of examining the comparability of controlled transactions involving intangibles should also include – apart from standard comparability criteria – the assessment of the ability of the transaction parties to perform a given function and to assume a given risk in the scope of possessing the legal title, protection and maintenance, creation, development and enhancement and exploitation of intangibles (the so–called DEMPE functions (Development, Enhancement, Maintenance, Protection and Exploitation)).

In the context of the aforementioned, it is advisable to consider the preparation – in addition to transfer pricing analysis – of the so-called DEMPE analysis which is focused on the functions related to the development, enhancement, maintenance, protection and exploitation of intangibles. The preparation of such an analysis largely consists in reflecting of the elements from the comparability study performed by tax authorities in relation to the transactions connected with intangibles. As a result, the presentation of the results of such an analysis during the discussions with tax authorities may help in limiting the risk of challenging the payment of the amount due to the related legal owner of a given intangible.

Valuation of the unique – hard to value intangibles

The concept of hard to value intangibles (“HTVIs”) is incorporated in Chapter VI of the OECD Guidelines as a tool for assessing which circumstances may be important for the valuation of intangibles and whether such type of circumstances may be rationally predicted upon the conclusion of a transaction (the so–called ex post assessment).

The provisions of the regulations on transfer pricing define HTVIs as the intangibles, as well as the rights to such intangibles, which – upon their transfer between related entities – did not have reliable comparable data and the forecast of future cash flows or expected revenue from such assets, or the assumptions applied for their valuation were burdened with a high level of uncertainty, which caused that the final economic result from the transfer of such intangibles was hard to determine.

The fulfilment of the conditions for considering a given intangible as HTVI results in two main consequences in the context of transfer pricing. Firstly, the comparability study process includes – in such a case – also the assessment of the transaction in terms of additional and specific criteria, such as – to give an example – the introduction of contractual clauses concerning the change of the price. Secondly, in the case of stating the difference between the forecast data and the actual data which results in the difference in the transfer price of the HTVI equal to at least 20% of the value of the transfer price calculated based on the forecast data, the tax authority is given the possibility of defining the transfer price of the HTVI on an ex post basis. Thus, the authority is not bound by the prohibition of taking into account the circumstances which could not have been known to its parties on the day of its conclusion and which – have they been known – could have caused the assessment of the higher or lower value of the subject matter of such a transaction by the parties.

In practice, the aforementioned regulation forces taxpayers to prepare accurate and reliable forecasts being the grounds for determining the transfer price in the transactions involving HTVIs as well as their verification in terms of possible differences with the actual data.


The regulations which became effective on 1 January 2019 have provided the tax authorities with new tools which enable them to perform a more detailed analysis of the terms and conditions of the transactions involving intangibles with related entities. We should also expect further regulation of such issues in our provisions following the development of the DEMPE concept introduced by the OECD. It is advisable to remember the above when fulfilling the documentation and reporting obligations in the scope of transfer pricing.


Tomasz Klusek, Supervisor in Transfer Pricing Team at KPMG in Poland
Karolina Łukawska, Consultant in Transfer Pricing Team at KPMG in Poland