Tax Records

We prepare tax records of transactions between related entities and transactions with entities located in countries of unfair tax competition.

Number of tax inspections that question transfer prices between related entities increases every year. Since 2003 taxpayers have been obliged to inform tax authorities about transactions with related entities (on tax declaration forms). This way tax authorities are able to easily select entities, where detailed inspections will be conducted.

Should any discrepancies occur, the consequences for taxpayers may be very serious. Income tax laws provide that tax authorities are entitled to estimate amounts of tax liabilities, if the declared transfer prices with related entities do not correspond with market prices (i.e. income or its part is “transferred” to other countries).

In order to avoid such situations taxpayers have to prepare appropriate documentation on transfer prices. Before income estimation tax authorities are obliged to ask a taxpayer to submit records of transactions within 7 days. If the taxpayer fails to submit the records, or the records are not approved, tax authorities are entitled to estimate the taxpayer’s income. The difference between income declared and income estimated by tax authorities is taxed at the rate of 50%. This may be very dangerous and in extreme cases even lead to bankruptcy.