Benchmark in transfer pricing

Polish transfer pricing regulations generally stipulate a three-year validity period for transfer pricing analyses. However, this is conditional on the relative stability of the economic environment. If changes in the economic environment significantly impact the prepared analysis, it must be updated in the year in which these changes occur.

Contemporary economic realities show that the three-year validity period of analyses can be considered a theory.

The conclusion? The three-year period does not guarantee the validity of the analysis. It merely establishes the maximum standard interval between updates, provided that no circumstances materially impacting the study occurred during that time.

What changes might “force” an analysis update?

Changes in the economic environment and their impact on benchmark assumptions or results are important. In recent years, businesses have had to contend with, among other things, high inflation, dynamic changes in interest rates, supply chain disruptions, rising energy costs, and the effects of geopolitical tensions. These phenomena impacted business conditions, corporate profitability, and the situation of individual industries. Consequently, they could (and did) influence the validity of previously prepared transfer pricing analyses, primarily comparative analyses (so-called benchmarks).

The Transfer Pricing Forum’s recommendations regarding the impact of crisis factors on transfer prices also indicate which events may impact the terms of controlled transactions. These include increased financing costs, currency fluctuations, changes in energy and raw material prices, economic sanctions, and restricted access to specific markets.

This does not mean, however, that the occurrence of any of these factors automatically requires a change in transfer pricing. The impact of economic changes should be assessed individually, taking into account the specifics of the industry, the nature of the transaction, and the actual behavior of market entities.

The same factor may therefore justify an earlier update of the analysis in one industry or transaction while having no material impact on another.

Update of the benchmark for loans according to the Director of National Information System

The Director of the National Tax Information referred to the effects of updating comparative analyses in the interpretation of 13 January 2025, reference number 0111-KDIB1-3.4010.704.2024.1.JKU, regarding loans granted to related entities.

The interest rate on the loans was determined based on comparative analyses current at the time of the transaction. However, a subsequent update revealed that the interest rate applied was no longer within the market range. According to the applicant, this should not lead to a change in the terms of previously concluded loans. He pointed out that unrelated entities (particularly banks) do not automatically update the interest rate or the margin above the base rate solely due to subsequent changes in market conditions. The applicant also emphasized that, in his opinion, the obligation to update the benchmark is purely for documentation purposes and should not automatically lead to a change in the terms of the transaction.

The Director of the National Tax Information (KIS) deemed this position incorrect. He indicated that the taxpayer should continuously monitor the terms of the transaction and amend them accordingly if unrelated entities would do so in a comparable situation. If the interest rate was market-based at the time the loan was granted but later ceased to be market-based, it may be necessary to adjust it. The authority believed that the result of the updated analysis should therefore be reflected in the loan interest rate. It also noted that the regulations do not only provide for a formal update of the analysis, but rather serve to periodically verify the marketability of the transaction. If the updated benchmark indicates that the transaction terms are no longer market-based, the taxpayer should analyze and amend the transaction terms accordingly.

The KIS Director’s position confirms that regular benchmark updates are intended to verify whether the current price still reflects market conditions. It serves as a signal to verify transaction terms, taking into account functions, risks, and assets.

However, updating the analysis does not always mean a change in the interest rate.

Practical guidance on financial transactions is provided in the Transfer Pricing Forum’s report on financial transactions, dated October 1, 2025. The FCT notes that benchmark updates and assessing the marketability of financing terms are separate issues. The new analysis result does not necessarily mean that the loan interest rate should be changed.

In practice, it’s important to assess not only the current benchmark score but also the circumstances surrounding the financing, such as the contract term, the nature of the transaction, the risk level, and the behavior of unrelated entities under comparable conditions. If the key financing terms remained unchanged, unrelated entities would not always renegotiate previously agreed terms. A good example are variable-rate loans, where the base rate changes with market conditions, while the margin generally remains constant.

However, this may not be the case when events impact transaction risk, such as a deterioration in the borrower’s financial situation, debt repayment difficulties, or a significant change in financing terms, occur. In such situations, a new benchmark result may prompt a reassessment of the marketability of the terms applied.

It should be noted, however, that the approach presented by the FCT is more nuanced than the position presented by the Director of the National Tax Information System in the interpretation of 13 January 2025. The authority seems to link the result of the benchmark update with the need to adjust the interest rate, while the FCT indicates that it should be assessed each time whether, in comparable circumstances, a change in the financing terms would also occur between unrelated entities.

Please note: We would like to point out that the marketability of loan transactions is not limited to interest rates alone. The borrower’s creditworthiness, ability to service and repay the debt, the value and term of the financing, collateral, and other factors are also crucial.

So: how often should you update your transfer pricing analysis?

As we mentioned at the beginning, although the regulations provide (in principle) for a three-year validity period for transfer pricing analyses, the current economic situation requires an annual verification whether they remain valid.

In practice, a safer approach is to treat the three-year period as the maximum standard update period, rather than as a guarantee that the analysis will remain current throughout that period. Ultimately, the key is not meeting the formal requirement, but the ability to demonstrate that the terms used in controlled transactions corresponded to those that unrelated entities would accept.

The deadlines for fulfilling transfer pricing obligations for 2025 are getting closer.

For many taxpayers, the coming months will be a time to finalize their 2025 transfer pricing obligations. Now is the perfect time to verify that the transfer pricing analyses they are using reflect current market conditions. This will help reduce the risk of tax authorities challenging your settlements. If you need assistance preparing documentation, analyses, or the TPR form, please contact our team.