A Mazowieckie-based software company had been filing intercompany service invoices for three years without once questioning whether those transactions fell within Polish safe harbour provisions. When the Head of the National Revenue Administration (Szef Krajowej Administracji Skarbowej, KAS) opened a transfer pricing audit in spring 2025, the answer mattered enormously. The difference between qualifying and not qualifying was a potential surcharge exceeding PLN 800,000 – plus interest.

Polish tax law provides two distinct safe harbour regimes for related-party transactions: one for low-value-adding services and one for shareholder loans and cash pooling. A taxpayer that meets the prescribed conditions – including a mark-up ceiling of 5% on costs for services and a defined interest rate band for financing – is exempt from the obligation to prepare a full benchmarking study. The exemption is administered by the Head of the National Tax Administration (KAS) and monitored through annual transfer pricing information forms (TPR).

This case study walks through how the company's position was reconstructed, which safe harbour applied, and what any Polish taxpayer can take from the outcome. The structure follows four stages: background, strategy, process, and lessons.

What was the background to the audit?

The client was a mid-sized IT services company registered in Warsaw. It supplied software development services to a related entity in Germany. Annual intercompany revenue sat just below EUR 2m. The transactions had been documented – loosely – in a local file prepared in-house, without external benchmarking.

The KAS audit notice arrived in March 2025. The auditors focused on two issues. First, whether the mark-up applied to the service transactions was arm's length. Second, whether the company had correctly disclosed those transactions in its annual TPR form submitted to the National Court Register (Krajowy Rejestr Sądowy, KRS) reporting chain. A third, procedural concern emerged quickly: the local file referenced a benchmarking analysis that had never actually been performed.

The company engaged our tax practice in April 2025 – roughly six weeks after the audit notice. That timing was tight. KAS had already issued its first information request, with a 14-day response window. The core question was whether the low-value-adding services safe harbour could be applied retrospectively to the three years under review.

  • Annual intercompany service revenue: below EUR 2m
  • Mark-up applied by the client: between 4% and 6% on costs
  • Documentation: local file without benchmarking
  • Audit period: tax years 2022–2024
  • Response deadline at engagement: 14 days

How was the safe harbour strategy constructed?

Polish tax law's low-value-adding services safe harbour sets a maximum mark-up of 5% on costs for services rendered to related parties, and a minimum of 3% for services received. A taxpayer applying the safe harbour avoids the benchmarking obligation entirely – but must satisfy three cumulative conditions. The services must be genuinely low-value-adding in character. The mark-up must fall within the band. And the taxpayer must hold a statement from the related party confirming that the same conditions apply on the other side of the transaction.

The first task was to reclassify the service catalogue. The company had bundled software development, testing, and project coordination under a single invoice line. Project coordination and testing qualified as low-value-adding under the Polish tax regulations. Core software development did not. Separating those streams immediately reduced the portion of revenue outside the safe harbour to roughly 35% of the total – a materially better position than the original all-or-nothing exposure.

We secured a written statement from the German related party within ten days. That statement confirmed the 5% ceiling applied on their side. With that document in hand, the safe harbour applied to the qualifying portion of services. The remaining 35% – pure software development – required a proper benchmarking analysis. We commissioned one from a specialist database provider, covering comparable transactions in the Central and Eastern European IT sector for the relevant years.

One micro-case point worth noting: we had handled a structurally similar matter for a manufacturing client in Lower Silesia (autumn 2024), where the same bundling problem had produced a PLN 1.2m exposure before reclassification. The lesson from that matter – separate the service streams before any audit contact – informed our approach here from day one.

What did the process look like in practice?

The process ran across three months, from April to June 2025. The first response to KAS was submitted within the 14-day window. It acknowledged the documentation gap and informed the authority that supplementary materials were being prepared. That transparent approach – rather than a defensive response – set a constructive tone with the auditors.

The revised local file was delivered in May 2025. It covered all three audit years and included: the reclassified service catalogue, the German counterparty statement, and the benchmarking report for the software development stream. The benchmarking placed the company's mark-up within the arm's length range for all three years. No adjustment was required on the development stream.

KAS issued its closing protocol in late June 2025. The authority accepted the safe harbour application for the qualifying service streams and the benchmarking for the remainder. The total adjustment proposed was zero. The surcharge exposure of PLN 800,000 was eliminated. Interest did not accrue. The TPR forms for 2022 and 2023 were corrected under a voluntary disclosure procedure, which capped any residual penalty exposure at a nominal level.

For businesses with cross-border financing arrangements, the parallel interest safe harbour – which references the base rate published by the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, KNF) plus a defined spread – operates on similar principles. Our tax practice in Poland handles both service and financing safe harbour reviews as part of a single engagement where the client's structure warrants it.

What are the transferable lessons?

Three lessons emerge from this matter that apply broadly to any Polish taxpayer with intercompany transactions. First, service bundling is the most common reason safe harbour eligibility is missed. If invoices combine qualifying and non-qualifying activities, the entire amount falls outside the safe harbour unless the streams are separated in the documentation. That separation costs almost nothing to implement prospectively – and a great deal to reconstruct under audit pressure.

Second, the counterparty statement is not a formality. KAS auditors check for it specifically. A missing statement – even where the mark-up is correct – disqualifies the safe harbour. Companies should collect that statement annually, at the same time as the TPR form is prepared. Building it into the year-end compliance calendar removes the risk entirely.

Third, voluntary disclosure works. Correcting TPR forms before an adjustment is formally proposed reduces penalty exposure from up to 720% of the additional tax to a capped nominal amount. The window for voluntary disclosure closes once the authority formally proposes an adjustment – so speed matters. Companies managing digital reporting obligations, including those monitoring the KSeF deadline timeline for 2026–2027, should treat TPR accuracy with the same urgency as e-invoicing compliance.

A second micro-case: we assisted a Pomerania-based distribution group (winter 2025) in applying the interest safe harbour to a PLN 15m intercompany loan. The KNF-referenced rate band was satisfied, and the group avoided a benchmarking obligation entirely – saving approximately six weeks of preparation time and external costs of around PLN 40,000. The key was confirming the rate band before the loan was drawn, not after.

  • Separate service streams in documentation before the audit begins
  • Collect counterparty statements annually, alongside TPR preparation
  • Confirm interest rate band eligibility before drawing intercompany loans
  • File voluntary TPR corrections promptly once a gap is identified
  • Review restructuring implications if related-party flows change materially

Companies considering structural changes to intercompany arrangements – particularly those involving asset transfers or group reorganisations – should also review the restructuring practice page for an overview of how transfer pricing intersects with Polish restructuring law.

Specific transfer pricing situations require tailored analysis. Applying the wrong safe harbour, or applying the right one without the required documentation, forfeits the exemption and exposes the taxpayer to full benchmarking scrutiny – an irreversible consequence once the audit protocol is issued.

To discuss how Polish safe harbour rules apply to your intercompany transactions, email info@kordeckipartners.com.

Frequently asked questions

Q: Can the low-value-adding services safe harbour be applied to software development transactions?

A: Core software development is generally excluded from the low-value-adding category under Polish tax regulations. The category covers ancillary services – such as administrative support, testing coordination, and routine project management – that do not create significant value or involve unique intangibles. Taxpayers with mixed service arrangements should separate qualifying from non-qualifying streams in their documentation. Applying the safe harbour to an ineligible stream exposes the entire transaction to audit challenge.

Q: How long does it take to prepare a transfer pricing local file in Poland?

A: A local file covering a single transaction category typically takes four to eight weeks from engagement, depending on the availability of internal data and whether external benchmarking is required. Where the safe harbour applies, preparation time is shorter because no benchmarking study is needed. Taxpayers should note that the local file must be ready by the time the corporate income tax return is filed – generally nine months after the end of the tax year – not only when an audit begins.

Q: Is it a misconception that a correct mark-up alone guarantees safe harbour protection?

A: Yes. A mark-up within the prescribed band is necessary but not sufficient. Polish tax law requires, in addition, that the taxpayer holds a written statement from the related party confirming equivalent conditions on their side, and that the services genuinely fall within the low-value-adding definition. Taxpayers who apply the safe harbour based on the mark-up alone – without the counterparty statement or a proper service classification – remain exposed to full transfer pricing scrutiny. The Polish Financial Supervision Authority (KNF) rate references for the interest safe harbour carry a parallel condition: the rate must be set at the time the loan agreement is concluded, not adjusted retroactively.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to transfer pricing documentation, safe harbour analysis, KSeF compliance, and tax advisory for Polish and foreign-owned groups. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.